From 1945 to 1964, Americans gave birth to seventy-six million children.
These seventy million some-odd children, the Baby Boom generation, are now seventy million adults reaching retirement age, or else getting close enough to retirement age that they’re starting to think through financial goals for their golden years.
For Baby Boomers, what financial goals should be most important, especially during these difficult economic times?
1. Eliminate Any Debts
Getting out of debt is important for all generations, not just Baby Boomers. However, for Baby Boomers, with retirement either looming or already starting, getting out of debt takes on extra importance.
Once you’re out of debt – including paying off the mortgage early – you can really start to enjoy those golden years. You’ll have the extra money you need to travel the way you always dreamed of, or spoil your grandkids for years to come. For all ages, debts are a drag on the finances; for people with fixed incomes, debts are especially dangerous.
2. Increase Retirement Savings
For the generation that once said, “Trust no one over thirty,” it’s hard to imagine that retirement is just around the corner. Maybe it was the culture of youth that kept you from saving for retirement in your twenties and thirties, or maybe it was just plain ignorance. At any rate, it’s never too late to start saving and investing to increase the size of your nest egg. Even if you’ve reached your early fifties, you still have close to fifteen years of working life to save for your retirement.
Financial author Dave Ramsey suggests that you save at least fifteen percent of your gross income towards your retirement. While a Roth 401k and Roth IRA retirement accounts are good places to start, they may not be enough if you started saving for retirement late in the game. If you did start saving late, talk to a financial advisor about more aggressive investing.
3. Get Healthy
What does getting healthy have to do with your financial decisions? If you’ve paid a doctor or hospital bill recently, you’ll realize that your physical health has everything to do with your financial health.
Although Baby Boomers might not want to admit it, their body is starting to get older, and that means more health problems are coming. Unless you want to spend that money you set aside for a trip around the world on medical bills, implement a diet and fitness plan now that you can live with. Considering the uncertainty of healthcare in the United States, who knows what will happen to the availability and expenses associated with medical care by the time you reach retirement? Therefore, now’s the time to lose the weight, quit the smoking, and cut back on any other indulgences that harm your health. An investment in your local gym, hiking club, or yoga studio could be one of the smartest investments a Boomer can make.
4. Create a Retirement Budget and Educate Yourself
Although it may sound like a no-brainer, a surprising two-thirds of people nearing retirement age haven’t yet created a budget for their retirement. Creating a retirement budget, along with a strategy for how you’ll draw from your nest egg, is a critical planning step for your upcoming retirement.
Fidelity recently surveyed recent retirees, asking them what they wish they would have done before retirement. When they asked the question, “What advice would you give to a family member or friend who’s within a year of their retirement?”, the most common answer was to seek guidance from a professional advisor to help with the transition.
Does your employer offer any resources that might help educate you for your upcoming transition? In Fidelity’s survey, 32% of the people who turned to their employer for guidance said they couldn’t have made the transition into retirement without the extra help.
5. Start Dreaming Now
If you’re a Baby Boomer in your late forties, fifties, or sixties, you owe it to yourself and to your family to stop procrastinating and take these financial steps now. Even if retirement hasn’t hit yet, it will come sooner than you think. You want your retirement years to be trouble-free, giving you the freedom to live where you want and how you want, whether that means selling your house and getting an RV to tour the country, or buying that beachfront property or cabin in the mountains.
If you don’t pay your credit card bill, you could face more severe consequences than you might think. Though it will depend on your credit card issuer, you can generally expect to be charged a late fee as well as a penalty interest rate which is higher than the regular purchase APR.
Life happens, and, from time to time, payments are missed, especially if you’re dealing with emergencies such as losing a job or a family crisis. In the event you have skipped a credit card payment, it’s crucial you understand what can happen. That way, you can take steps to reduce the odds of it having a major impact on your financial health.
Here, you’ll learn more about this topic, including:
• What happens if you don’t pay your credit card bills?
• What if you miss one credit card payment?
• What happens if you only can make minimum payments?
• How can you pay off credit cards?
What Happens If You Don’t Pay Your Credit Card?
Consequences for missed credit card payments could include being changed late fees and possibly losing your grace period. It may also negatively affect your credit score since issuers report your payment activity to the credit bureaus — in most cases after 30 days.
There may be other consequences depending on how late your payment is and whether it’s your first time missing a payment.
Accruing Interest
When you don’t pay your credit card, interest will accrue and will continue to do so as long as you have a balance on your card. In essence, you are paying more for your initial purchase thanks to that interest.
The longer you go without paying your credit card, the more you risk your rate going up. Your credit card issuer may start imposing a penalty annual percentage rate (APR), which tends to be higher than your regular purchase APR. If this happens, you’ll end up paying more in interest charges. The penalty APR may apply to all subsequent transactions until a certain period of time, such as for six billing cycles.
Collections
Depending on your credit card issuer, your missed payments may go into collections if it goes unpaid for a period of time. You’ll still continue to receive notices about missed payments until this point.
More specifically, if you don’t pay your credit card after 120 to 180 days, the issuer may charge off your account. This means that your credit card issuer wrote off your account as a loss, and the debt is transferred over to a collection agency or a debt buyer who will try to collect the debt.
Once this happens, you now owe the third-party debt buyer or collections agency. Your credit card issuer will also report your account status to the major credit bureaus — Experian, TransUnion, and Equifax. This negative information could stay on your credit report for up to seven years.
It’s hard to tell what third-party debt collectors will do to try and collect your debt. Yes, they may send letters, call, and otherwise attempt to obtain the money due.
Some collections agencies may even try to file a lawsuit after the statute of limitations expires. In rare cases, a court may award a judgment against you. This means the collections agency may have the right to garnish your wages or even place a lien against your house.
If your credit card bill ends up going to collections, take the time to understand what your rights are and seek help resolving the situation. Low- or no-cost debt counseling is available through organizations like the National Foundation for Credit Counseling (NFCC).
Bankruptcy
You may find that you have to declare bankruptcy if you still aren’t able to pay your high credit card debt and other financial obligations. This kind of major decision shouldn’t be taken lightly. You will most likely need to see legal counsel to determine whether you’re eligible.
If you do file bankruptcy, an automatic stay can come into effect, which protects you from collection agencies trying to get what you owe them. If successfully declare bankruptcy, then your credit card debt will most likely be discharged, though there may be exceptions. Seek legal counsel to see what your rights and financial obligations are once you’ve filed for bankruptcy.
Making Minimum Payments
A minimum payment is typically found in your credit card statement and outlines the smallest payment you need to make by the due date. Making the minimum payment ensures you are making on-time payments even if you don’t pay off your credit card balance. Any balance you do carry over to the next billing cycle will be charged interest. You can also avoid late fees and any other related charges by making a minimum payment vs. not paying at all.
What Happens if You Miss a Payment
If you can’t pay your credit card for whatever reason, it’s best to contact your issuer right away to minimize the impact. Let them know why you can’t make your payment, such as if you experienced a job loss or simply forgot. For the latter, pay at least the minimum amount owed as soon as you can (ideally before the penalty or higher APR kicks in).
If this is your first time missing a payment but otherwise paid on time, you can try talking to the credit card company to see if they can waive the late fee.
Some credit card issuers may offer financial hardship programs to those who qualify, such as waiving interest rates, extending the due date, or putting a pause on payments (though interest may still accrue) until you’re back on your feet.
15/3 Rule for Paying Off Credit Cards
The 15/3 payment method can help you keep on top of payments and lower your credit utilization — the percentage of the credit limit you’re using on revolving credit accounts — which can impact your score.
Instead of making one payment when you receive our monthly statement, you pay twice — one 15 days before the payment due date, and the other three days beforehand. This plan is useful if you want to help build your credit history and pay on time.
The Takeaway
Missing your credit card payment may not be a massive deal if it just happens once or twice, but it can turn into one if you continue to ignore your bill. While it’s not exactly fun to have to pay a late fee, you may be able to negotiate with the credit card issuer to waive it if you are otherwise a responsible user. Even if not, it’s better than being bumped up to the penalty APR or, worse still, having your account go to collections.
Are you looking for your first or a new credit card? Consider the SoFi Credit Card. With perks like cash back rewards on all purchases, no foreign transaction fees, and Mastercard ID Theft Protection, it may be just the right choice for your personal and financial goals.
The SoFi Credit Card: The smarter way to spend.
FAQ
How long can a credit card go unpaid?
The statute of limitations, or how long a creditor can try to collect the debt owed, varies from state to state, which can be decades or more.
What happens if you never pay your credit card bill?
If you never pay your credit card bill, the unpaid portion will eventually go into collections. You could also be sued for the debt. If the judge sides with the creditor, they can collect the debt by garnishing your wages or putting a lien on your property.
Is it true that after 7 years your credit is clear?
After seven years, most negative remarks on your credit report, such as accounts going to collections, are generally removed.
Photo credit: iStock/MStudioImages The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. 1See Rewards Details at SoFi.com/card/rewards. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website . This article is not intended to be legal advice. Please consult an attorney for advice. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. SOCC0523007
Savings may be essential for financial health, but building a savings account is easier said than done. Between regular expenses and well…life in general, it’s often hard to figure out what you can actually afford to save, let alone prioritize planning for the future.
Fortunately, the best money-saving apps on the market today promote saving techniques that work around your regular spending habits – sometimes so smoothly you save money without even noticing.
What’s Ahead:
Overview of the best money-saving apps
App
Fees
Investing included
Account minimum
Savings account APY
Checking/spending account
Acorns
$1-$5/month
Yes
$0 ($5 for round-ups)
N/A
Yes
Digit
$5/month
Yes
$0
N/A
No
Stash
$3-$9/month
Yes
$0 ($1 for certain investment accounts)
N/A
Yes
Chime
N/A
No
$0
2.00%
Yes
Twine
0.6%/year for investment accounts
Yes
$5 for investment accounts
1.05%
No
Qapital
$3/$12-month
Yes
$10 for investment accounts
0.1%
Yes
Best for first time investing – Acorns
Cost – $3 or $5/month.
Options – Saving, investing, and checking accounts, retirement accounts, children’s UTMA/UGMA accounts, cash back extension.
Acorns gets its name from the idea that small “acorns” of spare change can grow into big savings if you give them a little time. As a combo savings/investing app, Acorns makes things simple for the brand new investor and doesn’t require much money to get started.
The $3/month“Personal” plan gets you an Independent Retirement Account (IRA) and an “Acorns Spend” checking account. For $5/month, you can tack on investment accounts for children as well.
If savings are your main goal, the basic account will probably be enough to get you rolling. When you link a credit or debit card to your investment account, Acorns “rounds up” your purchases to the nearest dollar and invests the difference for you once it hits $5 or higher – a popular auto-savings technique. You can add a “multiplier” feature if you want Acorns to double or triple the amount of investment with every transaction.
Learn more about Acorns or read our full review.
Best for flexible savings – Digit
Cost – $5/month (first 30 days are free).
Options – Savings, investment, and retirement accounts.
Savings techniques – Automatic fund transfers, credit card debt reduction.
For $5/month, Digit’s algorithms analyze your spending patterns and cash flow, then make a savings plan tailored to you. When you can spare a little extra, Digit transfers some cash to a linked savings account. When you have just enough to pay the bills, Digit skips the transfer.
This method can work well for people with fluctuating incomes or anyone who has trouble deciding in advance how much to save. If Digit does overdraft your account (which they promise not to), they’ll reimburse fees for up to two overdrafts.
Like most money apps, Digit lets you pick your own savings goals, and if you’re paying down credit card debt, Digit can automatically send the amount you’ve saved to the credit card company on your behalf.
Learn more about Digit or read our full review.
Best for lots of investment options – Stash
Cost – $3 or $9/month.
Options – Savings, investment, and retirement accounts, checking accounts, individual stocks and fractional shares, life insurance.
For people who want to watch their savings grow, Stash offers over 150 ETFs, stocks, and other micro-investment vehicles. You have more control over your portfolio picks with Stash than you do with Acorns – you can design your own portfolio or pick a pre-selected one from Stash. You can even pick ETFs that align with your values.
Savings options are flexible, too: you can choose an amount to put in savings each month, invest your spare change with the “round-up” method, or let Stash’s “Smart Stash” feature figure out what you can afford to save based on your cash flow.
Stash comes with a debit card, something a lot of savings apps offer, and its own unique “stock-back” incentive. Whenever you use the Stash bank card to buy something at a publicly-traded company, Stash gives you a small fractional share of company stock to add to your portfolio.
The app’s cost depends on how many extra features you want. Most everyday savers will be fine with the $3/month Growth plan, which includes a debit card, an investment account, and stock-back perks. You can also add a tax-advantaged retirement plan (a good idea if you haven’t opened a retirement account yet). Serious investors can upgrade to the $9/month “Stash+” for 2x stock-back returns and extra market info.
Learn more about Stash or read our full review.
Disclaimer – Paid non-client endorsement. See Apple App Store and Google Play reviews. View important disclosures.
Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.
¹For securities priced over $1,000, purchase of fractional shares start at $0.05.
²Debit Account Services provided by Green Dot Bank, Member FDIC and Stash Visa Debit Card issued by Green Dot Bank, Member FDIC. pursuant to a license from VISA U.S.A. Inc. Investment products and services provided by Stash Investments LLC, not Green Dot Bank, and are Not FDIC Insured, Not Bank Guaranteed, and May Lose Value.” because the article mentions the debit card.
³You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the custodian.
⁴Other fees apply to the debit account. Please see Deposit Account Agreement for details.
⁵Stock-Back® is not sponsored or endorsed by Green Dot Bank, Green Dot Corporation, Visa U.S.A, or any of their respective affiliates, and none of the foregoing has any responsibility to fulfill any stock rewards earned through this program.
Best for low fees – Chime®
Cost – No monthly fees.
Options – Savings and checking accounts.
Savings techniques – Round-ups, automatic transfers to savings, paycheck transfers.
Chime is a mobile app that takes advantage of the lower-cost online-only financial app model to pass savings on to customers. They don’t charge a monthly fee, so you keep any money you save.2
Chime’s free checking and savings accounts offer plenty of the features you’ll find at a bank*, like:
A Chime Visa® Debit Card.
Check deposit options.4
Bill-paying functions.
Two-day advance on directly deposited paychecks.3
Checking and savings are linked; whenever you make a purchase with your checking account, Chime rounds up to the nearest dollar and adds the difference to savings.^ Or you can have Chime auto-deposit 10% of every paycheck into savings before the rest hits checking.1 Either way, the app does all the work.
Learn more about Chime or read our full review.
* Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank, N.A. or Stride Bank, N.A.; Members FDIC. ^ Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account. 1 Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account. 2 There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account. 3 Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date. 4 Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.
Best for joint savings – Twine
Cost – No fees for saving, 0.6% of invested assets/month for investing.
Twine is ideal for people who are saving for a goal together (though you can use it on your own, too!). It combines savings-app automation with robo-advisor guidance, which can be helpful if you have more than one savings goal.
The basic free Twine savings account earns you a little interest – there’s a 1.05% variable Annual Percentage Yield (APY). They encourage you to earmark accounts for certain financial goals, either “general savings” or specific goals like a vacation or a down payment on a house, and pick a monthly goal deposit amount so you can track your progress. If you’re saving with someone else, you’ll pick a joint goal but open individual accounts.
Investment portfolios are optional if you want to take your savings to the next level. Twine pre-selects diverse portfolios for you, and they only require $5 to get started.
Qapital runs on behavioral economics – their multiple savings strategies use your routines, habits, and everyday purchases to help bulk up your savings.
Here’s how it works: you get a spending account that earns you 0.1% in compounded monthly interest, and a “goals” account to grow your savings. To fund your goals, you can transfer regular, set amounts from a linked bank account to your goals account, or pick one of Qapital’s “rules” or savings tricks.
There’s the “round-up” rule, which lots of apps use. There’s the “trigger” rule which saves a specific amount every time you engage in a certain activity (something simple you do regularly, whether it involves spending money or not).
The “guilty pleasure” rule moves a little cash into savings whenever you indulge in your favorite pricey latte, takeout, etc. The “52-week” rule lets you gradually increase the amount you stash in savings over a year. Qapital has other rules, too, and you’ll probably find one that works for you.
Their pricing is higher than most money-saving apps – a $3/month basic plan has all the savings tools, while the $6/month plan unlocks pre-selected investment portfolios and gives you a Qapital debit card. The $12/month master plan lets you open joint savings with a partner, similar to Twine.
Learn more about Qapital or read our full review.
Why should you use money-saving apps?
You’re just starting to build savings
The idea of building a savings account might be intimidating, but it’s much simpler to stash away 50 cents whenever you buy a cup of coffee or a dollar whenever you refill your gas tank. That’s mostly what these apps do – take the work out of savings one small amount at a time, so your regular budget isn’t disrupted.
Read more: The Pros And Cons of ‘Spare Change’ Investment Apps
You struggle to make savings a habit
If your money management style is on the “spend now, save later” side, it may be unrealistic to overhaul your habits right away and heap everything into savings. That’s not how habits work; they take time to develop.
A free 30-day trial of Digit or Qapital, for instance, could be enough to show you how much the app can grow your savings in a typical month; and after 30 days, you’ll be more used to putting a little cash aside.
You’re curious about small-scale investing
Investing can be a great way to save, but it’s inherently risky, and you don’t want to launch yourself right into an investment account without knowing what you’re doing.
These apps make micro-investing as easy as sticking to an automated savings plan and assessing your risk comfort level. And they let you start with small balances, so you don’t have much to lose.
Read more: 7 Easy Ways To Start Investing With Little Money
Why shouldn’t you use money-saving apps?
You have a savings pattern that works for you
If you’re already saving money on a timeline that fits with your goals and income, a savings app could help you skim a little more off the top of everyday purchases, but it might not be worth the fees.
You already have substantial savings
The savings accounts built into money-saving apps are great tools to get started, but they’re not the highest-yield accounts out there. You’ll earn more money keeping your savings in a bank or investment account that offers a higher APY (Annual Percentage Yield), especially if you have decent credit.
Most important features of money-saving apps
Automated saving
Money-saving apps take the “how much can I afford” guesswork out of savings by putting them on autopilot. You won’t see a huge interruption to your regular cash flow, which is nice – saving money doesn’t have to feel like a penalty or a punishment.
And most apps make the automation flexible; if you’re having a lean month or two, you can temporarily stop withdrawals (or, as with Digit, the app stops them for you).
Most importantly, you’ll get into the savings habit after a while.
Saving for short- and long-term goals
Sometimes it’s easier to save if you have something to look forward to. Money-saving apps keep you motivated by letting you choose your goals and showing you how much your savings have progressed.
“Rounding up” purchases
This auto-savings technique is available on almost every app now. By rounding up your purchases to the nearest dollar (or two dollars, or three – some apps let you multiply) you’re saving small, manageable, regular amounts while you spend.
Checking accounts
Several apps set you up with a checking account and debit card, though you can usually link an existing checking account as well.
Everyday money management
For elaborate budgeting templates, look for a budgeting app specifically (you can find our recommendations here). But savings apps have plenty of tools to keep your finances in line, especially if you tend to be disorganized and overdraft your accounts by accident. You can observe your spending patterns, set up payment reminders for bills, and get regular balance alerts all through the app.
Investing options
While investment accounts aren’t available with every savings app, they seem to be becoming more of a standard offering. “Micro-investing” lets you start out with spare change. Once you really get the hang of it, you may choose to switch to a higher-yield investment account elsewhere.
Summary
Money-saving apps are a great starting point, but they’re only one aspect of a solid financial management plan.
Think of them as a helpful tool to analyze your spending behavior and nudge you into the next steps, whether that means breaking down a monthly budget or working towards financial freedom.
Save more, spend smarter, and make your money go further
April is Financial Literacy Month, making it a great time to boost your money knowledge and take charge of your financial life. To celebrate, we’ll be providing you tips, tricks and insights throughout the month to help you manage your financial health. Be sure to check back in on the blog and join the conversation on Twitter & Facebook – we’ll be surprising some lucky followers with prizes throughout the month, so chime in to win!
Did you know that only one third of American households have a budget? Well, they say a journey of a thousand miles begins with a single step, so what are you waiting for? Kick off Financial Literacy Month and get your financial life in order. Here are a few ideas to help you get there:
Update your budget
Analyze your spending patterns over the last few months. If you’ve gone a little overboard on entertainment or dining out, it’s a good time to revisit your budget and adjust for any changes. Make sure your budget matches your actual spending and perhaps take a minute to remind yourself of your financial goals that will help you better stick to your financial plan.
Check your credit score
Your credit score is three little numbers that can have a big impact on your financial life. Get your free credit score from Mint.com so you know where you stand and look at ways to improve your score.
Automate everything
Use Financial Literacy Month as a motivator to finally automate all of your bills and savings. The more you can automate, the easier managing your finances will be the rest of the year. Download a free bill payment app like Mint Bills that will help you pay your bills on time (and on-the-go) and maintain a healthy credit rating.
Develop a debt payoff strategy
Take the time to review your balances. If you have extra cash in the bank, you might want to make a large payment toward cutting down your debt. If you can’t pay down a debt you’ve accumulated so far this year, create a payoff plan that will get it down by this time next year. You can pay down your debt from smallest to largest, or pay down the debt with the highest interest rate first. Either way, Financial Literacy Month is a perfect time to develop a strategy to become debt-free.
So happy spring! There’s no better time than now to hit the financial refresh button and be good with your money. Just think how much you’ll enjoy your summer vacation with your budget on track.
Do you have a personal finance success story you want to share? Or perhaps there is a financial stumbling block you’ve encountered, and want to share how you overcame it? If so, leave a comment below to help inspire other MintLife readers.
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Mint is passionate about helping you to achieve financial goals through education and with powerful tools, personalized insights, and much more. More from Mint
Save more, spend smarter, and make your money go further
When it comes to your financial health, what you don’t know can cost you. Just like the annual physical with your doctor keeps your body’s health on track, knowing your financial vital signs can save you money and help you keep fiscally fit. Match your financial knowledge in the categories below to see where you can shape up!
Net Worth
Do you know what your net worth is? If the answer is no, you’re not alone: most Americans don’t! But knowing your net worth, the value of your assets (your savings and retirement accounts, your house, collectibles, your car) minus your total debts (including house payments and car payments) – is key to tracking your financial health. Knowing your net worth offers a clear picture of your financial state, showing you how you spend your money. Calculate your net worth regularly—ideally once a quarter—to identify areas where there’s room for improvement.
Mortgage Rate
According to a new Bankrate.com report, a whopping 35% of Americans don’t know their mortgage interest rate. How about you? Rates have bounced around historical lows for years, yet many homeowners who could benefit from refinancing haven’t taken advantage of the potential savings because they were unaware of their current rate. With rates expected to rise from 4.2% to over 5% in 2015, now is the time to do some easy research and stop leaving thousands of dollars on the table.
Credit Score
Your credit score – a three-digit number that represents your credit risk with a number that ranges from about 300 to 850 – is looked at by everyone from lenders to landlords. The National Foundation for Credit Counseling recently found that 60% of adults hadn’t reviewed their credit score within the previous 12 months. Big mistake, particularly if you’re in the market for a loan. Why is this number so important? Score high (mid 700s) and you could save thousands of dollars in low interest rates. Score low (below 620) and when you apply for a loan you’ll be offered a higher rate, favorable terms or even worse, you may not be able to obtain financing at all. Want to know where you stand? You can get your score for free from any number of providers including Mint.com. If your score is low, work on improving it by making your payments on time (try Mint Bills to get reminders when bills are due, stay organized, and pay on the spot). Also, cut back on using credit cards; a good rule of thumb is to avoid using more than 10% of your available credit on any card.
Make Friends with Your Credit Report
Your credit report contains detailed information about your credit history including things like credit-card use, auto loans and debts that were sent for collection. For such important information, an alarming number of credit reports contain mistakes. In fact, an FTC study indicates that as many as 40 million Americans have a mistake on their credit report. Since fewer than one-in-five consumers check their reports, chances are most people don’t know about the errors. Yet if a mistake is serious, it can lower your credit score and possibly result in your being denied credit. Get a free copy of your credit report on AnnualCreditReport.com and review it carefully.
–Vera Gibbons,Mint Contributor and Personal Finance expert
This post was corrected on March 6, 2015.
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Happy Star Wars Day! Today, Star Wars fans worldwide celebrate their favorite movie franchise, wishing each other “May the fourth be with you” in honor of the films’ most iconic line.
Though it may be difficult to imagine Obi-Wan Kenobi ever balancing a checkbook, there’s much to emulate from the Jedi Order when it comes to improving your finances. Self-discipline is a key tenet of Jedi life, as well as the foundation to keeping your money goals on track. Unfortunately, we all know human nature is sometimes at odds with fostering self-discipline. So, in honor of May the Fourth, consider these four Jedi-worthy “mind tricks” – inspired by Yoda himself – to help you stay focused on building a bright financial future. No light saber required.
“You must unlearn what you learned.”
“Unlearning” your bad spending habits requires that you discard temptations to return to your old ways. E-mails from your favorite shopping destinations arrive in your inbox daily boasting sales, deals and shiny new product arrivals. Each time you click to a website – even if it’s “just to browse” – you’re opening yourself up to the temptation to spend.
Help yourself avoid the allure of spending unnecessary dollars by unsubscribing to recurring e-mails that urge you to shop. Use a free service like Unroll.me to unsubscribe from hundreds of newsletters with one click. Catalog Choice helps you opt-out from receiving paper catalogs and coupons at home. Your budget and the environment will benefit.
“The dark side clouds everything. Impossible to see the future is.”
Psychologists have touted the benefits of visualization for decades, with studies showing that goals are more easily achieved by creating a mental image of the future state you desire.
Take visualization a step further by creating a physical image of your inspiration to hang up in your home or office. It can be a print out, a drawing or even a post-it note describing your financial goal. Look at this image daily and re-charge your commitment to long-term financial health.
“Patience you must have, my young padawan.”
Patience may be the hardest virtue, but it’s well worth cultivating in your financial life. Whenever you are considering a purchase – especially larger purchases – slow down, walk away and sleep on it. Putting time and space between yourself and the register allows you to determine if the item is essential to your life or simply an impulse.
Your will is stronger than you think. Luke Skywalker also needed help trusting his abilities, too. Never forget: the force is already strong within you. Slow down and you can save money in the long run.
“You will find only what you bring in.”
More than 60 percent of Americans don’t have savings set aside to manage a $500 emergency. While putting aside money is challenging, it is one of the most important parts of a healthy financial life.
Consider making your approach to savings more automatic. After ensuring you’re putting enough of your pay aside into your 401(k) or investment account, consider deferring a portion of your payroll directly to your savings account. After a few months, you’ll find you have a “rainy day fund” set aside just in case you need it.
Connecting your spending to saving is another great way to make saving money more painless. Several banks and apps allow customers to round-up purchases to the next dollar and save or even invest that money in a risk-based portfolio. You’ll enjoy the benefits of compounding interest, but you don’t need to be an expert at investing.
Yoda famously said “Fear is the path to the dark side.” Fear can play a big role in keeping people from achieving their financial goals.
Readers: Are you a financial Jedi? How do you avoid the dark side and stay on track with your money goals? Leave a Comment here or share your suggestion on Twitter with hashtag #FinancialJedi.
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Editor’s Note: This story was written byLauren Toms from partner site MoneyCrashers.
If you’ve been following the news this year, you might have heard about bank runs: Silicon Valley Bank, Signature Bank and First Republic in the U.S. and Credit Suisse internationally. And it’s understandable if you’re spooked.
A bank run happens when many — if not most — of a bank’s customers try to withdraw their money all at once, either because they’re worried the bank might go out of business or they’ve heard rumors about the bank’s financial health. Bank runs can be very stressful for both the bank and its customers and can have big effects on the economy as a whole.
Fortunately, there are things you can do to protect your money now so a bank run doesn’t ruin your day or your net worth.
Keep your money in a federally insured bank
Mark Van Scyoc / Shutterstock.com
One of the best ways to protect your money during uncertain times is to keep it in a federally insured bank. That means your deposits are insured up to $250,000 per depositor by the Federal Deposit Insurance Corporation (aka FDIC) or National Credit Union Administration (for credit unions).
If the bank fails, you won’t lose your money so long as you don’t have more than the insured amount in all your accounts with that bank.
To find out if your bank is federally insured, you can look for the FDIC or NCUA sign at your bank or credit union or ask a representative. You can also check the FDIC’s online database, BankFind, to verify if your bank is insured.
Don’t make assumptions. Some banks are uninsured, so it’s important to do your research and ensure your money is protected. Some banks or credit unions may also have private insurance. But it’s not backed by the U.S. government and is subject to the rules of the bank’s underwriter.
In addition to providing insurance for your deposits, using a federally insured bank also comes with other benefits. For example, federally insured banks must comply with certain regulations that protect consumers and promote stability in the financial system. Theoretically, that means that your money is more secure and less likely to be at risk in the event of a bank failure.
Diversify your wealth
Syda Productions / Shutterstock.com
Diversifying across different banks and credit unions is an important step to protect your money during uncertain times. That means spreading your money across different FDIC- and NCUA-insured institutions, with no more than $250,000 in each account.
That serves two purposes. One, the more banks you have, the more likely you are to have at least one unaffected by bank runs. They tend to spread, meaning that if one bank starts to fail people start worrying about others, which results in a run on others.
Two, it ensures that if the worst does happen and the bank becomes insolvent, you have a better shot of having at least one bank remain unscathed — meaning you still have money in at least one account to keep paying bills and living life.
And diversification doesn’t just apply to the rich and powerful. Even if you only have a few thousand dollars in the bank, keep it in at least two different institutions. Otherwise, you could temporarily lose access to all your cash between the moment the bank stops processing withdrawals and the moment the FDIC steps in — which can take a few days.
For example, maybe keep half in a longstanding bank like Chase and the other in a neobank like Chime (which importantly has no connection to Chase). By diversifying across different banks, you reduce the risk of losing access to all your money at once.
Stay informed and be prepared
Prostock-studio / Shutterstock.com
Staying informed about your bank’s financial health is a key part of protecting your money during uncertain times. Regularly check your bank’s financial statements and reports, which are usually available online or in-branch. These reports can give you insight into your bank’s financial performance and stability.
Another way to stay informed is to pay attention to the news and any announcements your bank makes. That can help you stay up to date on any changes or developments that may affect your bank’s stability. But if you hear any rumors or concerns about your bank’s financial health, it’s important to verify them before taking any action.
In addition to staying informed, it’s important to be prepared in case of a bank run. That means creating a plan to protect your money and ensure you have access to funds when you need them.
One way to do that is to keep a small amount of emergency cash on hand at all times. How much you keep depends on what you think you might need, how big an emergency you’re planning for, and whether you have a safe place to keep it.
Some people, especially those with several banks, may just want a few hundred dollars on hand in case there’s an immediate issue. Others may want an entire month’s worth of money in case the worst happens.
But neither of those is a good idea if you don’t have a safe place to store it. Technically, you could use a safe deposit box. But bank branches might close if the bank goes under, severing your access to those funds.
In lieu of that, think of a safe place in your home where you can keep it away from the prying eyes of houseguests and burglars alike. Ideally, it would be inside a fireproof, waterproof safe in case of natural disaster.
Keep calm and don’t panic
fizkes / Shutterstock.com
During a bank run, it’s natural to feel scared and uncertain. However, panicking can actually make the situation worse and put you at greater financial risk.
One danger of panicking is that you may withdraw too much money too quickly, leaving you without enough funds to cover your expenses and causing any automatic payments to bounce. Additionally, withdrawing large amounts of money can contribute to the bank’s instability and potentially make the situation worse for everyone involved.
To stay calm and make rational decisions during uncertain times, go back to your plan — and maybe even have a backup plan in case it’s worse than you thought or happens faster than you predicted.
One way to stay calm is to focus on the things you can control, such as your own finances and your own actions. That means avoiding rumors and speculation, and instead relying on verifiable facts and information.
Another way to stay calm is to remember the importance of having a long-term financial plan. By focusing on your goals and priorities, you can avoid making hasty decisions.
Final word
Mallika Mitra / Shutterstock.com
Bank runs can be a scary and uncertain time for both banks and their customers. However, by taking proactive steps to protect your money, you can minimize your risk and safeguard your finances.
By taking action now, you can protect yourself and ensure you have access to funds when you need them. Remember, it’s always better to be safe than sorry when it comes to your money.
Historically, life insurance has been a taboo subject.
As humans, we’re hardwired to think we’ll live forever. Since discussing life insurance means we’re addressing our own mortality, far too many of us choose to avoid the situation altogether.
Fortunately, the tide appears to be turning as more and more families choose to buy coverage for their families.
A study from Life Happens and life insurance research and development agency (LIMRA) showed that over 106 million of American adults are in need of some type of life insurance coverage or more of it.
Further, the number of households with life insurance coverage decreased by 13% over the last decade.
Parents under 45 with children in the home are buying coverage at higher levels than ever. From 2010 to 2022, individual coverage for millennials under the age of 35 also grew by a whopping 48 percent.
While this is all good news, far too many families still don’t have enough life insurance coverage in place. As a 2022 study from Bankrate showed, nearly half of respondents said they had less than $100,000 in coverage, while 21 percent noted they had $21,000 in coverage or less.
While some coverage is better than nothing, for most families, this isn’t nearly enough.
Introducing Haven Life
Fortunately, there’s a new – and easy – way to purchase the right amount of term life insurance coverage for your family. With Haven Life, you can apply for a tailored life insurance policy online and get coverage in a matter of days – or even hours.
Better yet, you can purchase a Haven Life term life insurance policy on top of the life insurance coverage you already have. So, if you have a life insurance policy through your employer, you don’t have to give it up. Best of all, term life insurance typically coverage costs a lot less than you think.
But, why Haven Life? First off, Haven Life only sells affordable term life insurance. With Haven Life, you’ll never have to endure a long sales speech about whole life insurance that costs an arm and a leg.
Since Haven Life only sells term coverage, you can shop for the coverage you want without worrying about cheesy salesman or absurd pricing. Keep in mind, a 35-year-old man could buy $500,000 in term life insurance coverage for as little as $21 per month!
Another huge reason to shop for life insurance with Haven Life? You can apply entirely online. By clicking through to Haven Life’s online application page, you could be on your way to affordable life insurance coverage in minutes.
Simply fill out the application with your personal details, health information, and life insurance needs, and you’ll quickly find out how much you qualify for – and how much it costs.
And if you’re in perfect health, the news could be even better.
Because Haven Life offers InstantTerm – a type of policy that doesn’t require a medical exam – those with excellent health could apply for life insurance coverage and have a policy in place within hours. You don’t have to apply for an InstantTerm policy separately, either.
Once you fill out Haven Life’s application, you’ll find out whether you qualify for InstantTerm right away. Check to see if no exam life insurance for smokers applies to you.
If you do not qualify, you will have 90 days to go through the standard medical exam procedure that most other term life insurance companies employ.
Where you once had to sit in a stuffy insurance agent’s office to buy life insurance or get contacted by a bunch of agents through an online form, the online application process created by Haven Life has made buying a policy that much easier.
Better yet, you’ll get the same quality of coverage you would buy through a normal agent and you get coverage that is competitive with the rest of the industry, even those that require a medical exam.
With Haven Life, you can count on receiving:
A simple online application process
No medical exam for qualified, healthy applicants
Easy price and policy comparisons
An immediate decision with InstantTerm
Backing of Mass Mutual, an insurer with 160 years of experience
A plain language no commission policy
The Haven Life Online Application Process
Since you’re reading this review, you’re probably aware you need more life insurance coverage. While you’ve taken a positive first step in the right direction, you’re not done yet.
In order to receive the coverage your family so desperately needs, you need to move forward with the application process.
The good news is, the Haven Life online application process is simple – and with no strings attached. To get started, you’ll simply head to HavenLife.com and fill out some basic information on the home page.
From there, you’ll select the prompt that says “Apply Now.”
Once you begin your application, you’ll need to fill out some basic information about yourself, your income, your family, and your health.
Before you get started, here are some details you’ll need to have ready:
Name
Address
Income
Net Worth
Employment Status
Military Status
Criminal History
Driving History
Travel Plans
Tobacco Use
Alcohol Use
Health History
Social Security Number
Driver’s License Number
Once you submit the required information, you’ll get an answer immediately on whether you’re approved or not and how much your monthly premium will be.
In some cases, you’ll need to complete a medical exam to get coverage, but will still have coverage while the underwriting process takes its course.
Fort those who qualify with the best rate class, however, will likely qualify for an InstantTerm policy with no medical exam required. With Haven Life’s InstantTerm, you can apply for coverage in the morning and have a life insurance policy in place by afternoon.
How Much Does Term Life Insurance from Haven Life Cost?
While whole life insurance coverage can be prohibitively expensive, term life can be downright cheap. I filled out a few applications to work up some examples, and here’s what I found:
A 35-year-old woman in excellent health can buy a 20-year term policy with a death benefit of $500,000 for as little as $18.50 per month.
A 47-year-old man in excellent health can buy a 20-year term insurance policy for $500,000 for as little as $58.50 per month
A 26-year-old man can buy a 30-year term life policy for $250,000 for as little as $19.75 per month.
A 36-year-old woman can buy a 20-year policy for $750,000 for as little as $28 per month.
At the end of the day, the cost of your policy depends on factors such as your age, your health, and how much coverage you want to buy.
That’s why filling out a preliminary application with Haven Life is the best way to get started – you don’t know how much you could save unless you apply.
Even if you hope to buy a larger policy, it may be more affordable than you think.
On the other hand, Haven Life does have the right to deny applicants who have poor health or a higher risk of early death. And even if you’re quoted an affordable monthly rate, the true monthly premium of your policy could change once your medical exam results are read.
Fortunately, you are not required to purchase a term life insurance policy from Haven Life – even after you submit an application and complete a medical exam.
Also keep in mind that Haven Life offers quotes from competing insurers as well as their own. If you could find a better deal on term life insurance elsewhere, Haven Life will let you know.
Since term life insurance all works similarly, the best thing you can do is shop around among different issuers or at least compare prices before you buy. Haven Life makes this part easy by offering competing quotes directly on their own site.
Haven Life Plus
Haven Life has unveiled a new “rider” on their insurance plans, and it’s very different than most riders out there. You don’t get accelerated death benefit or anything like that. Instead, you’re getting additional benefits that you won’t get with any other carrier.
First, you’re getting legal services (wills and healthcare power of attorney) through Trust & Will. These services usually cost $129, but if you have a Haven Life insurance plan, you get them for free.
Next, you’ll get 15% off health care services at any MinuteClinic. These MinuteClinics are in CVS and Targets across the country. You don’t have to have an appointment and they are open every day.
Additionally, if you’re a Haven Life policyholder, you get a LifeSite membership for free. LifeSite is a secure and easy way to store all of your important documents and share them across multiple platforms and devices. A membership typically costs $80, but you get this for free with Haven Life.
The most interesting benefit of Haven Life Plus is the discount to use TeloYears. What is TeloYears? It’s an at-home DNA test which details your biomarkers. These biomarkers can outline some ways you can improve your health and point out any potential problems in your lifestyle.
Lastly, you’ll get a LifeLink subscription. The goal of LifeLilnk is to make calling emergency services as easy and simple as possible. If you’re ever in an emergency, LifeLink allows you to get in touch with emergency services with just one button. After the call is over, your emergency contacts will be automatically contacted.
All of these benefits are included in the cost of your plan. You won’t have to pay extra for the benefits. Haven Life wants to help you live your best life, not just provide coverage after you pass.
What are People Saying About Haven Life?
Although Haven Life launched in May of 2015, they have already built an excellent reputation among both consumers and life insurance ratings agencies.
This is partly because Haven Life is owned by MassMutual, an insurer with 160 years of experience in the life insurance business.
As of February 2023, MassMutual and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company were rated by A.M. Best Company as A++ (Superior; Top category of 15).
Of course, ratings aren’t nearly as important as firsthand reviews and experience. Fortunately, I know one person who saved almost 50 percent on her premiums when she bought a 20-year term policy for $1,000,000 last year.
Where another company quoted her $60 per month for coverage, a policy with Haven Life came in at just $28 per month.
Haven Life on Trust Pilot
Trust Pilot also offers a range of ongoing reviews from new Haven Life customers. Here are some of the reviews consumers have left:
“The experience with Have Life was excellent. The process was very easy and not burdensome. The response was quick and not drawn out like I experienced with other life insurance companies.” – Tiffani
“Can’t say enough good comments about this product and the ease, no hassle experience with this company. Their website is very easy to use which made it easy to decide exactly what I wanted. A couple of emails back and forth, a 20-minute visit by the nurse to for the medical checkup and that was it. No pressure, no trying to steer me to a different product, can’t beat it!” – William
“The process of buying life insurance through Haven Life was great. I dreaded going to see a financial advisor who would try to sell me on products I didn’t want or need. This was a perfect alternative to that process and took less than 30 minutes to complete. If you know what your looking for and don’t want the hassle of a salesman trying to upsell you, Haven Life is perfect.” – Benjamin
How Much Life Insurance Should I Buy?
If you’re one of the millions of Americans who have some life insurance coverage, you might wonder whether buying more is a good investment. Keep in mind that most experts suggest buying at least 5-10x your income in life insurance coverage. If you earn $50,000 per year, for example, you’ll want to have at least $250,000 – $500,000 in place.
While this is a good place to start, many experts believe you need a whole lot more.
Fortunately, Haven Life offers a life insurance calculator you can play around with to get an idea of how much coverage to buy. Based on your answers to a series of questions, you can get a general range of coverage that will adequately protect your spouse and kids.
While there are numerous reasons to load up on life insurance coverage, here are some of the main life expenses your policy needs to cover:
Income Replacement – If you or your spouse were to pass away early, you would need to make sure your life insurance policy was adequate to replace your income during your working years.
College Tuition – If you have children and want them to attend college, it’s important to consider this expense when you buy life insurance. With enough coverage in place, you could get your kids through college debt-free.
Mortgage Payments – Whether you have the typical thirty-year mortgage or a loan with a shorter term, it’s important to consider how this loan will be paid off if you died. Consider adding enough life insurance to pay for your mortgage in its entirety upon your death.
Funeral Expenses – Passing away before your time is both tragic and expensive. Depending on the type of funeral your family plans, they might need to spend $10,000 or more. Make sure your life insurance policy is large enough to cover funeral expenses in addition to everything else.
Children’s Expenses – Kids are expensive, and they only get more expensive as they age. If you have children at home, make sure you have plenty of coverage to pay for daily living expenses, college tuition, sporting events, weddings, and more.
Who Can Get a Haven Life Policy?
If you’re thinking about getting a Haven Life term life insurance policy, you’re in luck. Currently, the insurer sells affordable term life insurance in 48 states plus the District of Columbia.
They’re not yet available in California or Montana, but they hope to change that soon.
To qualify for a policy, you must meet medical standards or pass a medical exam set up by Haven Life. You should be at least 18-years-old but younger than 65. You also need to meet the following qualifications:
Be a non-military U.S. citizen
Have a valid driver’s license
Not intend to use the policy for business purposes or to replace another policy
Financial Strength of Haven Life
The financial strength of Haven Life is evidenced by the fact that it is backed by the 150-year-old MassMutual, a leading provider of life insurance and retirement products.
With over $500 billion in assets, MassMutual has maintained an A++ rating from AM Best for nearly two decades, making it one of the most highly rated life insurers in the US. Additionally, Haven Life is licensed to sell life insurance in all 50 states and also holds licenses with other jurisdictions.
RATING AGENCY
RATING
OUTLOOK
A.M. Best Company
A++ Superior
Stable
Fitch Ratings
AA+ Very Strong
Stable
Moody’s Investors Service
Aa3 High Quality
Stable
Standard & Poor’s
AA+ Very Strong
Stable
The Bottom Line – Haven Life Insurance
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If you’re thinking of buying a term life insurance policy, don’t delay.
The younger you are when you buy a policy, the more affordable your monthly premiums will be. And if you should happen to become sick, you’ll have peace of mind knowing you already have the life insurance coverage you need.
To get started, visit Haven Life’s home page to begin the quick and simple process of applying online. Within a matter of minutes, you should have a general idea of whether you’ll qualify, how much coverage you can buy, and how much your monthly premiums will cost.
You may not want to talk about life insurance, but you do need to act. Buying an inexpensive term policy is the best way to protect your family today, tomorrow, and always.
Do you have term life insurance coverage? How much did you pay?
Haven Life offers a refreshing approach to life insurance, making the process of purchasing a policy easier and more convenient for consumers. The company provides a user-friendly online platform where you can quickly compare different life insurance options, determine your coverage needs, and apply for a policy. The application process is straightforward and easy to complete, with no medical exams required in many cases. One of the standout features of Haven Life is the use of technology to streamline the life insurance experience. From the online platform to the automated underwriting process, everything is designed to make the process as fast and hassle-free as possible. Customers also appreciate the ability to manage their policy online, view account information, and make payments with ease.
Cost and Fees
Customer Service
User Experience
Overall
4.3
Pros
Convenient online process: Haven Life makes it easy to purchase a life insurance policy online, with a simple and straightforward application process.
No medical exams required: In many cases, Haven Life does not require a medical exam for approval of coverage, making it a convenient option for those who are healthy and do not want to go through a medical exam.
Affordable: Haven Life offers competitive life insurance rates, making it a cost-effective option for many consumers.
Access to financial advice: Haven Life provides customers with access to financial advice and support, helping them make informed decisions about their coverage and overall financial health.
Cons
Limited coverage options: Haven Life primarily offers term life insurance, which may not meet the needs of everyone. If you are looking for a more comprehensive coverage solution, you may need to consider a different company.
Online process may not be for everyone: While the online process can be convenient for some, it may not be ideal for those who prefer to work with a human agent.
Potential for higher premiums: If you have pre-existing health conditions, you may be charged a higher premium for life insurance coverage, which could make it more expensive than other options.
Newer company: Haven Life is a relatively new company in the life insurance market, which may make some customers hesitant to work with them.
LifeHappens.org (2022 April) Owning Life Insurance Provides a Clear Path to Financial Security Retrieved from https://lifehappens.org/research/owning-life-insurance-provides-a-clear-path-to-financial-security/
MassMutual.com (n.d.) Financial Performance and Insurance Ratings Retrieved from https://www.massmutual.com/about-us/massmutual-financial-summary
Trust Pilot Haven Life Review (n.d.) Retrieved from https://www.trustpilot.com/review/havenlife.com
The 2022 TIAA Institute-GFLEC Personal Finance Index (2022) Retrieved from https://gflec.org/wp-content/uploads/2022/04/TIAA-Institute-GFLEC-2022-Personal-Finance-P-Fin-Index.pdf?x59497
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It’s been drilled in our heads for the last 36 months: “lender’s standards are going higher, while our FICO scores are headed lower.”
This divergence in underwriting standards and scores is bad news for a whole lot of people, roughly 70,000,000, who now score below 650. And those of you who are smart have made some effort to increase your scores so you can enjoy the most “shopper friendly” credit environment in 20 years.
If you’ve already found yourself in the land of the 780s, it’s time to take your foot off the accelerator because you’re good — really good. Any further efforts have you officially beating a dead horse and attempts to take the magic number any higher could land you back in the land of the 720s.
Here’s what you need to hear (though you may not want to):
There is no incremental value to being higher than 780
Other than bragging rights, there’s really no reason to stress out about your scores if they’re already over 780. Even in today’s credit environment a 780 puts you about 20 points to good and you’ve now found yourself squarely among the credit elite. You will likely get whatever you’re applying for at the best rates and terms the lender or insurance company has to offer.
As of September 2010, a 780 FICO score gets you a credit card at 7.9% (issued by a credit union). It also gets you auto financing from a captive lender (the manufacturer’s finance arm) for as low as 0% on selected models. And even if captive financing isn’t an option for you, a 780 gets you rates as low as 5.2% for a new car. And if you’re trying to buy a home, a 780 (along with satisfying other non-credit criteria) gets you a rate around 4%, which is crazy low.
The point is, your rates, premiums and terms will be no better at FICO 810, 830 or 850 than they are at 780.
You can do more harm than good
If I’ve said it once I’ve said it 1000 times…credit scores move like water. They’re going to take the path of least resistance. That means a score of 780 is easier to turn into a 680 than it is to turn it into an 800.
This is especially true for people with young (age) or thin (number of accounts) credit files. The good people at Mint.com have told me that many of their MintLife readers are in their 20s.
Something that you won’t see from reading online stories about credit scoring models is the fact that young people generally have younger credit reports (duh). That’s determined by calculating the average age of the accounts on your credit reports by looking at the “date opened” of your accounts. And the younger the credit file the more volatile the score. In English this means your scores are going to react to changes in your credit data more significantly than someone who has had credit for decades. So this story is especially meaningful to Mint readers because of their age and their younger credit files.
If you apply for and open a new account, apply for a credit line increase, max out a credit card, miss a payment, have a collection show up on your credit report, or experience a variety of other credit incidents, your scores are likely to be damaged disproportionately to someone who has a well-aged credit report. This is because you don’t have as much positive compensatory information to offset the bad stuff.
Yes, your scores can actually be too high
Some lenders don’t want an abundance of customers whose scores are too high. Stratospheric scores, those well into the 800s, generally belong to people who don’t use credit. And those who don’t use credit don’t generate income.
For the first time ever there’s now a sweet spot, credit score wise. You really want to fall between 760 and 810, give or take a few points in either direction. The 760 means you’re a very good credit risk. It also means you’re probably using credit, have credit card balances, and have installment loans. This means you’re generating revenue for your lenders and credit card issuers.
If you score too high it means you are probably not using credit cards. You’re a very good credit risk but that’s not good enough in today’s credit environment. The lender wants and needs to make some dough and if your score indicates that you’re a great credit risk but have poor revenue potential then they might just decline you. Yes, you can get declined for having too high of a score. It’s called a “high side override”, meaning you scored higher than the lender’s low-end criteria but they still declined you.
So for those of you who are at 760-780, your journey has ended. Sit back and enjoy the view from atop the FICO score mountain!!
For The Haters
Save it. This isn’t score obsession. As long as lenders, insurance companies, utility companies and landlords use credit scoring to determine rates, premiums, deposit requirements and terms (and employers use credit reports as part of employment screening) it’s something we have to take seriously, and you should regularly check your free credit report to keep tabs on your financial health.
You can’t “choose” to not be under the influence of your credit reports and credit scores. That’s not possible. Having good credit reports and scores, and paying less for things (your mortgage, your car loan and your insurance) is a “Top 5” wealth building tool. Trying to earn a great FICO score is no different than checking the performance and allocation of your investments. The minute credit reports and credit scores cease to have importance, I promise I’ll start writing a weekly knitting column.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and the author of the “credit history” definition on Wikipedia. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.
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Retiring at 40 may sound like a pipe dream. But it’s entirely within reach if you save $1 million while working. The key elements for achieving this feat are sticking to a budget and implementing a comprehensive retirement strategy. But with rising expenses, is $1 million enough? To answer this question, you must identify your expenses, including taxes and monthly debt obligations and compare them to your sources of income. Here’s how investing and budgeting can set you on the path to early retirement.
A financial advisor can also work with you to get a realistic estimate of when you may be prepared to retire.
Can I Retire at 40 With $1 Million?
Retiring a quarter-century before the standard retirement age requires careful planning. However, one rule persists for retirement no matter what age it begins: Your savings must generate enough income to cover your living expenses for the rest of your life.
With this principle in mind, retiring at 40 means you can’t rely on traditional retirement vehicles such as individual retirement accounts (IRAs) or 401(k) accounts.
These accounts are not accessible until you reach the age of 59.5. Therefore, you must research alternative retirement savings instruments to create the income you can use once you stop working.
Smartasset’s retirement calculator helps you assess how your financial situation matches your retirement objectives. You’ll enter information such as your rate of return, Social Security benefit and location to evaluate your ability to retire at 40.
How to Determine How Much You Need to Retire
Retirement always requires evaluating how taxes, expenses and income work together for you. Retiring young means having all your ducks in a row to avoid surprises or financial hardships later on. Here’s how to assess how much you need to retire:
Calculate Your Costs in Retirement
Your expenses are an essential piece of information in a retirement plan. In other words, your cost of living provides the necessary context for how you’ll retire. For example, a yacht club membership can significantly alter your budget.
Likewise, your state of residence impacts how far your dollars go each year. For example, a recent study from the U.S. Department of Commerce shows that in Nevada, a popular retirement state, the overall cost of living is 95.5% of the national average.
As a result, retirees will get a discount on living expenses (plus zero state income taxes!) for living in the state. On the other hand, Hawaii’s costs are 113.2% of the national average, meaning that retirement there will cost more.
Determine Your Income
Your tax rate decides how much income stays in your pocket. Retirees often prefer living in a tax-friendly state like Georgia or Florida because of the absence of state income taxes.
That said, your forms of income will also influence your tax status. For example, rental income from real estate incurs regular income taxes, while selling stocks for a profit incurs capital gains taxes.
In addition, healthcare expenses are a growing cost for retirees. Specifically, HealthView Services data reporting shows that a couple retiring at 65 in good health will spend about $662,00 on healthcare throughout their lives.
As a result, it’s best to plan for several hundred thousand dollars of medical expenses during retirement. Furthermore, retiring at 40 means addressing an additional 25 years of medical costs.
To do so, experts advise designating 15% of your annual income for healthcare costs. However, this amount may be higher if you have a chronic health condition.
And having children at home is expensive, whether you’re retired or not. For instance, The Washington Post states the average annual cost of child-rearing is about $17,000 per child. Therefore, it’s crucial to add this item to your budget for an accurate idea of your finances.
Identify Retirement Income Streams
With expenses accurately laid out, you can turn to your income streams. For retirement to be feasible, the $1 million nest egg must return enough income to cover your expenses. So, if you invest $1 million for a 5% return, your annual income is $50,000.
Remember, stocks are riskier than other assets, such as certificates of deposits (CDs), so diversifying your investments is critical. Otherwise, a stock portfolio that is successful this year might tank the next year, leaving you without income. In addition, you have little margin for error with $1 million; every dollar needs to provide a return.
Next, Social Security is a form of income that you’ll encounter a few decades into retirement. Because you won’t collect Social Security benefits until 62 or older, retiring at 40 means waiting 22 years to receive your first check.
So, while Social Security will be a boon in the second half of your retirement, you’ll have to get yourself there with the income you create independently.
Look at the Numbers
So, let’s look at an example combining costs and income streams. Let’s say you want to retire at 40 with one child in the house. Your life expectancy is 80, so you plan a 40-year retirement. In addition, you’ll retire in Nevada, which has no state income taxes. Here are your annual expenses:
$22,000 for housing
$15,000 for healthcare
$5,000 for utilities and property taxes
$7,000 for food
$6,000 for entertainment, phone and internet
$3,000 for auto upkeep and insurance
Your total annual expenses are $58,000, or $4,833 monthly.
To meet these expenses, you collect income from multiple sources: First, you purchase two rental properties for $500,000 total, which generate $4,000 of monthly income ($48,000 per year).
You also have a $250,000 savings account with a 4% interest rate ($10,000 per year) and a $500,000 brokerage account with an average return of 5% ($25,000 per year). So, your investments provide $83,000 of annual income.
Next, your income and single filing status place you in the 12% tax bracket, leaving you with about $51,040 of your real estate and savings account income after taxes. In addition, you’ll pay 15% for long-term capital gains taxes on your brokerage account.
So, your total monthly income after taxes is $72,290 annually. Fortunately, this figure is about $14,300 above your expenses, leaving a margin for when investments underperform or surprise expenses crop up.
That said, your income and expenses won’t remain static throughout retirement. Instead, inflation will drive up your cost of living each year at an average rate of 3%.
The expenses of $58,000 this year will grow by thousands of dollars after five years because of economic trends. Overall, it’s best to sock away surplus income to prepare for higher expenses in the future.
Remember, you’ll age into Social Security at 62 and receive an income bump at that time. For example, the Social Security Administration’s 2022 Statistical Supplement estimates the average 62-year-old’s monthly check to be $2,364.
Depending on your circumstances, you can decide when you reach 62 whether to start collecting this benefit or delay it for higher future income.
How to Boost Your Retirement Income
The example above demonstrates a path for retirement at 40 with $1 million. However, you must adhere to a tight budget to do so. On the other hand, you can give yourself more financial flexibility by increasing your income with these tactics:
Delay Social Security Benefits
Social Security isn’t automatic. Instead, you apply for it when you want to start collecting it. As a result, you can choose any age starting at 62 to begin collecting this benefit.
Increase Your Interest Rate
The interest rates of savings accounts and certificates of deposit (CDs) are constantly shifting to attract customers. For example, the typical high-yield savings account has an interest rate of between 0.5% to 4.15%.
So, moving money out of a conventional savings or checking account can provide more annual income. Plus, your deposits have FDIC insurance up to $250,000, meaning they have shelter from market downturns.
Understand Your Income Tax Implications
Your tax situation is unique to you, and failing to grasp the details can incur additional fees. For instance, say you want to sell some stock through your brokerage account after holding it for 364 days.
Doing so will incur short-term capital gains taxes, which are identical to regular income taxes. On the other hand, waiting a few days will put you in the long-term capital gains timeframe, increasing your taxes by 3%. So, staying on top of these transactions can help lower your tax burden.
How to Make Your Savings Go Further in Retirement
Likewise, you can maximize your savings potential to make early retirement easier. Here’s how to make your savings work for you:
Use a Budget
Although the word ‘budget’ might make your stomach churn, it’s one of your most powerful financial tools. Budgeting helps you gain control of your finances by providing a clear overview of your income and expenses.
Budgeting lets you track where your money is coming from and where it is going, enabling you to make informed decisions about your spending and saving habits.
Additionally, a budget also helps you set financial goals and work towards them. In this case, it’s your roadmap to retiring at 40. So, you can allocate resources wisely and prioritize what matters most.
Choose Low-Fee Investments
Management fees can be the death of otherwise successful portfolios. This characteristic applies to brokerage accounts, which can invest in mutual funds, exchange-traded funds, real estate investment trusts (REITs) and other funds that can have exorbitant administrative fees.
Evaluating an account’s fee structure before investing money is crucial to keeping more of your money.
Care for Your Health
Healthcare is paramount for retirement planning. It’s undeniable that every retiree will require healthcare services at some point in their journey. However, by taking proactive measures, you can determine the timing and way you receive such care.
In particular, regular check-ups and engaging in physical exercise serve as preventive measures that can substantially diminish the frequency of hospital visits, fostering physical well-being and financial stability.
Work Part-Time
Additionally, embracing part-time employment can bolster your finances upon early retirement. Pursuing this option can augment your income and counteract rising inflation. Moreover, this approach possesses the added advantage of enabling a prolonged deferral of Social Security, which ultimately translates into higher benefits later on.
Pay Off Debt
Lastly, it’s critical to recognize the dangerous grip that debt can exert upon your financial liberty. For instance, the burdensome nature of credit card balances and personal loans comes from their exponential interest rates. This predicament imposes sizable obstacles on the path toward retiring at 40.
Remember, the gains from investments seldom surpass the annual percentage yield (APY) that debts impose. Therefore, prioritizing the repayment of high-interest debts promotes financial health, whether during the prime of your career or your golden years.
Bottom Line
Retiring at 40 with $1 million requires a strategic investment approach. Specifically, you must create a well-thought-out plan that includes various types of assets, such as brokerage accounts, savings accounts and real estate.
In addition, calculating your expenses meticulously and ensuring that your income covers them effectively is crucial. In this scenario, $1 million must last for several decades until you become eligible for Social Security. So, thinking creatively about generating income during that time is essential.
Tips for Retiring at 40 with $1 Million
Investing $1 million for retirement means maximizing the return of every dollar during your career. Working for two decades or less means you can’t afford a mistake when investing. Fortunately, a financial advisor can help you find assets with low fees and substantial returns. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Ideally, retiring at 40 means starting off your golden years while you’re relatively young and healthy. However, your future health is unknown, especially after you become a senior citizen. So, you can prepare for this possibility by budgeting for the cost of independent living.
Ashley Kilroy
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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