12 Things to Do When You Get a Raise at Work

Getting a raise always feels great. It’s tangible proof that you’re good at what you do and your hard work has been recognized.

But what should you do with the extra income? While most of us can’t help but daydream about all the new things we plan to buy, it’s important to take a close look at your personal finances before going on a spending spree.

That way, you’ll have a clear idea of how much your pay raise actually amounts to, what your financial priorities are, and how to make smarter investments and purchases with your additional income.

How to Handle a Salary Increase

When you first get a raise, it’s tempting to make a big, celebratory purchase. But before you do, there are some steps you should take to ensure you’re making decisions that reinforce your financial stability and improve your financial future.

1. Give It Some Time

Initially, the dollar amount of your raise might sound like a significant windfall, but remember that a considerable portion will go toward taxes, health insurance, retirement, and social security, if applicable.

Before you get ahead of yourself, wait for a couple of paychecks to see how much extra take-home cash your raise amounts to on a biweekly or monthly basis. What sounds good on paper may be significantly less in your pocket after all is said and done.

You can also calculate the biweekly amount of your raise yourself, but it won’t be accurate unless you know the amounts of any relevant deductions.

Waiting it out will give you a chance to see real numbers and how much of a difference it’s actually making on each paycheck. This will allow you to determine what any extra money amounts to so that you can spend it wisely instead of overspending or accidentally increasing your monthly expenses.

2. Reassess Your Budget

Once you know how much your new salary increase will put in your bank account, use it as an opportunity to reevaluate your budget. Now’s a great time to review your expenses to determine where any adjustments can be made and how your raise can do the most good.

For example, you may want to allocate a portion of your salary increase to paying off credit card or student loan debt instead of booking an expensive vacation. Or, you may use the extra cash to bolster your rainy day fund.

It’s easy to fall victim to lifestyle creep after a pay increase by indulging in luxuries and not keeping a close eye on your spending habits. Budgeting helps to keep you in check and supports your financial goals.

Instead of increasing your spending on big-ticket upgrades to your lifestyle each time you get a raise, consider how higher bills will affect your financial health. How would buying a bigger home or a new car affect your retirement plans and how much debt you have?

Use your budget to keep an eye on your cost of living so you don’t accidentally overspend after a new raise.

3. Retool Your Retirement

Especially if you aren’t hard up for cash right now, you can use your salary increase to boost your retirement savings.

For example, you can increase the amount you put into your Roth IRA or 401k retirement accounts. Even a small monthly increase can make a significant impact over time, especially if your employer offers contribution matching.

Not only will investing more in your retirement give you long-term financial security, but it will also make sure your raise is put to good use.

4. Pay Off Debts

If you have debts, entering a new salary range is an ideal way to put more money toward paying them off. For example, you can use your pay increase to cover:

  • Credit card debt
  • Student loans
  • Car loans
  • Medical debt
  • Personal loans

The more debt you pay off, the more you save in interest charges over time, keeping a significant amount of money in your pocket. If possible, save the most by paying off debts entirely instead of just making payments.

You can even improve your credit score by paying off debts, helping your financial situation even more, especially if you plan to make any big purchases, such as a home, in the future.

5. Plan for Taxes

When you get a raise, you can expect to pay more in taxes this year than you did last year. Depending on which tax bracket you’re in, you may even find that your raise is barely noticeable if it means you no longer qualify for certain deductions or tax credits.

Understanding how your new salary will affect your taxes gives you an idea of whether you should expect a refund or a bill.

If you aren’t comfortable calculating or assessing your taxes yourself, get in touch with an accountant or financial planner. They’ll be able to give you a good idea of what to expect come tax time based on your pay increase.

If it looks like you’ll owe more money at the end of the year than you anticipated, talk to your employer about increasing your withholdings so the amount you owe is covered.

6. Increase Charitable Donations

Another way to spend your raise is to increase your donations to charities and nonprofit organizations. Not only will it spread the wealth, but charitable donations typically count as tax deductions, potentially reducing the amount you owe each year.

This is especially useful if your raise bumped you into a higher tax bracket.

You can either choose to donate a specific dollar amount or a percentage of your income, whichever works best for your budget. You can also donate items like a used car, however, you’ll need a tax receipt in order to claim it on your taxes.

7. Add to Your Emergency Fund

Your emergency or rainy day fund is meant to lend a hand when your financial situation changes or you need to make an unexpected purchase. For example, it’s helpful to have a buffer of cash set aside if you lose a job or your fridge decides to stop working.

If you don’t have any pressing purchases to make with your new raise, it’s an ideal time to fill up your emergency fund. Having funds you can rely on in the future will give you peace of mind and save you from having to panic about how to cover an expense during a stressful situation.

8. Monitor Your Spending

It’s completely acceptable to celebrate when you get a raise, but it’s important to keep your spending in check. A nice dinner or night out is one thing, but extended overspending and unaffordable purchases are another.

If you do decide to treat yourself — and you should — make sure whatever you reward yourself with is within your spending limits and that it’s a one-time occurrence. Otherwise, you’ll soon fall victim to lifestyle creep and those luxuries will become the norm.

Choose one or two ways to treat yourself and stop there. Just because you’re making more money doesn’t mean you need to spend your entire raise on frivolous items and outings.

9. Consider Inflation

If you haven’t had a raise in a while, you can safely assume that part of your salary increase will go toward covering the costs of inflation. That means that instead of adding up to extra cash in your pocket, your raise will go toward rising prices for everyday expenses like housing and groceries.

Before spending your raise, take a look at the inflation rate to see how much prices have increased since the last time you received a pay bump. This will give you a better understanding of how much added buying power your raise amounts to and what it will mean for your budget and financial planning.

10. Save for a Big Purchase

If you’re planning to make a big purchase in the near future, use your raise to help get you closer to your goal. For example, put it toward:

  • A down payment on a house
  • A wedding
  • A new vehicle
  • A dream vacation
  • Your child’s tuition
  • A home renovation

Consider whether you have any major expenses coming up before spending your raise elsewhere. Setting aside your extra cash to cover upcoming costs will allow you to reach your goals faster and help you to navigate any unexpected costs you encounter.

11. Invest in Yourself

Investing in yourself is an excellent way to use your raise. For example, you could:

You can even do something like get laser eye surgery or have an old tattoo removed. Whatever helps to improve your personal quality of life and makes your future happier and healthier.

12. Do Something Fun

At the end of the day, you earned a raise through your hard work and dedication. You deserve to acknowledge your accomplishment by treating yourself to something special. Whether it’s a new pair of shoes or a fancy dinner, make sure at least a small portion of your raise goes toward celebrating your success.

Depending on how big your raise is and what you have left after you take care of any financial priorities, you could:

  • Go on a vacation
  • Plan a spa day
  • Buy yourself something nice
  • Treat a loved one
  • Fund a hobby

Take this as an opportunity to recognize your professional achievements and reward yourself for a job well done.

Final Word

Moving up on the pay scale is always worth celebrating, whether it comes with new responsibilities or not. But before you spend all your new money, take some time to consider how to get the most out of it.

That could mean reviewing your budget, paying off debts, or saving up for a big purchase — whatever suits your financial goals and situation.

Regardless of how you choose to spend your raise, remember to set some money aside to treat yourself. After all the time and effort you put into your career, you deserve to celebrate your accomplishments.

Source: moneycrashers.com

5 Reasons You Should Not Delay Retirement

Grandfather reading to his granddaughter
LightField Studios / Shutterstock.com

Some people view retirement as something that should be delayed as long as possible. They say that, for many older workers, waiting as long as possible to collect Social Security benefits is the prudent choice.

Important as this advice is for many of us, it may not apply to you. If you are financially prepared, there are good reasons to consider retiring at the traditional age of 65, or maybe even sooner.

“Time is the most valuable asset anyone can ever have,” Mike Kern, a certified public accountant based in South Carolina, tells Money Talks News. “I would encourage anyone who has the ability and wants to retire early to do so.”

There is plenty to see, do and learn in retirement. Many retirees go on to pursue new careers or fulfill lifetime goals they didn’t have time for when they were working. Freed from the burden of a 9-to-5 job, they find that life has many new possibilities.

What follows are powerful reasons not to delay your retirement.

1. Delaying Social Security may not be right for you

Before deciding, consider your personal circumstances, advises Money Talks News founder Stacy Johnson:

“For some people it’s a great idea to take Social Security early, and for some people it’s a great idea to wait.”

You generally can start receiving Social Security as soon as age 62. Some people wait as late as age 70. If you plan to continue working until your benefits reach their maximum at age 70, delaying your claim will result in greater monthly payouts. However, if you have concerns about how long you may live or you need the money right away, filing an early claim may make the most sense.

Good to know: The system is actuarially neutral, designed to make your overall benefits work out approximately the same over the course of your retirement, no matter when you first claim them. Delaying your first claim increases your monthly retirement benefit, but it may not affect the total amount you receive over a lifetime.

2. Retirement can lower your housing costs

When you retire, you no longer need to live close to a job. Where you decide to live in retirement can affect your quality of life, due in part to the price of real estate and rental homes.

“Your house is typically the biggest expense in your budget,” says Kern. “Oftentimes, the best way to considerably decrease your costs is by downsizing or moving to a cheaper place.”

Smaller towns generally have less-expensive housing than large metropolitan areas. For example, in early February, the median home value in Boise, Idaho — a community of about 229,000 residents — was $406,579, according to Zillow.

Sound expensive? Well, compare that to San Francisco. Zillow says Frisco’s median home value in early February was $1,402,470.

3. Your good health may not last

Nobody lives forever. If you don’t get started on your post-retirement goals in a timely manner, you may never reach them.

“As grim as it sounds, if your health is on the decline, then it may make sense to take an early retirement in order to maximize the net payout of your lifetime,” says attorney Jacob Dayan, CEO of Chicago-based tax services company Community Tax.

Consider, too, that you may experience health problems as you age. If your retirement goals require being in good physical shape so that you can hike the Inca Trail in Peru or bicycle through Ireland, it makes sense to retire sooner.

4. You want to start a new career

Retiring allows you to pursue your true passions. Some retirees use their savings and pension benefits to finance the start of another career.

You can’t claim Social Security retirement benefits until age 62, but if you’ve invested in a retirement plan or qualify for a pension, you may be able to use part of those funds to launch a new career.

Dayan advises careful planning and consideration before making a change. If retiring early and starting a new career requires a substantial financial investment, consider all the risks, including tapping your retirement funds. Make sure the switch won’t put you in financial distress.

5. You can afford to do it

Money doesn’t buy happiness, but, with careful planning, an adequate retirement account may allow you to quit your job. If you no longer feel fulfilled at work and can afford it, it may be time to make the transition. A few things to consider:

  • When you’re starting out in your career, it’s easy to become obsessed with getting ahead. At some point, though, you reach your goal. You deserve a reward for your hard work.
  • If you have loved ones who need your help, and you can afford to stop working, retiring frees you to help them with their day-to-day activities.
  • Retirement offers you time to grow, cultivate new interests, pursue hobbies and spend time with loved ones. It frees you to do the things that matter most.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

58-Year-Old Landlord Says Goodbye to Tenants

Meet Frank and Linda, (not their real names). Frank and Linda have been married for 30 years and had begun having conversations around making plans for Frank to leave Corporate America before Frank turned 60. Linda would wind up her teaching career around the same time Frank would retire, and for the first time in their lives they realized that they would soon have the time they always wanted together.

Frank wanted to spend a month in Europe like he had always talked about, and Linda just wanted to go to the beach; sleep late, read books, boil shrimp and enjoy the different wines from her wine club recommendations. “Let’s do Europe in the spring when the weather is cooler,” Frank suggested, “and then we can do the entire summer at the beach when we’re ready for our warm, sunny, lazy days on the beach.” Frank’s idea sounded perfect to both.

And then it hit them: They’re not going anywhere.

Instantly Frank and Linda re-centered around the reality of their real estate portfolio. During their careers, Frank and Linda has acquired three rental homes — a storage facility, a four-plex apartment and two vacant lots in the subdivision where they lived. Frank had watched his father speculate and gamble in the stock market and lose big more than once. Frank was currently helping his dad with medical costs and carried a bit of resentment for his dad’s fast-and-loose ways with money when his dad was younger. At 25, Frank had decided he would build his own personal wealth in real estate, something he reasoned would always be there for him; and it had. Frank and Linda’s real estate portfolio, excluding their primary residence, was now valued at over $2.6 million and represented the lion’s share of the wealth they would rely on for their retirement income to supplement Frank’s Social Security and Linda’s pension as a teacher.

“How about we just sell it all,” Linda suggested, “After all, the market is so good right now.” This seemed like possibly a good idea to Frank. “Then we will have the time and the money to do what we want,” Linda reasoned. Frank said that sounded good but wanted to make sure he knew what the taxes would be, because he knew there could be a fair amount to pay were they to sell.

CPA Delivers Good News and Really Bad News

Frank and Linda had a long-standing relationship with a local CPA who had helped with all the accounting, bookkeeping and filings their real estate holdings had required. Frank offered to reach out to the CPA the next morning and run some numbers on what the tax bill might look like were they to sell all their investment real estate holdings.

Two weeks later Frank went to see his longtime CPA and friend, Lanny. Lanny pulled up Frank and Linda’s tax return from the previous year and started running calculations on all the real estate that the couple have been depreciating. After what seemed a solid half hour of the CPA banging on his keyboard, he looked up, squinted and leaned across his desk. “Well, I have good news, and I have not-so-good news. The good news is, you and Linda have made a lot of money on this real estate. The bad news is you’re going to get killed on capital gains taxes and depreciation recapture.”

Lanny went on to explain that since the total gains were large sums, those gains would be taxed at the current 20% capital gains rate, plus the 3.8% Net Investment Income Tax. He went on to say that depreciation recapture was taxed even higher, at 25%.

“So how bad is it?” Frank asked.

“Just over $500K,” Lanny murmured.

“You mean that Linda and I have to write a check to the IRS for more than $500K if we sell our real estate?” Frank was almost shaking.

In his head he was thinking the number might be closer to $200K, which he thought he might be able to tolerate. The very idea of writing a check to the IRS for more than half a million dollars left Frank angry, astonished and perplexed all at the same time.

How about a 1031 Exchange?

“There’s always a 1031 Exchange,” Lanny offered as what seemed to Frank a flimsy condolence. Frank knew of the 1031 Exchange, but that would just mean selling his real estate and buying other real estate that he and Linda would have to keep up with. Sure, they could sidestep $500K of tax, but he and Linda would have all the same headaches of property ownership, just with different addresses. Tenants are tenants, Frank said to himself, and all that goes with them. No, a 1031 Exchange was not going to solve their problem. Selling and buying again might look good on a spreadsheet, but it was not going to give him and Linda the freedom they wanted.

Several weeks went by for Frank and Linda without mention of their real estate assets. Then, one evening after dinner, Frank and Linda were sitting in their living room where Frank was watching baseball and Linda had her laptop out looking at travel blogs she followed online. Frank’s team was losing badly enough where he was considering turning it off. At that precise moment Linda said, “Frank, what’s a DST?”

 “I don’t know, some kind of pesticide,” Frank quipped.

 “Frank, it says here in this article that I’m reading that a DST is a passive form of real estate ownership that qualifies for a 1031 Exchange. The article says that many people today are opting to sell their real estate using a 1031 Exchange to move their equity into Class A apartment buildings, self-storage portfolios, medical buildings, industrial warehouses and even things like Amazon distribution centers, Walmart stores and Walgreens buildings. Apparently, these investments offer solid monthly income to investors and attractive opportunities for long-term growth,” Linda continued. “Frank, this could be it. This could be what we are looking for.”

Frank and Linda’s dilemma is not uncommon. Perhaps it was an aging population that was considered when in 2002 the state of Delaware passed the Delaware Statutory Trust Act. Revenue Ruling 2004-86 soon followed and allowed for DSTs to qualify as “Replacement Property” for the tried-and-true 1031 Exchange (part of our tax code since the 1920s). Many DSTs offered to real estate investors are capitalized with $100 million or more, and smaller investors can now access these offerings in smaller fractionalized amounts as low as $100,000. Properties include medical buildings, Class A multi-family apartment buildings, hotels, senior living, student housing, storage portfolios and industrial warehouse buildings. Nationally known tenants are typically companies like Walgreens, Hilton and Amazon, among others. Often, investors might feel better with a large and stable company like Amazon guaranteeing their monthly income, rather than the tenants who last skipped out on rent, leaving them high and dry.

Some Caveats to Consider

All real estate investing, including DSTs comes with risk, and investors should do their homework, perform their own due diligence, and read the Private Placement Memorandum, (PPM) before investing any capital.  DST offerings are typically illiquid and would not be considered suitable for a large portion of someone’s wealth when liquidity is needed. Because DSTs are regulated and are “securities,” they must be purchased from a Registered Investment Adviser and/or a Broker Dealer Representative who holds a proper securities license, Series 7 or Series 65. 

Many times, we are asked who can invest in a DST. Accredited Individuals and certain entities qualify. An individual must have a net worth in excess of $1 million, excluding his or her home, OR an income over $200K per year for the last two years. If married, the combined income required is $300K. The income is required to be “reasonably expected” going forward.

For the right person in the right situation, a DST might be the perfect answer to a common dilemma faced today by many real estate investors across America.

For more information, please visit www.Providentwealthllc.com or www.Provident1031.com.

Chief Investment Strategist, Provident Wealth Advisors

Daniel Goodwin is the Chief Investment Strategist and founder of Provident Wealth Advisors, Goodwin Financial Group and Provident1031.com, a division of Provident Wealth. Daniel holds a series 65 Securities license as well as a Texas Insurance license. Daniel is an Investment Advisor Representative and a fiduciary for the firms’ clients. Daniel has served families and small-business owners in his community for over 25 years.

Source: kiplinger.com

How to Find Felon-Friendly Apartments After Getting Out of Jail

Yes, you can rent an apartment as a felon — just do your research.

Do you have a felony on your record and happen to need a new place to rent? Well, it may seem daunting to try and find a place that won’t require a background check but it is possible to find felon-friendly apartments.

No background check apartments are rarer but they do exist and are a great option for renters with a not-so-appealing stain on their background. Let’s dive into how to find felon-friendly apartments if you have a record.

Can I rent an apartment if I have a felony record?

Apartment for rent sign.

The short answer is yes, you can rent an apartment with a felony record. However, renting an apartment with a felony record is tricky because almost every landlord or apartment complex runs background checks on future tenants.

They’ll often check everything from your credit score to your criminal history, so it’s best to share with the landlord that you have a felony — it will definitely show up. Unfortunately, landlords can reject your application on the spot if they see a felony.

While some may do this, there are some landlords that will look past it.

How to find apartments that accept felons

Starting the search for apartments that accept felons is overwhelming. It’s difficult to know where to look, what to put on your application, what to leave out of your application and how much to disclose.

The best thing to do is to educate yourself and know where to start looking and how to best prepare for the application process. Here are four tips for finding felon friendly apartments:

1. Search for no background check apartments

Criminal background check.

A great place to start is by searching for apartments that don’t run a background check. While many apartments include a background check as part of the standard application process, not all do. This is great news for you as you’ll be able to apply for the rental without having to worry about your felony appearing on the background check portion of the application process.

You can also take the time to search for “second chance rentals.” Here, you’ll be able to find listings that don’t typically ask for background checks and are often felon-friendly apartments. Everyone needs a place to live and there are landlords who are willing to give felons that second chance they need to get back on their feet, find stable housing and have a place to call home.

2. Find an individual landlord

Another way to go about finding apartments that have no background check is to search for individual landlords or private renters as opposed to apartment complexes.

By having an individual landlord, you’ll be able to take the time to discuss your situation one-on-one. Be honest and upfront about your background check. By doing this, they may look past your felony as they get to know you personally and not purely based on your background check.

A realtor is also a good way to find places to rent. They have different resources and may already know where to look for you. Using a realtor may cost money compared to looking on your own, but, you’ll likely be able to find a place to rent more quickly and get settled into a new home right away.

3. Use local and national resources

There are many local and national resources that help those who have felonies get housing. Start by looking into your local non-profits and see if there are any programs that help people with felonies get back on their feet.

A great place to get help is with The U.S. Department of Housing and Urban Development aka HUD. They offer low-income housing to those in need and also have a list specifically for felon-friendly apartments.

Another place to seek help is with The Lion Heart Foundation. Their goal is to help give people the tools to restart their lives. On their website, they have a list of felon-friendly apartments in every state. Again, by starting your search with places that’ll work for you right away, you’ll save time and stress in the house-hunting process.

4. Be prepared for a more challenging application process

Handshaking over a contract.

Being prepared for the application process is crucial in finding apartments that accept felons. Here are some ways you can better prepare yourself:

  • Write a letter: Handwritten letters are personal and convey a sense of caring. Take the time to write the landlord your story. This way they can start to feel a personal connection. Also, telling your story about your felony and how you’ve changed might make it so they don’t reject your application right off the bat.
  • Have a character witness: Landlords want to make sure they’re renting to good tenants who pay on time and don’t cause trouble. Having someone else vouch for you and your good character is very helpful in convincing a landlord to rent to you.
  • Offer to pay more: Whether it’s a higher security deposit or maybe two months’ rent upfront, paying more might help you to rent an apartment. This also shows that you are serious about renting and can pay on time.

Finding a home

While finding a felon-friendly apartment is difficult, it’s not impossible. There are several different resources and tools to use when searching for a new home.

Having the knowledge of where to start and who to ask for help is the best place to start. By knowing what you’re getting into, the experience will be less stressful and daunting. Like anything, it might seem overwhelming but you can do it!

Source: rent.com

15 Ways to Save Money Landscaping Your Yard

If you have a yard, you’ve probably daydreamed about what you want it to look like someday. But landscaping costs keep many homeowners from breaking ground.

Whether you want to improve your curb appeal, make your yard more functional, or plant your own botanical oasis, landscaping doesn’t have to be expensive. With a little creativity and forethought, you can have the outdoor space you’ve always wanted without emptying your wallet.

Landscaping Tips to Save Money on Outdoor Living

You don’t need to hire a professional landscaper to have a beautiful backyard. You just have to get your hands dirty. From planting perennials to making your own compost, homeowners have many options when it comes to saving on landscaping costs.

1. Choose a Purpose for Your Space

How you plan to use your outdoor space determines how you landscape it. Decide whether you want to tailor your landscape design to:

  • A play area for kids or pets
  • An outdoor dining and lounging area for yourself and guests
  • A productive herb or vegetable garden
  • A butterfly or bee garden

You can choose more than one, budget and space permitting.

But knowing how you plan to use your yard allows you to make a budget and avoid overspending on unnecessary purchases. It also helps you determine where you can cut costs and what your most significant expenses will be, such as putting in sod or building a ground-level deck.

2. Work With Your Yard

Work with the yard you have instead of trying to create something completely different. For example, if you have large, naturally occurring rocks and boulders in your yard, having them moved costs a lot of money. Rather than paying for removal, work around them by turning them into a rock garden or using flowers and mulch to create an attractive feature piece.

The more you need to change your yard, the more costly landscaping becomes. Uprooting trees, leveling terrain, and relocating rocks are all expensive endeavors. Instead of making your yard into something it isn’t, work with what you have.

3. Salvage Existing Wooden Fencing or Decking

Fences, decks, and patios are crucial components of many yards. And without proper maintenance, they can fall into a state of disrepair. But just because your outdoor wooden structures are looking a little worse for wear doesn’t mean you can’t salvage them for your new landscaping project.

Rather than spending a fortune on replacing an old fence or deck, fix it yourself by:

  • Repairing or replacing damaged and broken boards
  • Pressure-washing aged wood and chipping paint
  • Giving everything a good scrub
  • Applying paint or stain and waterproof sealant
  • Maintaining it each year

A quick trip to a home improvement store like Home Depot to rent a pressure-washer or buy some sealant is bound to cost a lot less than paying a contractor to rebuild your outdoor structure.

4. Choose Fence and Deck Materials Based on Climate and Need

Sometimes, salvaging your wooden fence or deck isn’t practical in the long run. If you need to replace or rebuild a fence, deck, or patio, save some money down the road by choosing materials suited to your climate.

For example, in areas where it’s either particularly hot or humid, wooden structures often need to be maintained and replaced more frequently since they’re constantly exposed to harsh elements like the sun or rain, which can damage and destroy them.

Instead, explore options with a longer lifespan, like brick, concrete, composite, vinyl, or metal. Do a cost-benefit analysis to determine how much you could save in the future for maintenance and replacement costs by choosing an alternative to wood.

5. Use Natural Elements

Found natural elements like rocks and stones are inexpensive alternatives to store-bought pavers and edging. You can also use tree stumps as stools or tables and natural mulch like grass clippings, shredded leaves, or pine needles in your flower beds.

These elements add a rustic and natural appeal to your yard and come at little to no cost. Pick up free rocks in new housing developments or by browsing online marketplaces like Craigslist and Facebook Marketplace. Repurpose dead trees by turning them into furniture. And simply empty your lawn mower bag for free mulch.

6. Create a Lush Lawn

If you have sparse grass coverage or weeds have overtaken your yard, you need to put in some work to grow a healthy lawn. But you don’t need to hire an expensive landscaper to bring your grass back to life. You can take care of weeds by pulling them by hand or using a lawn-friendly weed killer.

For dead or thin grass, try reseeding your lawn to bring it back to life. You can also promote its growth using a high-quality fertilizer, which can also help kill weeds.

Just ensure it’s a match for your soil type and United States Department of Agriculture plant hardiness zone, a measure of a region’s climatic conditions (such as heat and humidity) that helps gardeners determine the likelihood of a plant’s growth and survival.

Local home improvement stores and garden centers only carry plants and materials suited to your zone, so if you buy locally instead of online, you can find products suited to your zone without much effort. And you can always ask a store employee for assistance with choosing materials for your soil type.

If your lawn is too far gone, you may have to plant new grass, which takes a lot of time and effort. It involves stripping your old grass, laying down landscaping fabric and topsoil, and seeding or putting in squares or strips of pre-grown grass, which is called sod.

You can hire a landscaper to install it for you, but doing it yourself can potentially save a lot of money. According to Angi (formerly Angie’s List), it costs between $0.35 to $0.85 per square foot on average to buy sod, depending on what type of grass you get and prices in your area. You also may need to purchase fertilizer, landscaping fabric, and topsoil and rent equipment to grade the lawn.

Hiring a landscaper costs between $1 and $2 per square foot. So doing it yourself could potentially save you several hundred dollars. But it may not be worth it.

Angi also notes that it takes around 40 hours of work, though Home Depot says it only takes two to four hours. Either way, cutting corners could prevent your grass from taking root, costing you more money in the long run. So if you aren’t confident in your abilities, it may save you money to have a pro do it. Get some estimates from professionals and compare the costs of DIY.

Regardless of the state of your lawn, getting it back into tip-top shape is key to having a front yard with curb appeal or a backyard oasis.

But keep maintaining it after you complete your landscaping project. Just like most front yard and backyard landscaping, slacking on lawn care only costs more money in the long run. If you don’t stay on top of grass and weed issues each year, your lawn only gets worse with each season. Remember to weed, seed, fertilize, and water your grass to keep yourself from having to pay for extensive and expensive renovations in the future.

7. Landscape With Native Plants

Native plants are the plants that grow naturally in your hardiness zone. Native plants tend to thrive in your climate and soil, which means they’re low-maintenance and easy to grow, unlike potentially finicky nonnative plants.

Because native gardening often requires less maintenance, it helps save on costs for things like fertilizers, pesticides, and water while still growing healthy and strong. It’s particularly useful for novice gardeners since it can prevent you from wasting money on plants that aren’t suited to your soil or zone or take a lot of extra effort to grow.

As a bonus, they also attract birds, bees, butterflies, and wildlife since they provide familiar shelter and natural diets to various creatures in your region.

You can find native plants by perusing the Native Plant Database or talking to someone at your local plant nursery.

8. Plant Perennials

Unlike annuals, which only bloom for one season, perennial plants come up each year. For example, bulbs like crocuses, daffodils, and irises are typically perennials and sprout each spring. Perennials can also be herbs, ground cover plants, fruit bushes, and vegetables.

Because you only have to plant perennials once, you don’t have to purchase new flowers or plants each year. And they tend to multiply, so over time, you can separate the plants and bulbs and use them in other parts of your garden or trade them with others.

9. Plant From Seed

If you’re growing a garden or flowers, planting from seed rather than buying established plants and sprouts is a lot cheaper, although it requires more work on your part. For example, a packet of basil seeds typically costs between $1 and $3 compared to a single basil plant, which can cost anywhere from $5 to $15, depending on the variety. However, seeds can take anywhere from a few days to a few weeks to sprout.

You can either sow seeds directly into the ground or start them indoors based on their growing season and germination period.

If you choose to grow indoors, you must purchase some supplies upfront, like starter trays, a grow light, and a growing medium. But you can reuse many of these tools each year, saving you from buying it again each season.

If you plant them outdoors, you just need a garden bed or planter and some soil.

10. Build Your Own Garden Beds

Flower beds and veggie gardens are simple DIY landscaping projects. Putting in a new garden doesn’t have to be complicated or expensive. You can use flower beds or planters around trees or features as natural edging or start a simple herb or vegetable bed in an unused corner of your yard. Some popular options include raised planting beds and container gardens.

Depending on lumber costs and whether you can make one from found wood or old containers you already own, DIY planting beds can be much more cost-effective than buying prefabricated beds. And they’re definitely cheaper than hiring someone to build them for you. That’s especially true if all you want is something simple to house your veggies or keep flowers from spreading.

For more information on using found containers or repurposed materials as plant beds, read our article on saving money on gardening.

11. Join (or Start) a Plant Swap

Plants are probably part of your landscaping plan, whether you’re planting ornamental grasses, succulents, flowers, herbs, or veggies. Unfortunately, plants come with price tags — unless you join or start a local plant swap or seed exchange.

In a plant swap, local gardeners and plant enthusiasts trade their extra seeds or propagated plants. They give you a chance to diversify your garden for free as long as you have sprouts, seeds, or established plants of your own to barter with. Seed exchanges are also sometimes offered as part of the non-book-related free services at public libraries.

You’ll also meet fellow green thumbs who can offer tips and landscaping ideas that may help you to save money and have a more successful garden.

12. Buy Trees Late in the Season

Depending on what type you want and how common they are in your area, trees can come with hefty price tags, especially during peak gardening and landscaping season.

But unlike many flowers, herbs, and vegetables, you don’t have to plant trees early in the growing season. And if you wait, you can save big.

Many garden centers and nurseries offer discounts as the season progresses, with the most significant being in the late summer and early fall. And as long as you get your tree in the ground with enough time to establish roots before winter, waiting a month or two to buy and plant it doesn’t do any harm.

13. Make Your Own Compost

Compost does wonders for your garden. It helps improve your soil structure and fertility and provides beneficial nutrients.

Instead of spending money buying compost to boost your garden beds’ productivity and health, save money, reduce your waste, and help the environment all at once by making your own in a compost heap in your yard or composting container by using discarded organics like kitchen waste and grass clippings.

14. Build a Fire Pit

Fire pits are a popular garden idea that adds to the atmosphere and usability of your yard. They’re perfect for enjoying cool summer evenings and roasting marshmallows. But when purchased from a retailer, they can cost a lot of money.

Instead of buying a fire pit, build your own using rocks, bricks, concrete, or metal. Depending on the materials you use and the size of your fire pit, it could cost you less than $100 to build.

Just ensure you’re legally allowed to have one and that it meets your city’s rules and regulations. For example, most fire pits have to be a certain distance from buildings and permanent structures like fences and sheds.

15. Buy in Bulk

One of the best landscaping tips is buying in bulk to reduce your costs for supplies like soil, mulch, sand, river stones, and crushed rock. If you’re planning a large-scale yard renovation or soil amendment, calculate how much material like soil, rock, and mulch you need and put in a large order instead of making multiple one-off trips to the garden center.

Save even more by asking your neighbors if they need anything and split delivery costs on the order.

Final Word

Landscaping your yard can improve your home’s outdoor living experience and motivate you to spend more time outside. And it doesn’t have to break the bank. You can have a beautiful and inviting yard while keeping costs low.

To keep enjoying your yard year after year, continue maintaining it regularly by seeding, fertilizing, and weeding the lawn; tending to plants and trees; and repairing and sealing fixtures like fences and decks. That will keep you from having to take out a personal loan just to cover landscaping costs in the future.

Source: moneycrashers.com

17 Biggest Home Buying Mistakes & How to Avoid Them

Whether you’re a first-time homebuyer looking for a starter home or a seasoned homeowner ready to upgrade or downsize your property, the buying process is similar. From searching for the perfect place to call home to putting in an initial offer, it’s an exhilarating and life-changing adventure for new and experienced buyers alike.

And with such a major decision on the line, it’s important to make sure you don’t come to regret your decision in the future or miss out on your dream home by making a common — but avoidable — mistake.

17 Home Buying Mistakes to Avoid

Simple missteps like overestimating your DIY skills or making a lowball offer can put a damper on the excitement you feel during or following the home buying process. And they can cost you money, stress you out, and give you buyer’s remorse.

But, if you know what the most common mistakes are and you prepare in advance, you can bypass them — and the negative side effects they come with.

These are the most common home buying mistakes you should seek to avoid.

1. Not Reviewing Your Budget

Before you buy a home, you need to know what you can afford. This means taking a deep dive into your budget and reviewing your current costs and expenses, as well as estimating any new costs and expenses you’ll take on from owning a home.

For example, additional or increased costs may include:

  • Your monthly payment for rent or a mortgage
  • Property taxes
  • Homeowners insurance
  • Repairs and maintenance
  • Landscaping
  • Homeowners Association (HOA) or condo fees
  • Furniture
  • Utilities

You should also budget for a home emergency fund to cover potential problems like broken appliances or unexpected repair and maintenance costs.

If the estimated costs are too high, it might mean you have to rethink your budget by lowering your price range or reducing your homeowner expenses.

Knowing what you can afford beforehand ensures that you only look at houses within your budget and aren’t tempted to overspend.

2. Overlooking the Community

A house is one thing, but the community it’s in is another. Many homebuyers become excited about a particular property and fail to pay attention to the neighborhood or area it’s in. However, where a home is located can have a significant impact on your quality of life and overall happiness.

For example, pay attention to location-based factors such as:

  • The property’s proximity to an airport, dump, or train tracks
  • Whether it’s a family-oriented neighborhood
  • How close it is to amenities like public transportation, schools, and parks
  • How far it is from your place of work
  • Where necessities like grocery stores and gas stations are located

It’s also useful to look into future developments in the area, like commercial buildings, apartment complexes, and public spaces. If you’d prefer to live away from busy public areas, purchasing a property close to a future strip mall might not be a great option for you.

Or, if you want to be part of an up-and-coming area, planned developments give you a clear idea of what to expect in your neighborhood in the next few years, like new restaurants or off-leash dog parks.

Take some time to think about what you want to be close to or far from before you start your home search. Consider your interests and lifestyle to determine where your ideal property would be located, then use the information to ensure you wind up in a community that you feel good about.

3. Forgetting About Maintenance Costs

The great part about renting is that you don’t have to worry about the costs of homeownership like appliance repairs, building upkeep, or landscaping. But you do have to cover these expenses when you buy a new home.

As with forgetting to make a budget, forgetting to consider ongoing maintenance costs has the potential to wreak havoc on your finances. And avoiding maintenance and upkeep will only end up costing you more money in the long run because it will lead to larger repairs and more serious problems.

Homeowner maintenance includes a variety of recurring tasks, such as:

  • Mowing, trimming, and weeding
  • Snow removal
  • Applying paint and stain
  • Cleaning gutters
  • Pressure washing decks, patios, and siding
  • Chimney cleaning
  • Exterior window washing
  • Servicing your heating and cooling system

Depending on the home, it may also include tasks like replacing shingles, treating hardwood floors, or hiring an arborist to prune your trees.

When it comes to getting these jobs done, you can either take them on yourself or hire a professional to do them for you. However, both will cost you some combination of time and money.

Most home maintenance tasks require equipment. So if you plan to tackle them yourself, expect to cover the costs of equipment, like buying a lawnmower or a ladder or renting a pressure washer. And, if you hire a contractor to do your home maintenance for you, you’ll of course need to pay them.

Maintenance costs aren’t included in your mortgage loan, so you need to be able to cover them out of pocket. When reviewing properties, consider what kind of maintenance the property will need and whether you can afford it. Not only does it cost money, but it also takes a lot of time.

If a high-maintenance property isn’t a fit for your lifestyle or budget, look for something that requires less work, such as a newer home or lower-maintenance property like a condo.

4. Not Getting a Preapproval

One of the first steps you should take on your journey to homeownership is to get a mortgage preapproval. A preapproval is the amount a bank agrees to lend you based on factors like your savings, credit score, and debt-to-income ratio.

Having a preapproval tells you exactly how much a bank will allow you to borrow, giving you a maximum purchase price for your home.

Without being preapproved, you have no idea how much a mortgage lender is willing to give you or what your interest rate will be. This means you’ll be house shopping with no real budget in mind. You won’t even know if a bank will approve you at all, meaning you could be wasting your time even looking for a home in the first place.

Before you think about booking a showing or talking to a realtor, book an appointment with your bank or a mortgage broker. Find out exactly how much you have to work with so you can view homes within your price range and budget.

5. Only Looking at a Few Properties

Buying a home is a major undertaking, not just financially, but emotionally as well. Only looking at a handful of houses won’t give you a realistic picture of what’s on the market, what home prices are like, or whether something better is out there.

Book multiple showings to get a feel for your options. Even if you think you’ve found your dream home early on, there’s no guarantee you’ll get it. Keep your options open and check out a wide variety of properties to give yourself some perspective.

Who knows, you might find a hidden gem or dodge a bullet simply by taking your time and not limiting your options to a handful of properties.

6. Not Having a Real Estate Agent

When embarking on a home buying journey, you may be tempted to save yourself some money by opting to go without a buyer’s agent. But for most people, that’s a mistake. Unless you’re well-versed in real estate law and property negotiations, you should have a good real estate agent.

After all, their fees are typically covered in your mortgage as part of the closing costs of the home, meaning you don’t have to pay for them out of pocket.

But that’s not the only reason you should have a realtor when buying a property. A buyer’s agent provides many benefits, such as:

  • Networking with other realtors and property owners to find new and upcoming listings
  • Having access to property listing tools such as the MLS
  • Negotiating offers and conditions
  • Helping you to find a broker, lawyer, or other professional you may need
  • Handling important paperwork
  • Ensuring you’re aware of any important disclosures

An experienced buyer’s agent will work for you, helping you to find the perfect property not only for your lifestyle and budget but based on what’s available. They’ll take on the heavy lifting when it comes to paperwork, showings, and communicating with sellers and their agents, giving you a chance to focus on more important things.

7. Not Making a Wants vs. Needs List

Some people jump straight into viewing properties without evaluating their needs versus their wants. But it’s a common mistake that complicates the home buying process and causes decision paralysis. When buying a home, it’s essential to know what you need in your new home compared to what you would like it to have.

For example, if you have a dog, a yard could go on your needs list, while something like a pool or walk-in closet might go on your list of wants. If a lack of closet space would be a deal breaker for you, you might list the walk-in closet as a need for you instead.

You can give this list to your realtor, which will help them to filter through potential properties to show you. This saves both of you from wasting time viewing homes that won’t work for you.

And, it encourages you to get your priorities straight by forcing you to think about what you really need to be happy and fulfilled in your new home. Plus, knowing what you want gives you a better idea of your budget and which bonus features or upgrades you can afford.

If you don’t make a list, you could end up buying a property that isn’t a great match for your lifestyle.

8. Taking on Too Much Work

Fixer-uppers tend to be romanticized in reality TV shows about house flipping and interior design, but they’re a lot of work. Overestimating your DIY skills and taking on a house that’s going to require a significant amount of time and money to renovate or repair can quickly turn your motivation into buyer’s remorse.

On top of a mortgage payment, you’ll have to cover the costs of materials and labor for any upgrades or renovations that need to be done. If you’re handy, you can save money on labor, but you’ll still need tools, supplies, and a serious time commitment.

If you have to hire professional contractors to complete the work for you, expect costs to be relatively high depending on what you need done. If a home project goes over budget — which happens often — you don’t want to be left in a bad financial situation and an unfinished home.

Before moving ahead with a home purchase, consider how much work you’re willing to take on and how much of a renovation budget you can afford.

9. Buying in the Wrong Market

In real estate, there are two basic types of extreme markets: a buyer’s market and a seller’s market. In a buyer’s market, there are a variety of homes available for you to view and consider, meaning sellers are more likely to try to entice you with competitive prices and other incentives.

In a seller’s market, there aren’t many homes up for sale, so buyers have to compete against one another to win bidding wars. This often results in paying over the asking price, which increases monthly mortgage payments and possibly even your down payment.

The best time to buy a home is in a buyer’s market. Sometimes, waiting for a season or two to buy will save you a significant amount of money and keep you from the stress and uncertainty of buying in a seller’s market.

If you’re able to, buy when the market is in your favor and not working against you.

10. Feeling Uncertain

If you feel uncertain about a home, an offer, your real estate agent, or your financial situation, it’s not the right time for you to buy. Purchasing a house is one of the biggest financial commitments you’ll ever make, so you need to feel confident that you’re making the right choice for you, your budget, and your family.

If something feels off, carve out time to figure out what’s causing your uncertainty. It’s normal to feel nervous about taking on a home loan, especially if you’re a first-time homebuyer, but watch out for feelings of apprehension, uneasiness, or even dread.

Your home buying experience should be positive, so if your gut is telling you to reconsider, it might be best to take a step back and reevaluate.

That’s not to say you shouldn’t buy a home at all. It just means you need to change something about your situation, such as getting a new real estate agent, looking at more properties, or lowering your budget. Consider what will make you feel confident about buying a home and don’t move forward until you feel comfortable, positive, and satisfied.

11. Making a Lowball Offer

Making a lowball offer on a property is a rookie mistake that many seasoned and first-time homebuyers make. It offends home sellers, starting negotiations off on the wrong foot and sometimes even ending them altogether.

Sellers often spend a lot of time working with their real estate agents to price their homes based on the market, comparable homes in the neighborhood, and the state of the property. Just like you need to work within a budget for your home purchase, they need to make a certain amount of money from their home sale.

Lowball offers are rarely accepted and don’t provide much benefit to either party.

When making an offer on a home, listen to your real estate agent and offer a fair price. Being respectful and considering the true value of a home in your offers makes them more likely to be accepted.

12. Not Talking to a Broker

While a bank is often the first place you go to find out how much you can get approved for, they’re not your only option. A mortgage broker can provide you with a variety of different mortgage rates and terms from different lenders, allowing you to choose the best offer.

As with your bank, you’ll need to provide financial information like pay stubs, your credit score, and details about your assets and debts. The broker will use this information to shop around and find you the best interest rate and mortgage terms based on your financial situation.

Often, they can find you a better deal than what your bank is offering. However, make sure your broker has your best interests in mind. Don’t take out a mortgage with a disreputable or unestablished lender just to save some money.

A good broker can save you a lot in interest, so they’re worth talking to regardless of whether you choose to go with one of their offers.

13. Having a Small or Nonexistent Down Payment

There are a variety of different loans when it comes to buying a home, each with different down payment requirements:

  • VA home loans, which are for veterans and require as little as 0% down
  • Conventional loans, which are the most common for those with strong credit and no military service
  • FHA loans for borrowers with poor credit and low down payments

If you’re opting for a conventional loan, you’ll likely need to have a hefty down payment, especially if you want to avoid having to pay private mortgage insurance (PMI). Typically, you have to pay for PMI if you don’t have the minimum down payment required by a lender, and it’ll cost you anywhere from $50 to $200 per month.

Most lenders prefer to have at least 20% of the purchase price as a down payment. So, if you were buying a home for $350,000, you’d need to have $70,000 cash to put toward your mortgage.

Not planning for a sufficient down payment can put a huge damper on your home buying experience. It affects how much a lender will give you, your interest rate, and whether you have to pay PMI. Plus, it impacts your cash flow and the funds you have to put toward closing costs, renovations, and repairs.

Make sure you know how much you need in advance and plan ahead to avoid a disappointing and disheartening experience.

14. Going Without a Home Inspection

When you make an offer on a house, you have the option to make it dependent on a home inspection. Some lenders even make it a requirement of your mortgage terms. But if they don’t, or if you’re buying your property without a loan, you may choose to go without a home inspection.

But skipping a home inspection can cost you a lot of money and stress down the road.

Home inspectors are certified professionals who inspect a property’s condition. They review the structure, plumbing, electrical, exterior, and interior elements of the home and provide you with a report detailing any issues they find. For example, a home inspector would catch wiring that is not up to code or water damage in the basement.

These reports help you to avoid major repairs and give you an overview of the property’s condition. This can save you from buying a home that needs a new roof or that has a mold problem. Seeing as home inspections typically cost between $300 and $500, they’re often worth it.

Even if you choose to move ahead with a home purchase after you receive your inspection report, you can use it to renegotiate your offer based on any repairs that need to be made.

For example, if the report noted that the railing on the deck needs to be replaced, you could either request that the seller have it fixed or reduce your offer by how much it would cost a contractor to do.

15. Not Including the Right Conditions in an Offer

Your real estate agent will help you to figure out which conditions to put in your offer, but the most common include:

  • Home inspection
  • Financing
  • The sale of your current home
  • Closing date
  • Fixtures and appliances
  • Who pays which closing costs

You can also request an appraisal or survey, repairs, or specific cleaning tasks.

Conditions protect you so that you don’t commit to purchasing a house before you know you have financing and a home inspection in place. And they keep you from walking in on moving day only to find out the appliances weren’t included in your purchase price.

Base your conditions on the property you’re interested in and make sure they’re fair and within reason. Add too many unreasonable conditions to an offer and you risk getting rejected by a seller.

16. Not Seeing a House Yourself

Although video tours are OK, they don’t give you the full sensory experience of a home. You don’t pick up on any strange smells or noises, and you don’t truly get a feeling for the size or condition of the space or the neighborhood it’s in.

Even having a friend or family member view a home in your stead is a better option than going with video alone — especially if you won’t be able to visit yourself before you make an offer.

Ideally, though, you should visit and view a home yourself before you commit to buying it. If you happen to be buying a home in another state or country, try to plan a trip beforehand to look at houses. If you can’t do that, consider finding temporary housing to stay in after you arrive so you can search for a home in person.

If you don’t, you could end up buying a property you aren’t completely happy with or one that has unexpected issues.

17. Not Checking Your Credit Rating

Buying a house means having a solid grasp of your personal financial situation, including your credit score. Knowing your credit score keeps you from encountering any disappointing surprises when you talk to a bank or broker about getting preapproved for a mortgage.

Monitoring your credit score gives you a chance to improve it before you apply for a mortgage, increasing your chances of being approved and getting offered more competitive rates.

Check your credit score before you get too far into the home buying process to see what your rating is and whether you have any recent dings like late payments that may affect your interest rate or mortgage terms.

Final Word

Buying a house is meant to be an exciting and enjoyable experience. With such a major personal and financial commitment on the horizon, you want to do everything you can to avoid buyer’s remorse after you sign the dotted line.

Prepare yourself by getting your finances in order, having a clear idea of the kind of place you want to call home, and understanding the current market to have a happier, more successful home buying experience.

Source: moneycrashers.com

Should I Pay Off My Mortgage Before Retirement?

Older couple in front of a house
Syda Productions / Shutterstock.com

Heading into retirement without debt can make your golden years gleam. So, should you pay off your mortgage before retiring?

Money Talks News reader Sara sent us that question:

“I’ve always heard you shouldn’t retire if you still have a mortgage. But if I wait till my mortgage is paid off to retire, I’ll die at my desk. What should I do?”

OK, Sara, let’s discuss.

Federal Reserve statistics show that in 2019, 37.6% of households headed by people age 65 to 74 had a mortgage on their primary residence, as did 27.7% of those 75 and older. Those numbers have been growing for years, which isn’t surprising considering homes have gotten more expensive while inflation-adjusted wages haven’t changed much.

So, the first thing you need to know, Sara, is that if you have to retire with a mortgage because you have no choice, do it. You’re not the only one.

But for those of you who do have a choice — you either have the savings or the income to pay off your mortgage before you retire — let’s look at the pros and cons.

Mortgage payoff pros

One advantage to getting rid of that mortgage is increased cash flow. Money you’re no longer putting toward your mortgage can now go into something more productive — like your savings or, better yet, making your golden years more fun.

Another advantage is not having that obligation over your head. Not only does it feel good, but should things go south, it’s one less bill to worry about.

Finally, if you’re earning less on your savings than you’re paying in mortgage interest, you’ll be better off paying down the mortgage. If you’re paying 4% on your mortgage and earning 2% at the bank, you’re going backward by 2% per year. Pay it off, and you’ll be gaining 2% per year.

Mortgage payoff cons

What are the disadvantages of paying off a mortgage? One is turning a liquid asset — money in the bank — into an illiquid asset, home equity. For example, a few years back during the housing crisis, I had a bunch of money in the bank earning very little. I used it to buy the house next door at a bargain price. I fixed it up, then sold it for a big profit.

Theoretically, I could have borrowed against my house to raise the cash, but I probably wouldn’t have. Because I had the cash and it wasn’t earning much, I did something with it that earned a lot.

In short, having money in the bank can help you make more money. Plus, it feels good to know that if things go south, or an opportunity arises, you’ve got the funds to deal with it.

Another thing to consider: You might get a tax deduction for your mortgage. This is harder to do now because the standard deduction for single taxpayers is $12,000 and $24,000 for married couples, so a lot of us are no longer getting a tax write-off for mortgage interest. Still, if you’re getting that deduction, it essentially lowers the cost of the interest you’re paying.

The bottom line

I’ve given you pros and cons, but what should you do? Well, it depends. Pay off your mortgage if:

  • You’ve got all your retirement accounts fully funded and you’re socking away as much as you can.
  • You’ve got a ton of savings that’s earning almost nothing.
  • You’re not getting a tax deduction.
  • You can’t see any future use for the cash.

On the other hand, you might be better off leaving your mortgage alone if:

  • You’re earning more with your savings than the mortgage is costing.
  • You’re getting a tax deduction.
  • You might find something rewarding to do with your cash.
  • You simply don’t have the money to pay it off.

Either choice could be the correct answer.

I hope that answers your question, Sara!

About me

I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

Renters Rights Privileges You Can Expect as a Tenant

Renting an apartment, condo or even a house entitles you to certain rights. While some specifics will vary by state, there are key rules in place that govern everything from your living space to the property manager’s responsibilities.

Combined into a series of federal, state and local laws, your specific renter’s rights get dictated by where you live. They’re in place to prevent things like housing discrimination and rent gouging. These basic rights ensure you have a safe, clean place to live as well as detailed courses of action when things are going wrong.

Landlord-tenant law helps you live peacefully in your rental. Do you know your tenant’s rights?

Fair housing

renters rights

Before even taking a tour of a potential apartment, it’s your right to have fair access to housing. This means your rental application will not get rejected based on:

  • Race
  • Color
  • Religion
  • Age
  • Sex
  • National origin
  • Family status
  • Mental or physical disabilities

Your renter’s rights in this case receive protection at the federal level by the Fair Housing Act. State and local laws may reinforce the Fair Housing Act and even add more categories to this list to ensure everyone has equal access to apply for housing.

Not only can your rental application not get refused based on these factors, but, if you have a disability, landlord-tenant law requires they make reasonable accommodations for you to access the apartment. This could mean installing ramps or making a unit on a lower floor available.

Legal documentation

renters rights

Another piece to your renter’s rights is the lease. It’s the responsibility of the property manager to give you a legal rental contract to sign that abides by all laws.

In addition to specifics about the property, and breakdowns for processes like requesting repairs, using common areas and more, a lease must clearly indicate the leasing period and your monthly rent. It should also have your name, and any roommates, on the document.

The lease should also include a series of general disclosures. The law requires these, although it varies by state which specific ones must get listed. A few common disclosures you may see in your lease if they’re applicable to the rental unit, include:

  • Notice of mold
  • Lead-based paint disclosure
  • Notice of sex offenders, recent deaths and any potential health or safety hazards

Living space

renters rights

A variety of rules govern your living space when you’re a renter. This ensures you have somewhere to live that’s actually livable. Tenants’ rights, when it comes to your actual apartment get pretty involved, so make sure you know the highlights.

Habitable housing

It’s not enough for a property manager to provide you with an apartment; the apartment must be safe for you to live in it. This means more than a lack of dangerous conditions. Your renter’s rights entitle you to a home with usable utilities, including heat, electricity and water.

This area of your renter’s rights also means you have a home that’s safe and livable in other ways. Specifics within these guidelines require an apartment to have functioning locks on doors and windows, smoke detectors and a dedicated way to escape in case of fire.


This area of landlord-tenant law requires action on both sides. To ensure you have a habitable home, it’s up to you to report any maintenance issues using the process that’s outlined in your lease. Find out the best way to report issues like this to your landlord (such as through email or an online portal).

On the management side, their responsibility is to complete repairs in a timely manner. Your lease will define what this means, but different repairs rank higher in priority. For example, failure to repair a heater in winter can quickly lead to an uninhabitable living space for safety reasons, whereas a garbage broken disposal doesn’t create that serious of an impact.

If your property manager fails to make repairs in a timely manner, you have additional rights. Check with state and local laws about what’s within your rights.


Although you’re only renting a home, and someone else owns it, your rights as a tenant mean a certain level of privacy. Once your rental agreement is in place, a property manager cannot come into your home without proper notice.

Notice is also required for more than just repairs. If you’re getting ready to move, and the property manager wants to start showing your unit to prospective tenants, for example, they must give you notice each time.

Security deposit refund

renters rights

Each state usually handles security deposits differently as far as how much you’re required to put down. It’s normal for you to pay a security deposit though since that protects the property manager from having to pay out-of-pocket for any damages you may cause while living in your rental.

As far a payment goes, some states set caps on how much a property manager can ask for. They also can’t impose a higher deposit for your rental, when compared to other units in the building, without a specific reason, like having a pet.

It’s also within your renter’s rights to get the security deposit back, in a timely manner, if it’s not covering any damages. Most state laws set the time frame at 30 days, and you’ll not only receive your security deposit back but any interest that accrued as well.

If any of your deposit is withheld, you can ask for written documentation of the damages it’s paying for, and the property manager must comply.


renters rights

The situations where your property manager has the right to evict needs clear stating within your lease. Make sure to review them before you sign it.

Standard landlord-tenant law states that you can get evicted if you break your lease in specific ways, such as:

  • Failing to pay rent
  • Allowing prohibited animals to live with you
  • Having roommates that aren’t on your lease
  • Committing a crime on the premises

As a renter, your tenant rights enable you to address evictable issues within a specified time frame before an eviction can take place. You will receive notice of a pending eviction from your property manager. If you fail to fix the issue, they can then file an eviction with the courts resulting in legal removal from your rental.

State-specific renter’s rights

Although you’ll find many standard regulations associated with renting if you move between states, expect additional laws everywhere you go. Since renter’s rights get regulated on both the state and local level, if you’re relocating to a different part of the country — familiarize yourself with local tenant laws.

Some unique landlord-tenant laws include:

  • In Hawaii, security deposits with no deductions must get returned within 14 days
  • A property manager must give 48 hours notice before entering your apartment in Delaware
  • West Virginia has no minimum notice required for a rent increase on month-to-month rentals
  • In North Carolina, two month’s rent is the required minimum for a security deposit on a one-year lease
  • A lease can get terminated once rent is only five days late in Arkansas

As you can see, some states have pretty extreme rules. Being aware of them can help you maintain a positive relationship with your property manager while also protecting your own rights as a renter.

Know your renter’s rights

No matter how great, or rocky, your relationship is with a property manager, you should always follow the law as it pertains to your situation. This not only protects you, but it ensures your property manager gets held accountable when anything isn’t up to par.

Familiarize yourself with state and local landlord-tenant laws, read your lease thoroughly before signing and do your research when faced with a potential issue. Protect yourself by knowing your tenant’s rights.

The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.

Source: rent.com

Everything You Need to Know About Hypothecation

Hypothecation may be a word you’ve never heard, but it describes a transaction you’ve probably participated in. Hypothecation is what happens when a piece of collateral, like a house, is offered in order to secure a loan.

Auto loans and mortgages involve hypothecation since the lender can repossess the car or house if the borrower is unable to pay.

There are, though, some more subtle details to understand about hypothecation—and rehypothecation—particularly if you’re in the market for a home loan. Read on to learn about hypothecation loans.

What Is Hypothecation?

Hypothecation is essentially the fancy word for pledging collateral. If you’re taking out a secured loan—one in which a physical asset can be taken by the lender if you, as the borrower, default—you’re participating in hypothecation. (Hypothecation is also possible in certain investing scenarios, which we’ll talk briefly about later.)

Some of the most common hypothecation loans are auto loans and mortgages. If you’ve ever purchased a car, it’s likely you have (or had) a hypothecation loan, unless you were able to pay the full purchase price in cash.

Importantly, just because the asset is offered as collateral doesn’t mean that the owner loses legal possession or ownership rights of that asset. For instance, with an auto loan, the car is still yours, even though the lender might hold the title until the loan is paid off.

You also maintain your right to the positive parts of ownership, such as income generation and appreciation. This is perhaps most obvious in the case of homeownership. Even if you’re paying a mortgage on your property, you still have the right to lease the place out—and you can still collect the rental income.

However, the lender has the right to seize the property if you fail to make your mortgage payments. (Which would be a bad day for both you and the renters alike.)

Why Is Hypothecation Important?

Hypothecation makes it easier to qualify for a loan—particularly a loan for a lot of money—because the collateral means the transaction is less of a risk for the lender.

For instance, hypothecation is the only way that most people are able to qualify for mortgages. If those loans weren’t secured with collateral, lenders might have very steep eligibility requirements to lend hundreds of thousands of dollars!

There are loans where hypothecation is not present, however. They are also known as unsecured loans. A personal loan is a good example.

Because unsecured loans are riskier for the lending institution, they tend to be harder to qualify for and carry higher interest rates than secured loans.

It’s a trade-off: With an unsecured loan, you’re not at risk of having anything repossessed from you, and you can use the money for just about anything you want.

On the other hand, if comparing, say, a car loan and personal loan of equal length, you’re likely to pay more interest over the life of the unsecured loan and be subject to a stricter eligibility screening to get the loan in the first place.

Recommended: Smarter Ways to Get a Car Loan

Hypothecation in Investing

Along with hypothecation in the context of a secured loan on a physical asset, like a house or a car, hypothecation can also occur in investing—though usually not unless you’re taking on more advanced investment techniques.

Hypothecation occurs when investors participate in margin lending, which involves borrowing money from a broker in order to purchase a stock market security (like a share of a company).

This technique can help active, short-term investors buy into securities they might not otherwise be able to afford, which can lead to gains if they hedge their bets right.

But here’s the catch: The other securities in the investor’s portfolio are used as collateral and can be sold by the broker if the margin purchase ends up being a loss.

TL;DR: Unless you’re a well-studied day trader, buying on margin probably isn’t for you and you probably don’t have to worry about hypothecation in your investment portfolio. But you should know it can happen in investing, too!

Recommended: What Is Margin Trading?

Hypothecation in a Mortgage

As mentioned above, a mortgage is a classic example of a hypothecation loan: The lending institution foots the six-digit (or seven-digit) cost of the home upfront but retains the right to seize the property if you’re unable to make your mortgage payments.

Given the staggering size of most home loans and the risk of losing the home, you may wonder if taking out a mortgage is worth it at all.

Even though any kind of loan involves going into debt and taking on some level of risk, homeownership is still often seen as a positive financial move. That’s because much of the money you’re paying into your mortgage each month usually ends up back in your own pocket in some capacity … as opposed to your landlord’s pocket.

When you pay a mortgage, you’re slowly building equity in the home. And since most homes have historically tended to increase in value, or appreciate, you can often end up making a profit even after factoring in whatever interest you pay on the mortgage—most or all of which is likely tax-deductible.

A Note on Rehypothecation

There is such a thing as rehypothecation, which is what happens when the collateral you offer is then, in turn, offered by the lender in its own negotiations.

It’s like hypothecation inception. We have to go deeper.

But this, as anyone who lived through the 2008 housing crisis knows, can have dire consequences. Remember The Big Short? Rehypothecation is part of the reason the housing market became so fragile and eventually fell apart entirely, and thus is practiced much less frequently these days.

The Takeaway

Hypothecation is the process in which a piece of collateral, like a house or car, is offered as part of the negotiation of a loan. Mortgages are a classic example of hypothecation—and hypothecation is the reason most of us are able to qualify for such a large loan.

If you’re looking to finance or refinance a home, SoFi offers a range of fixed-rate mortgages with terms ranging from 10 to 30 years.

Prequalifying takes just two minutes, and mortgage loan officers are standing by to help guide you through every step of the process.

It’s quick and easy to find your rate.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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.


Source: sofi.com

PODCAST: Get the Most from the Expanded Child Tax Credit

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David Muhlbaum: Some of us are about to get yet another stimulus from the government. The latest version is the expanded child tax credit, which starting this month means payments to qualifying families. Joy Taylor, editor of the Kiplinger Tax Letter, joins us to talk about how all this will work. Speaking of taxes, as wedding bells ring out again, what does that mean for filers? All coming up on this episode of Your Money’s Worth. Stick around.

David Muhlbaum: Welcome to Your Money’s Worth. I’m kiplinger.com senior editor David Muhlbaum, joined by my co-host, senior editor Sandy Block. How are you doing, Sandy?

Sandy Block: I’m peachy.

David Muhlbaum: Just peachy. Yeah. That fruit is coming into season. Question for you though, have you been invited to any weddings?

Sandy Block: Not recently, but it looks like there might be some out there on the horizon.

David Muhlbaum: Oh, who?

Sandy Block: I can’t say, but people are definitely talking about it, getting engaged, talking about it. I’ve heard a lot of stories about people who were going to get married last year and postponed it until fall of 2021 or even later. So it sounds like there’s a lot of marriages sort of in the hopper.

David Muhlbaum: In the works. Yeah.

Sandy Block: In the works. That’s right.

David Muhlbaum: Right. Yeah. That’s why I brought that up, because I feel like we may be on the cusp of an explosion in weddings. Or, not! What I wanted to talk about was a piece Emma Patch wrote for Kiplinger’s Personal Finance that was a good solid recap of how marriage affects taxes. And it’s not like those rules are really going to affect whether someone schedules a wedding in 2021, but they’re good to know and review — you know, personal-finance guidance. But I thought, hey, let’s see what the data says, like, are we on the cusp of a wedding boom? Those anecdotes that you and I have, well, that’s great, but is there data on this? An economic indicator? Because as we know, there’s a ton of money sloshing around the wedding industry. So you would think that people who rent venues, sew dresses, bag bird seed, whatever, they’d want to know. Now, I found a survey from The Knot, the big wedding website that suggested a boomlet. But, it’s a survey of their own readers, so it’s kind of a self-selecting group.

Sandy Block: Right. You’re not going to The Knot if you’re not getting married or at least thinking about it. I guess people could look at marriage licenses. You can’t get married, well, legally, without one of those. I remember getting mine and I got some free household goods out of the deal.

David Muhlbaum: Lucky you.

Sandy Block: Oh yeah.

David Muhlbaum: Well, that’s true. That’s true. But marriage licenses, those are issued by a zillion counties and municipalities, and they don’t tell you what kind of party someone’s going to throw.

Sandy Block: Right. To bring another Emma story into it; we’ve got one in the works. Emma talked to a wedding planner in Portland, Oregon who gave the impression that it’s not necessarily full steam ahead, party down for the wedding industry. Because a lot of her clients still have concerns about guests who might be immunocompromised or have family members who aren’t vaccinated. Young people — what do you do about that? There are still local regulations in many places about large gatherings. So that’s just an anecdote, but it’s from someone right in the heart of the business.

David Muhlbaum: Yeah. I guess we’re not going to get a forward-looking indicator on weddings. So let’s recap the marriage stuff so that we at least squeeze in some actual useful facts before we get to our main segment.

Sandy Block: Right. That’s marriage and taxes.

David Muhlbaum: Right. That’s what we’re going to talk about now. Then we’re going to talk about children and taxes. So, okay. Marriage and taxes. Now, one of those is inevitable and the other isn’t, but when you get married, it can change your tax situation. Now, in the old days, and by old days, I mean before 2017, when you were talking about matrimony and taxes, the word marriage was usually followed by penalty, marriage penalty. It was just one of those things that people like you and me would talk about with the younger people getting engaged. “Well, it’s lovely that you and McKayla are tying the knot, but it’s a pity about that marriage penalty.”

Sandy Block: But nowadays, when someone tells me that their partner doesn’t want to get married because of the marriage penalty, I just tell them, “Your partner just doesn’t want to get married.” Because under the 2017 tax law, the marriage penalty pretty much went away except for the very wealthy. In fact, some couples may actually enjoy a marriage bonus, and what this is all about is the idea of filing jointly, putting the spouse’s incomes together. I sometimes hear from people who say, “Well, we’ll just file separately and save taxes.” No, you won’t. The IRS is onto that, and it doesn’t want you lowering your taxes by filing separately. But under the current regime, it’s very unlikely that filing jointly will result in a higher combined tax bill than you would have if you never got married and just lived together.

David Muhlbaum: There still could be reasons though to file separately, to pass up that new marriage bonus.

Sandy Block: Right. I guess the major one, and this is probably something you should seriously think about if you’re thinking about getting married, is that if your spouse commits fraud. Or to be less harsh, maybe your spouse has his own business, and maybe it’s not reported all of his or her income. You could be on the hook for that, if you’re married. if you’re single, you’re off the hook. So certainly file separately if you think that the IRS has the goods on your spouse.

David Muhlbaum: Yeah. You might want to have a little chat there.

Sandy Block: I think this is a good thing.

David Muhlbaum: Yeah. But the marriage penalty might be alive and well at the state level, right? I mean, we’ve got 50-plus regimes to deal with there.

Sandy Block: Yes. Absolutely, and that’s something that Emma covered in her story. There are 15 states that have a marriage penalty built into their tax bracket structure. Seven states and the District of Columbia, however, offset the marriage penalty in their bracket structure by allowing married taxpayers to file separately in the state, even if they filed jointly on their federal tax return.

David Muhlbaum: Yeah. Of course, there are a good number of states that don’t have an income tax at all, or a flat one. Hey, check out Kiplinger’s Tax Map for that, newlyweds. When we return, more on taxes — but different ones — with Joy Taylor, editor of the Kiplinger Tax Letter.

Child Tax Credit with Joy Taylor

David Muhlbaum: Welcome back to Your Money’s Worth. The American Rescue Plan, remember that, is still pumping money into the economy. The latest flow starts this month with advanced payments from the IRS, for the expanded child tax credit. Unlike earlier stimulus efforts that went extremely wide with the goal to put cash in the pockets of just about every taxpayer as quickly as possible, the expanded child tax credit is a more tailored affair. Like number one, you’ve got to have kids, but that’s not all there is to it, and a range of income limits apply. Joy Taylor, the editor of the Kiplinger Tax Letter will help us sort out this complex program to make sure you can take advantage of it in the best way for your finances. If you’re sitting there thinking, hey, I pay taxes. I don’t have kids, what’s up with that? We’ll touch on those issues a bit too. So welcome, Joy. Thanks for joining Your Money’s Worth. First time, right?

Joy Taylor: Yes, it is. Thanks for having me, David and Sandy.

David Muhlbaum: It isn’t our first go round with the expanded child tax credit though. Earlier this year, we had Rocky Mengle, Kiplinger’s senior tax editor here on Your Money’s Worth to talk about stimulus checks. Then Sandy, you asked him about the child tax credit.

Sandy Block: I just like to stay ahead of the news. Are you blaming me for that?

David Muhlbaum: A little. I have no doubt that Rocky did the best job imaginable in laying out how the child tax credit worked up until now, because child tax credits aren’t new, let’s make that clear. And then, how the American Rescue Plan was going to expand it. But at the end, I was still like, oh my God, this is complicated and who is going to remember all those numbers and phaseouts and income levels? That was even before we knew how the government itself was going to administer the program, which is its own new layer of complexity.

Sandy Block: Right. But the news here is that people are going to start getting checks, and that’s one of the things that Joy is going to give us details on.

David Muhlbaum: Yeah. Yeah, absolutely. Absolutely. That’s why we’re doing this again. But the problem of the numbers, and the phaseouts, and the income levels, it hasn’t gone away. So right off the bat, I want to plug a tool that we’ve come up with here at Kiplinger, that you can go online and use to see how the expanded child tax credit works for you. It’s the 2021 Child Tax Credit Calculator, and it does exactly what it says on the tin. Because, even if we do the most exhaustive explanation possible here today, you’re probably going to forget some portion of what we said, and in any case, you’ll want to run your own numbers. So “Child Tax Credit Calculator,” search those words or look in our show notes. The other thing we’re going to plug now, and maybe later, depending on how stuck we get, is Joy’s FAQ piece, “Child Tax Credit 2021. Who Gets $3,600? Will I get Monthly Payments?” I’ll also link to that in the show notes.

David Muhlbaum: Sorry, Joy. I’m trying to make this easier on everyone, you included. In fact, my first question is going to attempt to skip past all those numbers altogether, and just get you to talk about one of the main things that makes the expanded child tax credit so different. That is, if you qualify, you get some of the money upfront, as Sandy mentioned. Government pays you! So if someone wasn’t paying attention to us or lived under a rock or whatever, they could end up having money appear in their bank account, starting July 15th, just like that.

Joy Taylor: Yes. That’s true, David. The expanded child tax credit allows for advanced monthly payments of the credit. It’s sort of based on the stimulus payments from earlier, from last year, and then earlier this year. People who, eligible families who qualify, will receive, starting July 15th, a monthly payment, per child. A monthly credit per child, depending how many children they have, their income, et cetera, for six months this year. So it’ll be July 15th and pretty much the 15th of each month until December. They’ll be getting these payments of this child credit up front. That puts more money in peoples’ pockets to help them, to help them pay their rent, their mortgage, food, or whatever they want to do with the money. Remember, the payments are an upfront sort of advance of a child credit that will be taken on your tax return that you file next year.

Sandy Block: So Joy, David didn’t want to get too bogged down in the numbers, but let’s go for the big number. What’s the most money that parents can get from this program?

Joy Taylor: So it all depends on the number of children you have and the age of the child. So the most money is $3,600 per child under the age of six, $3,000 per child from age six through 17. So when you’re talking about, that is the total annual credit per child that you have. When you’re talking about advanced payments, you’re talking about at least $300 per month, per child under age six, $250 per month, per child age six to 17. Let’s say you have two children, one five, one 10, you’ll be getting, and your income, you qualify for the full credit. You could get payments per month of $550.

David Muhlbaum: Wow. Okay. Just to be clear, there’s no cap on the number of kids, right?

Joy Taylor: Yeah. So there’s no cap on the number of kids, there’s just a cap on the ages of the children, but not on the number of children.

David Muhlbaum: That’s between you and your household, if .. okay, okay., go for it. Since we’ve gone there, in terms of numbers, let’s talk about the income limits. So the child tax credit has always been income-limited, make too much, you don’t get it. But now there are two tiers of income limits in effect? Can you outline how that works a little bit please, Joy?

Joy Taylor: Sure. I think the easiest way to do this is to first discuss the rules that were in effect prior to 2021, prior to this year. So the income levels that were in effect for 2020 was $200,000 for single people and $400,000 for married people. So if your income levels exceeded that, that’s when the child credit started to phase out. For 2021, you still have those $200,000 and $400,000 income levels for the $2,000 child credit. But for the people who qualify for the higher child tax credit of $3,000 or $3,600, based on the age of the child, those income levels are different, they’re lower. So those income levels are $75,000 for single people, $150,000 for married people. So you have two different income levels: You have income levels to qualify for the higher child tax credit of $3,000 or $3,600, and you have the income levels to qualify for the $2,000 child tax credit.

David Muhlbaum: If we’re going to try to shorthand those, essentially you can make more money and get the old one. To get the bigger new one, the income limits are lower.

Joy Taylor: Yes. To get the bigger new one, the income limits are $75,000 for single people and $150,000 for married people. By the way, that’s adjusted gross income figures, not taxable income figures. One thing though that I should just clarify when we go back to the advanced payments is, people who only qualify for the $2,000 child tax credit — so people with higher incomes, I mean, wealthy people; I’m talking about, up to $400,000 if you’re married — you still will get advanced monthly payments.

David Muhlbaum: Whoa! I didn’t even realize that one.

Joy Taylor: You’ll still get a monthly payment of up to $167 a month. So the monthly payment does not apply only for-

Sandy Block: Oh interesting.

Joy Taylor: The people on the lower end of the income scale. The monthly payments, the advanced payments are for anyone who qualifies for the child tax credit.

Sandy Block: Alright. Lots of people get a check.

Joy Taylor: Yeah. I don’t think many people know that-

Sandy Block: No. I think that’s really interesting.

Joy Taylor: I don’t think that’s been widely publicized, because this has generally been publicized and been talked about by lawmakers as an anti-poverty.

Sandy Block: Right. Right.

Joy Taylor: It’s an anti-child-poverty measure. So you’re wondering, well, why would someone, why would a family who makes $400,000 get $167 a month per child as payments.

Sandy Block: Right. Which is kind of the same discussion that went on over the stimulus checks. But along those lines, we should note that this is, right, a one-year program. So in 2022, the tax credit won’t go away, but it would go back to the old values and phaseouts. Is that right?

Joy Taylor: That is right now. So yes, the program is only for 2021. So in 2022, the income levels and ..the higher income levels and the $2,000 child credit will come back. All the advanced payments and the higher child tax credit would go away. However, lawmakers want to make this permanent. As I said, this is a, I’d mentioned before, it’s an anti-child-poverty program. So lawmakers, especially Democratic lawmakers, want to make the program permanent. President Biden had proposed for it to go through 2025. He wants to make it permanent too. That’s just solely, 2025 is just because of a federal budget issue. But Democratic lawmakers want this to be a permanent, essentially permanent stimulus payments.

David Muhlbaum: Do we have any sense of what the cost of this program is? Essentially by the government passing up revenue by doing this program, the expanded child tax credit?

Joy Taylor: Yeah. The cost of the expanded child tax credit is estimated to be about $107 billion for essentially the 2021-2022 year.

David Muhlbaum: Bingo. Okay. That’s pretty precise. So in essence, Joy, on one hand, we could look at this from a policy perspective as: The child tax credit is a subsidy for having kids. Now, it’s a more generous subsidy for having kids. There will probably be people who are opposed to government spending on the face of it, they may be opposed to government spending for anything. But I’m just curious, kids are popular, but, is there a constituency that pushes back against this?

Joy Taylor: Well, I don’t know, when you say pushes back against this. Some might say fiscal hawks and more conservatives might push back against these government programs or a higher child tax credit. However, when you look at history, in 2017, then-President Trump and Republicans passed a tax reform law. That tax reform law actually doubled the child tax credit from $1,000 to $2,000. So, subsidizing children, it’s not a partisan idea.

David Muhlbaum: No. That makes sense. That makes sense. But yes, there could still be… I just sort of imagined in my mind, there are people going, “but wait a minute, I pay taxes, too.” But I see your point. Children are bipartisanly popular. Again, Sandy, we’ve talked in the past about, well, how do other countries do it? Definitely, if you look at the tax regimes of countries like the UK and many others, there are specific carve-outs like this, where there is favorable tax treatment for having children. Sandy, you had a question about how this is actually going to work.

Sandy Block: Yeah. Just last week, the IRS Taxpayer Advocate put out a report, a really devastating report about IRS service. How many tax returns have not been processed. How only about five people in the United States actually got through calling? I’m exaggerating, but hardly anybody who called the IRS talked to a person. So I guess this is a program, once again, that we’re looking to the IRS to manage. Are they going to be able to pull this off? They already had to do stimulus checks, unemployment benefits adjustments. I mean, we’re really asking a lot of an agency that by every indication is underfunded and understaffed. Is that going to be problem, do you think?

Joy Taylor: So there are definite concerns. I mean, IRS has been underfunded for years. They keep losing personnel. They keep having to deal with changes in the tax laws. So, I can understand those concerns, and there very well could be issues in the future. However, I actually was pleasantly surprised by how well IRS handled stimulus payments. That was put on IRS very quickly. IRS did not know that was coming, and that was put on them quickly. Yes. That was a one-time payment, which actually ended up being three times. But the IRS overall, with hiccups here and there, overall did a good job with the stimulus payments. I think because of that, Congress thought that IRS could handle the job of deal of handling, paying out child payments.

Now, it is going to be difficult. IRS had to create all sorts of systems, all sorts of new tools on their website … they’re going out and doing press. They’re trying to advertise this credit to everyone. I mean, not just to people with money and people who might listen to this podcast. But also to people in public housing who would qualify for the credit. So IRS has a lot on its shoulders, but I don’t know. At the beginning of this, I had thought that IRS would not be able to handle it, now I’m becoming a bit more optimistic. So far they’ve been meeting the timeframes.

David Muhlbaum: Well, that’s good news. The individual though, has some control here too. You mentioned the systems that the IRS has been setting up to make the system, to make the payouts work. The individual who’s eligible can also check in to make things go smoothly. Can you talk a little bit about what those are and how people should do that?

Joy Taylor: Sure. So there are a few things. First off, I guess the first main issue, the first main question is, do you want these child payments? Do you want these monthly payments? Or would you rather take the full credit when you file your tax return next year? As I said upfront, the monthly payments are advances of the child tax credit that you will take on your 2021 return that you’re going to file.

David Muhlbaum: As you also mentioned, they may be going to people who, well, it doesn’t make that big a difference for them.

Joy Taylor: Right. Right. So some people might want to, instead of receiving monthly payments, maybe they would like a large refund when they file their return next year. So IRS has, well, IRS pursuant to the law because the law requires that IRS allow people to opt out of monthly payments. So these people will still qualify for the child tax credit, but they don’t have to receive monthly payments if they do not want to.

Joy Taylor: If you want to opt out, IRS has created a tool, it’s called the Child Tax Credit Update Portal. So you go onto that tool online to essentially opt out. You generally have to… If you don’t want the payments, you generally have to opt out at least two weeks prior to the next scheduled payment. So it’s too late to opt out for the July 15th payment. If you want to opt out for August and the next five payments, then you have to do that I think by early August.

Sandy Block: Joy, can you also use this portal to update information? Maybe you’ve got a child the IRS doesn’t know about?

Joy Taylor: Yes. Although that feature is not yet available, it will be on that portal. You can update the portal to provide if there’s a change in your income level, if there’s a change in the number of children, the age of your children. Because IRS is generally, if you think about this, IRS is generally going to look at your 2020 returns and 2020 information to figure out the amount, if you qualify for advance payments, and the amount. So if your circumstances are changing in 2021, or you know they’re going to, then you are going to want to go on to the Tax Credit Update Portal on IRS’s website and make those changes.

Sandy Block: I’m thinking, yeah-

David Muhlbaum: If you have a newborn for 2021 right?

Sandy Block: That’s what I’m thinking. If you had triplets this year, you’re going to want to go to that portal.

Joy Taylor: Well, you want… Yes, that’s true, but remember, you’ll want to go to that portal if you want the payments in advance for those triplets.

Sandy Block: I think if I had triplets I’d want that money.

Joy Taylor: Yeah. So you’ll still qualify for the credits, right? Do you want that money now? Do you want the money each month? Or would you rather receive, if you’re eligible, I don’t know, my math is awful. But whatever $3,600 times three is, like $10,000, is it $10,800? All at once.

David Muhlbaum: Well, diapers.

Sandy Block: That’s what I was going to say, David. That’s a lot of diapers. I think I’d want the money now. The other issue, because this came up with the stimulus checks is: Will people be able to use that portal to update their bank accounts? So I assume most folks are going to get this direct deposit.

Joy Taylor: Yes, and that feature is already up.

Sandy Block: Oh, great. Okay.

Joy Taylor: So yeah. So yeah, IRS is generally going to send, if they have your bank account information, they’ll directly deposit the monthly payments. Otherwise, they’ll send a check. If you don’t think IRS has your information, you can go in and update it.

David Muhlbaum: Got it. Now, we talked about the idea of not receiving the monthly payments because well, you’d rather have the money later or you don’t need it right away, that sort of thing. There are good reasons to do that. But it makes me think a little bit of the flip situation, which is when someone not only really needs the money, but that child tax credit could end up being an income to them. What I’m driving at here is the fact that, my understanding is that not only was the prior child tax credit, what’s called fully refundable, but the new one is as well. Which means that even if your federal income tax liability is zero, you still get money. Did I get that right?

Joy Taylor: Okay. Well, partly.

David Muhlbaum: Or sort of?

Joy Taylor: Sort of. Sort of. The prior child tax credit was not fully refundable.

David Muhlbaum: Oh, okay.

Joy Taylor: It was only refundable up to $1,400 per child, and only for very low-income people. You had to have at least $2,500 of earned income, meaning you had to have been working, et cetera. All of those limitations are now gone. So now for 2021, the child tax credit is fully refundable, meaning, even if you have no tax liability, you can get the money. You don’t, by the way, families do not have to have earned income. So for non-working families, maybe families looking for a job, families on various government subsidies, et cetera. If they don’t have any income at all, they’re still eligible for the child tax credit payments.

Sandy Block: I guess that’s why this is being promoted by supporters as an anti-poverty program, because people who really need the money are going to get it.

Joy Taylor: Well, exactly, I mean, just think if you have a very low-income family with say, three young children under the age of six. I’m just giving an example. I mean, this family will get $900 a month from July through December, and then the remaining credit. The remaining credit they could take on their tax return, and get refunded for the other half of the portion. Because remember these advanced payments are only for half of the higher child tax credit.

David Muhlbaum: Yes. That’s a very good point to make, because we do have, as I said at the start, a lot of dollar values floating around. Yeah. You get the money upfront and you get the money at the back. Seems pretty good if you’re going to take it. One other fine slice on the question of it being not only fully refundable, but essentially money for people who really need it. There’s some question here, whether you could get over-credited in your advanced payments, and then not be on the hook for adjusting. Can you see what I’m stumbling about, trying to get at here?

Joy Taylor: Yeah. So, yeah. So there are instances where IRS is going to probably pay, I don’t know maybe as much this year, because they’re only paying half of the credit. But maybe they’re paying it to people who don’t qualify for the credit at all, or to qualify maybe for much less. There are going to be instances where IRS is going to be paying too much of the child tax credit.. Essentially the payments that you receive are going to be an excess of the child credit that you’re actually entitled to when you file your return next year.

David Muhlbaum: But it would get balanced out then, but you’re never going to have to give money back. You just don’t get as much on the second half.

Joy Taylor: Well, you might have to give money back. I mean, it all just depends, when you do the whole balancing out, let’s say, there might be instances maybe where the advanced payments exceed the total child tax credit that you are entitled to. Some people will have to pay, depending on your income, will have to pay the excess back. This is unlike the stimulus check or essentially the stimulus check, if you got it and then your income is way too high-

Sandy Block: It was all yours. Yeah.

Joy Taylor: It was all yours. So with the child tax credit, it doesn’t quite work that way, but there is a safe harbor though. The safe harbor essentially is, if you’re single with income of less than $40,000 or married with income of less than $60,000, you don’t have to pay anything back, even if you’re not entitled to what you received.

David Muhlbaum: Bingo. Okay.

Joy Taylor: If your income is for single people above $80,000, $120,000 for married people, you’ll have to pay anything you received in proper, you’ll have to pay it back. Anything excess you’ll have to pay back. For people in the middle, they’ll have to pay a portion of it back.

David Muhlbaum: Got it. So yet again, there’s another income threshold and I’m going to go, it’s such a good thing that you put together that FAQ, because when we get boxed into a corner, we can go look at that.

Joy Taylor: Yeah. Sorry about those numbers.

David Muhlbaum: No problem.

Joy Taylor: But sometimes they are important.

David Muhlbaum: Well, thank you so much, Joy, for joining us today, and walking us through our partial knowledge and improving it. I hope you’ve improved other people’s knowledge as well. As I said before, check out those links. They’re really good. Thank you so much, Joy.

Joy Taylor: Thank you.

David Muhlbaum: That will just about do it for this episode of Your Money’s Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and review. If you’ve already subscribed, thanks, please go back and add a rating or review if you haven’t already. To see the links we’ve mentioned in our show, along with other great Kiplinger content on the topics we’ve discussed. Go to kiplinger.com/podcast. The episodes, transcripts, and links are all in there by date. If you’re still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.


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