Partners in BALANCE (July 2016)
Personal Finance for Millennials
Many Millennials, who graduated during a time of job scarcity and enormous student debt, are more than a little skittish about financial matters. After all, in addition to their own challenges, many saw their parents’ generation struggle with layoffs, stock market losses, and the housing crisis. Still, there’s a lot that today’s 20-somethings can do to build a brighter financial future.
Commit to Saving
If you’re living paycheck to paycheck, saving may seem out of reach. But the first step is to make a budget, identifying where, exactly, all of your money’s going now and pinpointing the wallet sucks that are keeping you from saving. Make it a goal to save at least 10-15% of your income, and start by creating an emergency fund with 3-6 months of living expenses. If, after seriously scrutinizing your budget, you just don’t see room for saving, at least commit to saving any financial windfalls—like bonuses and tax refunds – and saving future salary increases.
Looking for Supplemental Income
For many young people who are just starting out, the best way to find money to save is to generate additional income with a side job. If your employer doesn’t prohibit it, you might take on a second job during your off-hours or earn extra cash Ubering or pet-sitting. Or, if you’re a crafty sort, you could try selling your wares on a site like Etsy.
Start Investing Early
Once you have a decent emergency fund, you should start thinking about retirement. Yes, retirement! If your employer offers a 401(k) plan, sign up as soon as you’re eligible, because even small amounts set aside while you’re young will add up to a significant nest egg decades from now. And, if your employer offers 401(k) matching funds, be sure to contribute enough of your earnings to max out the match. Otherwise, you’re leaving money on the table.
Manage Your Debt
No discussion of Millennials’ finances would be complete without a word or two about student debt. If you’re carrying a heavy burden in federal loans, you may have options for restructuring your debt to make it more manageable. If your loans are with private lenders, you’ll have less flexibility, but focus first on paying off the loans with the highest interest rates. The same goes for credit card debt. New grads are often bombarded with credit card offers, so it’s easy to get in over your head. If that’s where you are, rip up any new offers and commit to whittling down your debt by refraining from new charges and always paying more than the monthly minimum.
Shape Up Your Credit Score
Being late with payments or, worse yet, defaulting on your credit obligations has a huge and negative impact on your credit score. This may not seem like a big deal if you’re not looking to buy a house or car anytime soon, but it isn’t just lenders who make decisions about you based on your credit score. A poor credit score can cause you to pay higher rates for car insurance in some states. Most landlords and many employers also check credit scores when evaluating candidates.
Financial Tips for the Sandwich Generation
If you find yourself squeezed between caring for your children and caring for your aging parents, you’re part of what’s now referred to as the Sandwich Generation. It’s a scenario faced by nearly half (47%) of adults now in their 40s and 50s, according to a 2013 Pew Research Center study, and it can be recipe for financial disaster. Here are some things you can do to help keep your finances on track, while meeting your family responsibilities.
Prioritize Your Own Financial Situation
As a key support for others, it’s important that you stay healthy physically, mentally, and financially. So, be sure that you don’t short-change your own financial goals—especially saving for your retirement. It’s also really important to have a solid emergency fund of at least 3-6 months living expenses, maybe more, since your obligations are greater and you’re entering a stage in your own life when it’s not unusual for health concerns to arise that can affect your ability to work.
Get a Handle on Your Parents’ Finances
Talking about money with the folks can be awkward, but you’ll be in a much better position to help if you have a thorough understanding of their financial picture. This includes checking and savings accounts, but also things like insurance policies, pensions, and assets such as a home. If they own their home, or have significant equity, selling it could go a long way toward paying for their care needs if they have little retirement savings of their own.
Divide Responsibilities Among Siblings
If you’re an only child, you may be stuck shouldering the entire load. But if you have brothers and sisters, be sure that each is doing what they can to help your parents. If, for example, one sibling is not able to lend financial support, perhaps he or she can take the lead on care giving or dealing with parents’ medical issues. Or, siblings who live too far away to participate in caregiving can be asked to contribute financial support.
Explore Student Aid
Always remember that your children can get loans for college, but you can’t borrow for your retirement. So, even if you’re relatively affluent, be sure to explore all options for student aid, including grants, loans, and scholarships. Having children pay at least part of their college costs also ensures they have some skin in the game.
Don’t Forget the Tax Benefits
If you become financially-responsible for your parents, you may be able to claim them, as well as your children, as dependents on your tax returns. If you are paying for their medical care, those costs may also be deductible since they are dependents. Also consider looking into the Dependent Care Credit, which is available to those who pay for child care or elder care while working.
Get Estate Documents in Order
Wills and advance healthcare directives are musts for both you and your parents, but it’s also a good idea to have a financial power of attorney prepared so you are able to step in and handle financial matters on their behalf. While these issues are always difficult to discuss, it will make things easier on everyone in the family if your parents also make clear in advance their wishes regarding final arrangements when they pass away.
Tips for Scoring Cheap Summer Getaways
Everybody likes a summer vacation, but travel can be expensive. If you’re looking to squeeze one more getaway into your budget before summer ends, here are some tips for traveling on the cheap and getting the best deals.
Go in the Off-Season
During the hottest summer months, business at popular vacation spots like Arizona and New Mexico tends to slow down dramatically. If you can take the heat, you can score some great deals at premium resorts, golf courses, and other attractions during the off-season. Just remember that the off-season is also when many of these places perform annual maintenance and major construction projects. If, for example, a pool is important to you, make sure the resort you’re visiting won’t be renovating it while you’re there.
Buy a Package
When considering a last-minute getaway, travel packages that combine flights, hotel, and sometimes meals, can be the best deals out there. The key is to be flexible on where and when to go.
Get the App for That
These days, there’s a travel app or website for pretty much everything – including tracking down the lowest priced flights, hotels and travel packages. A few to consider include Kayak, Hipmunk, Momondo, Airfare Watchdog, and Skyscanner. Each has a slightly different focus, so try out several to see which ones work best for your needs. Keep in mind that some of these sites do not carry regional airlines, which often have good deals. And, when you do find a great flight deal, take a look at the airline’s website since some deals are only available when you book direct.
Just as some deals are only available when you book direct, some travel operators offer special deals for those who follow them on social media. The best deals go fast, so follow your favorites on Facebook and Twitter, and subscribe to their promotional email lists. Fly from Hubs: If you live in a smaller town, you could save big by driving to your nearest major city where flights are generally cheaper and more plentiful. By the same token, if you live in or are flying to a metropolis like Los Angeles, be sure to look beyond the busier airports like LAX to smaller airports like Burbank, Ontario and Long Beach. They may be slightly less convenient, but many low fare carriers favor these regional airports because their fees tend to be lower.
Capitalize on the Strong Dollar
If you’ve avoided destinations like Japan, which have historically been expensive for Americans to visit, now’s your opportunity to visit and cross them off your bucket list. The strong dollar means exchange rates are favorable, and your money will go farther. If you want to stay closer to home, travel gurus also recommend Canada this summer, since it’s 40% cheaper than it was just a year ago.
Managing Your Money During a Divorce
The emotional toll of divorce is tough enough without worrying about the impact it can have on your finances. It’s important, however, to be aware of how splitting up will affect your finances – short-term and long-term. Here are some specific steps to take early on to protect both your money and your credit rating:
Close Joint Accounts
Joint accounts with your spouse – from mortgages to credit cards—are both your responsibility, even after a divorce, so be sure to close them as soon as possible. If there are children involved, you may want to keep one joint credit or checking account open for shared expenses, but monitor it closely. It’s not unheard of for an embittered spouse to move money from a joint account to an individual account – denying the other spouse legitimate access—or to run-up major credit card bills that the other spouse will be responsible to pay.
Monitor Your Credit Report
You’re entitled to one free report from each of the three major credit bureaus each year, and you’ll want to take advantage of the opportunity these offer to guard against potential fraud. Be on the lookout for new accounts an estranged or ex-spouse may open in your name.
Establish Your Own Credit
If you don’t already have accounts in your own name, it’s important to begin establishing a solid credit rating on your own. Open one or more credit card accounts, then be sure to use your cards and pay off your balances each month.
Decide Whether You Want the House
Many people have strong emotional ties to a jointly-owned family home. But a home that was purchased with two incomes may be unaffordable when you’re on your own, so take a hard look at your post-divorce income and financial status before deciding how to divide joint assets.
Revise Estate Planning Documents
Your spouse is probably named as beneficiary in your will, and for your life insurance and retirement accounts, so you’ll want to update those and other documents right away to reflect your new situation. Don’t forget to also revise your living will or advance health directive, and change any powers of attorney that designate your spouse as a decision-maker for you.
Create a Budget
Even if one spouse is required to pay child support, it’s likely that both of you will be living on less money after the divorce. Avoid getting yourself into financial trouble later on by creating a budget that’s based on a realistic estimate of your post-divorce income. Remember, as a single person you’ll now be fully responsible for your own retirement savings and necessary insurance, so be sure to include those in your financial planning. If you have children, you may also need to determine how long-term goals like college planning will be addressed.
Track Child Support Expenses
If you have children, be sure to create a system – a spreadsheet’s a good idea – to track both child support payments and costs. This type of documentation can go a long way toward minimizing financial disagreements with your ex.