Loading...

Follow Poorer Than You on Feedspot


Valid
or
Continue with Google
Continue with Facebook

Editor’s Note: Graduation season is upon us! Congrats to all the freshly-minted graduates out there… a new chapter is beginning for you. But if this new chapter includes a page on paying for the last chapter, you might be feeling a bit overwhelmed right now. Not to worry! Kat Tretina from Student Loan Hero is here on the blog today to help you navigate everything you need to know before you start paying back those pesky student loans. Take it away, Kat…

After four years (or more) of college, it’s finally time; you’re going to graduate. Although it’s a huge achievement, you might not have a lot of time to celebrate. Graduation is a major milestone in your life and marks your transition into adulthood.

If you took out student loans to pay for school, your first harsh dose of reality will come in the form of your monthly payments. For many graduates, the amount due can come as a huge shock, and you might be unprepared to manage your debt.

If you don’t know where to begin with your student loans, here’s how to avoid common mistakes and get your financial life in order.

4 biggest student loan mistakes new grads make

When you first applied for financial aid, you probably didn’t give much thought to your interest rate, loan servicer, or repayment term. Over the course of your college career, you likely took out other student loans, too. Now that years have gone by, you might have even forgotten how much you owe.

Not having that information is a huge problem. Unfortunately, many graduates don’t understand their loans, leading to the following four mistakes.

1. They don’t know when their grace period ends

When you take out a student loan, your loan documents outline when you have to start making payments. Depending on the type of loans you have, you might not have to make payments until months after your graduation date. The period between when you graduate and when your first payment is due is your grace period. If you don’t know when your grace period ends, you could end up missing payments. That issue can hurt your credit and lead to late fees.

Most federal student loans have a six-month grace period. But payments for PLUS Loans begin as soon as the lender disburses them.

When it comes to private student loans, grace periods vary by lender. With some, payments are due while you’re still in school. Other private student loan lenders allow you to postpone making payments for a few months after graduation. If you’re not sure when your grace period ends, consult your loan documents or contact your lender.

2. They don’t know their student loan servicers

It’s easy to forget about your loan servicers by the time you graduate. To make it more confusing, loan servicers sometimes sell loans to other companies. If you don’t know your servicer, you won’t be able to make payments or request changes to your repayment plan.

There are two ways to find out who owns your student loans:

  1. Check the National Student Loan Data System (NSLDS): If you took out federal student loans, you can find your servicer by searching the NSLDS. It’s a comprehensive database that will show you your loan servicer and balance.
  2. Review your credit report: Private student loans aren’t listed on the NSLDS. Instead, you can find your loans by checking your credit report for free at AnnualCreditReport.com.
3. They don’t know how much they owe

One of the biggest mistakes you can make is not knowing how much you owe. Your current loan balance can be different from what you originally borrowed. With the exception of Direct Subsidized Loans, all private and federal student loans accrue interest while you’re in school and during your grace period. Depending on your interest rate and how long it’s been since the lender disbursed the loans, your balance could’ve grown by thousands.

To find out how much you owe now, contact your loan servicer for an updated balance.

4. They don’t know their interest rates

Many graduates don’t pay attention to interest rates, which can cause problems later on. Your loan’s interest rate affects your total balance and your monthly payment.

If you don’t know your interest rate, you can find out by contacting your loan servicer or by reviewing your original loan documents.

How to improve your finances after graduation

Once you know which loan servicer you owe money to, how much you owe, and when your payments are due, you can come up with a repayment plan that works for you. To improve your finances after graduation, complete the following steps.

1. Create a budget

Learning to live within your means is the best thing you can do for long-term financial stability. To do so, you need a budget. It doesn’t need to be fancy, and you don’t need special software. Just make a list of how much money you bring in each month. Then, list all your set expenses, such as rent, student loan payments, utilities, groceries, car insurance, gas, and your cell phone bill.

Your goal is to earn more than you spend each month by sticking to a budget. If your expenses are higher than your income, you’ll need to make sacrifices, such as by reducing how often you eat out.

2. Make sure you can afford your payments

When you create your budget, you might find that your student loan payments eat up too much of your income. If that’s the case, you need to take action right away before you fall behind on your bills.

You have two options when you can’t afford your payments:

  1. Apply for an income-driven repayment (IDR) plan: If you have federal loans, you might qualify for an IDR plan. With an IDR plan, the government extends your repayment term and caps your payments at a percentage of your discretionary income. Although you’ll pay more in interest charges over time, signing up for IDR can dramatically reduce your monthly bill now and give you more breathing room in your budget. To apply, contact your loan servicer.
  2. Refinance your loans: Another option to reduce your monthly payments is to consider student loan refinancing. When you refinance, you work with a private lender to take out a new loan. The new loan has a different repayment term, interest rate, and monthly payment. If you qualify for a lower rate or extend your repayment term, you could reduce your monthly bill. There are downsides to refinancing, especially if you have federal loans, but it can be a helpful tool if you’re struggling with your debt. If you decide that refinancing is right for you, compare offers from student loan refinancing lenders to ensure you get the best deal.
3. Boost your income

When you’re fresh out of school and in an entry-level job, your salary will probably be low. Without a large paycheck, it can be hard to pay down debt or set aside money for savings.

To help you accomplish your financial goals, boosting your income is essential. Luckily, you don’t have to depend on your regular job for money. There are a number of side hustles you can pick up to earn extra money in your spare time. You could consider walking dogs, delivering groceries, cleaning houses, tutoring students, or watching children.

If you use the cash you earn from these jobs to make extra payments toward your loans or to set up an emergency fund, you’ll be much more secure.

Tackling your finances

Graduating from college is an exciting milestone, but with it comes many obligations and responsibilities. Although it can be overwhelming, by taking the time to understand your loans and come up with a repayment strategy, you can take charge of your debt and get on track.

Photos: Jonathan Daniels

About the Author: Kat Tretina is a writer for Student Loan Hero. She graduated from Elizabethtown College, before earning a master’s degree from West Chester University. She specializes in writing about personal finance and is dedicated to helping people improve their financial futures and pay off debt.

The post What New Grads Need to Know Before Paying Back Their Student Loans appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

I was gonna make an “It’s Gonna Be MAY” reference in this month’s intro, but…

  • We’re here to talk about April so maybe let’s not with the “May” stuff just yet.
  • Though I am a 90s kid who certainly remembers, I wasn’t that into *NSYNC at the time. Case in point: I had to look up the proper spelling and styling of “*NSYNC.” I was almost certainly listening to Eve 6’s Horrorscope instead at that time.

So, while it is going to be May, let’s slow it down a bit here and remember that if you don’t think to think, in the blink of an eye… you could end up screwed by the horse that you rode in on. And also something about a wedding and then getting caught in an affair with a cute Guatemalan? Perhaps I should not have been listening to Eve 6 at such an impressionable age…

Alright jet pack, get off my back, I’ll run the numbers:

Change: +$1,643 or +1.50%

April Net Worth TOTAL: $83,697

Not a super exciting month, I’ll give you that. Well, except for whatever’s happening over on the debts side (which probably looks completely bananas if you haven’t been following my other recent net worth updates). Ah, well, either way, let’s dig in:

Cash: +$1,416

The hoarding of cash continues! You can see that I already have enough in cash to pay off my credit card balance in full, but because the credit card (which we’ll come back to in a minute, I promise) is at a 0% interest rate until June of 2019, I’m not going to do that. Paying it off now would defeat the purpose of having gotten it. Instead, I’m sacking away money into my 2nd 5%-APY Insight Card savings account until I hit the $5,000 limit, and then I’ll open another one.

Retirement: +$252

The only “retirement” account I contributed to this month was my HSA (Health Savings Account). That one comes directly out of my paycheck (for that sweet, sweet quadruple tax advantage) so it happens no matter what. But otherwise, nothing else in the ol’ retirements. I’m still in the slow part of the year for self-employment (so no Solo 401(k) contributions this month), and I’ve decided to hold off on IRA contributions until I have a better handle on whether Traditional or Roth makes sense for us this year. I know, exciting stuff. (A whole lot o’ nothing going on.)

Student Loans: -$7,962 / Credit Card: +$7,924

These debts are one and the same this month because my “refinancing the Unsubsidized Stafford Loan to a 0% interest $0 fee credit card” plan is finally complete. Well, “complete” as in the balances have all been transferred and now the repayment part has started. There’s still about $1,800 left on my Unsubsidized loan because I couldn’t fit the whole thing on the credit card. If I have the extra money this year, I may just pay off that $1,800 early. If not, it will be paid off in 18 months, which is only a few months after the credit card will be paid off, and then I can “snowball” both the credit card payment and the Unsubsidized loan payment into my Subsidized Stafford Loan and show that sucker the door, too.

I put this little plan into the calculator at Undebt.it, and it says I’ll be completely debt free in December of 2022. And that’s just assuming that I snowball my payments into the next debt—it will be even sooner if I do more crazy refinancing tricks or find extra money to shove at the debt. Though, I’m never so keen on the latter, given the mild fixed interest rates on my debts. But hey, you never know.

(I promise I am still working on my posts about how I refinanced the student loan to a 0%-APR credit card. I’m just being my usual wordy, procrastinating self. But they’re coming!)

Other Debts: $-416

Don’t get too excited. This one was just me paying my annual life insurance premium. I save up for that one monthly in my “Occassionals” savings and that takes some of the sting away. Some.

Milestone Progress

The Milestone: $100,000 net worth. Last month, I had to adjust everything for the crazy drop, and needed $2044 each month to get there by December 31st. I did slightly better than that this month, so I now only need $1812 each month to get there by December 31st. Alrighty, getting a little easier again. I’ll take it.

That’s it for this month, honestly. Here’s to “good-bye,” tomorrow’s gonna come too soon. Here’s a toast to all those who hear me all too well.

If you’d like to see how I stack up against other personal finance bloggers, be sure to check out The Ultimate List of Blogger Net Worths over on the Rockstar Finance directory!

The post Net Worth Update: April 2018 appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

The Federal Reserve raised interest rates by another 0.25% recently, and that’s a good thing for people saving in a savings account, because a hike in the “Fed Rate” usually results in an increase of the interest rate savings accounts pay. But still, another 0.25% is not going to raise interest rates to the magical levels they were back in the good ol’ days before the Global Financial Crisis of Doom. Back then, you could get 5% interest from online savings accounts! Except, here’s the crazy thing: I have a 5% savings account. FDIC-insured and everything. Wait—but how?

The big national bank chains are paying tiny percentages on their savings accounts. For example, I just looked at Bank of America, and as of this writing they’re offering 0.06% on their savings accounts, and only then if you’ve got more than $2,500 in the account and you have to be one of their “Preferred Rewards Platinum Honors Tier” customers (aka have more than $100,000 in accounts with them—yikes!). And that’s just to get 0.06% on your savings. Not 6%, or even 0.6%, but 0.06%. Which is practically nothing, and is way less than inflation… meaning your money still loses buying power over time with that interest rate.

So again… how the heck am I getting 5% when the big banks are offering a pittance compared to that?

Prepaid Debit Cards Offering 5% APY Savings Accounts

The answer is, surprisingly, prepaid debit cards. Yes, the kind that the “unbanked” population might use if there are no convenient bank locations or if they can’t get a checking account because of a bad history of overdrafting. These prepaid debit cards can be filled with fees, but many of them offer a “pay as you go” type plan that means you only pay a fee when you use the debit card like, well, a debit card.

And some of them also offer the ability to open a savings account with your debit card. And as an incentive to get the debit card, some of those offer ridiculously high interest rates (APY – “average percentage yield”). So that’s what you’re looking for—prepaid debt cards that meet all three criteria:

  1. A “pay as you go” fee plan that means you pay no fees as long as you don’t actually use the debit card
  2. The ability to open a savings account on the card
  3. That savings account needs to pay a much higher than average APY (interest rate)

I’ve found two cards that meet all three criteria: NetSpend and Insight Card.

Are There a Lot of Hoops To Jump Through to Get 5% Interest?

There are hoops, but not what I would call a lot of hoops. Just 3, and they’re pretty easy hoops at that:

  1. You have to log into the debit card’s online dashboard and manually move money from the debit card to the savings account every time you want to deposit money into the savings account. There is no direct deposit from your regular bank account directly into the savings account—you have to go through the debit card. (Same thing when you want to take money out, but in reverse. You’ve got to go to their website and move the money back to the debit card before your regular bank account can transfer it out.)
  2. You have to have a transaction more often than once every 90 days on each debit card to avoid any “account inactivity fees.” Thankfully, you can just schedule an automatic monthly deposit of $1 from your regular bank account. I’ll walk you through this, but it’s really as easy as it sounds.
  3. Each prepaid debit card has a limit on the amount they will pay 5% interest. For NetSpend, it’s only on up to $1000. For Insight Card, it’s up to $5000. But you can open three or possibly even four Insight Cards per person. So unless you have more than $21,000 in cash (or $42,000 per couple!) to put in the accounts, this really isn’t a big deal. It’s the opening of additional cards that’s the “hoop,” but that’s also really easy (you can do it online).
The Short Version of What You Need to Do to Earn 5% on Your Savings:

For people with short attention spans.

  1. Open up a NetSpend account with my refer-a-friend link and fund it with at least $40 within 30 days to get yourself a free $20 bonus.
    1. If you have a spouse or partner, refer them to NetSpend after you open your account, and that’s another free $40 bonus (another $20 bonus for them + a $20 bonus for you for referring)
  2. In your NetSpend account, open the savings account. It pays 5% on up to $1,000.
  3. Once you have $1,000 in the NetSpend savings account, set yourself a calendar reminder at the beginning of every quarter (so like, Jan 1st, April 1st, July 1st, October 1st) to withdraw the interest, because the interest above $1,000 won’t be earning the 5%.
  4. Now that you’ve filled up the $1,000 at NetSpend, time to open an Insight Card account! No bonus, but their savings account pays 5% on up to $5,000 and pays 5% on the interest, too.
  5. Once you have $5,000 in the Insight Card savings account, time to open another one! Just apply the same way you did before.
  6. Filled up a second $5,000 Insight Card savings account? Right on, you super saver! Open a third, same way.
    1. If you have a spouse or partner, they can also open 3 Insight Card accounts!
  7. You may be able to open a fourth Insight Card account—some people have reported that they’ve been able to, while others have tried and haven’t been able to open the fourth (yet). Keep trying, and if you succeed, come back here and tell us in the comments!

For each account that you open, you’ll want to set up at least 2 automatic recurring transactions per quarter to avoid the account inactivity fees. You need to set these up with your existing bank account and never set up a bank-to-bank transfer through NetSpend or Insight Card’s interface (because they charge fees for it, while your existing bank should not).

Thus endeth the short version. For more details, keep reading!

NetSpend: the “Starter Card” With a $20 Opening Bonus

NetSpend is the better card to start with, for three reasons:

  1. They offer a $20 bonus when you sign up using a refer-a-friend link (hey-o, like my refer-a-friend link! I also get $20 when you use this link, which is handy because that money helps keep this blog running).
  2. Their user interface is friendlier, so it’s a gentler introduction than Insight Card’s straight-outta-2001 website.
  3. They pay 5% on the first $1000 in the savings account, which is a decent amount but not crazy. So if you’re not a super-saver yet, best to go with NetSpend first and move on to Insight Card once you’ve filled up that $1000. And if you’ve got more than $1000? It’s still a good place to start and see if this whole “prepaid debit card savings account” thing is right for you.
You Will Need:
  1. An account (preferably a checking account, but a savings account will also work) with a bank that allows you to set up automatic transfers to accounts at other banks. I’ll refer to this account from here on out as your “Existing Account.” As in, the one that already exists when you start down this road.
  2. $40 in the existing account that you can transfer to NetSpend to get the $20 bonus.

That’s it. It’s a 2-item list of things you need. This is going to be pretty easy!

Why “preferably a checking account?” Because savings accounts have federal limits on how many times you can take money out of them each month (savings accounts are limited to 6 transfers out per month). Checking accounts have no such limits. This won’t be a big deal if you just set up 1 NetSpend account and 1 Insight Card account and don’t take money out of your existing savings account for any other reason. But if you end up setting up 1 NetSpend account and 4 Insight Card accounts each for you and your spouse/partner, using just the one savings account, you’d start to run afoul of the transfer limits for savings accounts. So you can either use multiple savings accounts in that scenario… or a checking account.

One additional caveat: Capital One 360 will not work as your “existing account” for NetSpend, because they refuse to let you connect your Capital One 360 account to NetSpend. You’ll need to use a bank other than Capital One 360 for the NetSpend account. (Capital One 360 does connect to Insight Card just fine, though – see below.)

How To Open a NetSpend Prepaid Debit Card (and get your $20 bonus)

It’s pretty easy: my NetSpend refer-a-friend link takes you right to the application page. Fill in the form and make sure that the “Referral Code” box is pre-filled with “8601849552” to qualify for the $20 bonus. Where it asks “Which of the following payments would you like to receive faster with Direct Deposit?” you can simply select “None at this time.” You can select whatever design for the card you like, but it doesn’t matter because you’re going to throw the card into a safe or the back of your underwear drawer.

Time to hurry up and wait 7-10 days for the card to come in the mail. Bookmark this blog post and come back when your card arrives.

Got Your NetSpend Card in Your Hand? (Welcome Back!)

Now follow the card’s activation instructions and be sure to decline any offer while activating to change from the “pay as you go” plan. The “pay as you go” plan is how you’ll avoid any fees. (There’s one more step to avoiding fees – we’ll get to that in just a second.)

Next, log onto your Existing Account and find the place to “link an external account” (this will vary depending on which bank you’re using for your existing account, but it’s generally under “External Accounts” or “Settings”). Use the Routing Number and Account Number from your NetSpend card (they’re in your NetSpend dashboard under “Direct Deposit” if you threw out the paperwork that came with the card). You’ll probably have to wait another 2-3 days for your Existing Account to send 2 small deposits to your NetSpend account for verification. But that’s normal and some banks don’t even take the 2 small deposits back from NetSpend, so that’s like $0.30-$0.50 extra right there! (Cha-ching!)

Then, just transfer the $40 from your Existing Account to NetSpend, and you’ll have your $20 bonus! My bonus posted the very same day the $40 transfer hit my NetSpend account. Woohoo, $20!

Got a spouse or partner? You can get another $40 in bonuses! Just send your referral link (find it in your NetSpend dashboard under “Features”>”Refer a Friend”) to your spouse/partner and have them follow the steps above. They’ll get the $20 bonus and you’ll get another $20 bonus—weehoo!

But you’re not here just for that free bonus money. You want to earn 5% on the $60 that you now have in the account(s)… and on the $940 more that you’re going to put in there. So let’s continue on!

Opening the NetSpend Savings Account Part and Getting Your 5% Interest

In NetSpend’s dashboard, click “Move Money” and then select “Enroll in Savings.”

Click the green “Enroll in Savings” button here and voilà! Your 5%-interest-bearing savings account is now open for business.

As I said in the “hoops” section above, you’ll need to move money manually from the debit card part (NetSpend calls this your “Prepaid Account“) and the savings account part (NetSpend calls this your “Savings Account”). They will not let you deposit money directly into the savings account from your Existing Account. No biggie, though. Just transfer the money from your Existing Account (remember, always push or pull from the Existing Account to avoid fees!) to the debit card (“Prepaid Account”). Then come back to the NetSpend dashboard “Move Money” section and click “Savings Transfer” to move it and start earning 5% on it.

Automate Regular Deposits to Your NetSpend Card to Avoid “Inactivity Fees”

Ah yes, the other hoop. Again, this is pretty easy, so don’t sweat it. In your “Existing Account,” set up an automated recurring transaction of $1 monthly from the Existing Account to the NetSpend card account. If you want to get fancy with it, you can set one up quarterly to push $1 to NetSpend and another one for 45 days later to pull that same $1 back out.

As long as you have a transaction on the debit card (“Prepaid Account”) more often than once every 90 days, you’ll be golden.

What Happens Once You Have $1,000 in Your NetSpend Savings Account

Straight from NetSpend’s terms & conditions (pulled on April 13th, 2018):

For that portion of the savings account that is $1,000.01, or more, the interest rate will be 0.49% with an annual percentage yield with an annual percentage yield of 0.50%.

So, in other words, every penny in the savings account above $1,000 earns just 0.50% interest. That’s… not great. Especially not compared to the 5% interest the first $1,000 is earning. And not compared to other online savings accounts, either—you can easily find accounts paying twice that these days.

I go in and take the interest paid on my NetSpend account out (transfer it back to the debit card part, the “Prepaid Account,” then have my Existing Account pull the interest amount back) every quarter, right after NetSpend pays it. I have a little calendar reminder on January 1st (and April 1st, July 1st, October 1st) to go in and do it.

You might be thinking that all this “moving interest” business should count toward the transactions to help you avoid the inactivity fee. And yes, moving the interest from the “Savings Account” to the “Prepaid Account” seems to count as one transaction, and then pulling it from the Prepaid Account to your Existing Account is another one transaction. But since these two transactions have to be done manually, you might forget. Might as well automate and not count on those two transactions and just make sure all of your bases are covered by automated transactions.

Where do I put the interest after I pull it out to my Existing Account? Why, into my Insight Card account, of course! Once you’ve got $1,000 in the NetSpend account, it’s time for you to get an Insight Card as well.

Insight Card: Paying 5% Interest on $5,000 and Beyond

The Insight Card is great once you’ve snagged your NetSpend signup bonus and you have $1,000 in NetSpend’s savings account. There’s no sign-up bonus for the Insight Card, but the ability to put up to $5,000 in each Insight Card savings account gives you a lot more room to earn interest.

Just one Insight Card savings account would pay $250 in interest per year on a $5,000 balance—and remember, you can open three or four of these cards per person. For two people, that’s the ability to pull in up to $2,000 per year in truly passive income. Oh, and unlike the NetSpend card, the interest rate doesn’t drop when you hit the $5,000 limit. Insight won’t let you put any more money in the savings account beyond $5,000 per account (they will still make your quarterly interest deposit, of course), but they will still pay 5% on the interest. So unlike the NetSpend card, this is a 5% compounding interest rate.

How To Open an Insight Card Prepaid Debit Card

Very easy. I’m going to assume that you might not have read the “how to open a NetSpend card” section above (hey, maybe you already have the NetSpend card and skipped down here, or maybe you just don’t like getting a free $20—no judgement) and repeat some stuff. If you did read the NetSpend part above, this will seem a bit repetitive because it’s nearly exactly the same process. But let’s go through it anyway:

You Will Need:
  1. An account (preferably a checking account, but a savings account will also work) with a bank that allows you to set up automatic transfers to accounts at other banks. I’ll refer to this account from here on out as your “Existing Account.” As in, the one that already exists when you start down this road.
  2. $10 in the existing account that you can transfer to the Insight Card (there’s a $10 minimum to open the Savings Account part of the Insight Card).

That’s it. It’s a 2-item list of things you need. This is going to be pretty easy!

Why “preferably a checking account?” Because savings accounts have federal limits on how many times you can take money out of them each month (savings accounts are limited to 6 transfers out per month). Checking accounts have no such limits. This won’t be a big deal if you just set up 1 NetSpend account and 1 Insight Card account and don’t take money out of your existing savings account for any other reason. But if you end up setting up 1 NetSpend account and 4 Insight Card accounts each for you and your spouse/partner, using just the one savings account, you’d start to run afoul of the transfer limits for savings accounts. So you can either use multiple savings accounts in that scenario… or a checking account.

If you read the NetSpend part above, you might be wondering if Insight Card has the same problem using Capital One 360 as the “Existing Account” that NetSpend does. Nope! So if you use Capital One 360 as your usual checking or savings account, no worries. You can follow the instructions below and be right as rain. I just did it the other day with my newest Insight Card and my Capital One 360 account!

Time to Open Your Insight Card Prepaid Debit Card!

Head to the Insight Card application page. Fill in the form (and don’t worry about the box that says “Referral Code”—right now, there are no referral codes and it doesn’t matter), and for the question “Which card product would you like?” be sure to select “Pay As You Go.” The “pay as you go” plan is how you’ll avoid any fees. (There’s one more step to avoiding fees – we’ll get to that in just a second.)

During the application process, you’ll be given the option to sign up for text alerts about your Insight Card account. At this time there are no fees from Insight Card to use this feature, so as long as your phone carrier doesn’t charge you per text, I recommend it. I only get texts from Insight Card when money hits my account, and that’s actually a really useful text to get. Oh, and a text when my Insight Card first shipped, which was also nice.

Time to hurry up and wait 7-10 days for the card to come in the mail. Bookmark this blog post and come back when your card arrives.

Got Your Insight Card In Your Hand Now? (Welcome Back!)

Now follow the card’s activation instructions and be sure to decline any offer while activating to change from the “pay as you go” plan.

Next, log onto your Existing Account and find the place to “link an external account” (this will vary depending on which bank you’re using for your existing account, but it’s generally under “External Accounts” or “Settings”). Use the Routing Number and Account Number from your Insight Card (they’re in your Insight dashboard under “Add Money”>”Direct Deposit” if you threw out the paperwork that came with the card). You’ll probably have to wait another 2-3 days for your Existing Account to send 2 small deposits to your Insight Card account for verification. But that’s normal and some banks don’t even take the 2 small deposits back from Insight, so that’s like $0.30-$0.50 extra right there! (Cha-ching!)

Then, just transfer the $10 (or more) from your Existing Account to Insight Card. Once the money hits your Insight Card account (a handy text message will let you know when, if you signed up for those), go into the Insight Card dashboard to open up a savings account. I didn’t grab a screenshot of this when I did it the other day for my newest Insight Card, but it’s very easy. Simply click on the “Savings” tab at the top of the Insight Card dashboard and there’s something like “Get a Savings Account.” It will ask you how much you want to transfer in (minimum $10) and as soon as you do that, you’re done! The savings account will be open.

As I said in the “hoops” section above, you’ll need to move money manually from the debit card part (Insight calls this your “Card Balance”) and the savings account part (Insight calls this your “Insight Savings Balance”). They will not let you deposit money directly into the savings account from your Existing Account. No biggie, though. Just transfer the money from your Existing Account (remember, always push or pull from the Existing Account to avoid fees!) to the debit card (“Card Balance”). Then on the Insight Card dashboard click..

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

I’m sorry, I can’t even with an intro today. This month’s net worth is so wackadoodle, I just have to dig right into it so that you can see. Because this month, up is down, left is right, cats and dogs living together, mass hysteria, and me saying I can’t do an intro and then doing one! So let’s go:

Change: -$3,793 or -4.44%

March Net Worth TOTAL: $81,600

Any number of things might jump out at you when you look at the chart and numbers this month. But, 10-to-1 odds (or something, I don’t actually know how odds work) the thing that you first noticed was holy crap look at the chart it went down for the first time in what, a year and a half?!? Yup.

The last time I had a downturn in the chart was November 2016. What happened back then? Oh, I only had a baby where the pregnancy and birth cost me over $7,500 out of pocket, that’s all. And yet, that month, the ol’ net worth was only down -$2,058, so what’s this month’s excuse with nearly double the loss?

Buckle in, friend, because this net worth update is about to get weird.

Cash: -$1,668 (but you’d think it would be up!)

Hey-o, our tax refunds came in! And they were not small, as I mentioned last month. My “Other Assets” category was up +$6341 last month, so shouldn’t cash be up this month since that money actually hit the account (thanks, IRS!)? Er, well, nope. I redistributed that cash refund, and a lot more this month.

I’ve described in previous net worth updates “the Marriage Bonus,” where sometimes my net worth climbs up simply because we moved money from my husband’s name to mine (and we don’t combine net worth numbers because some people are not internet bloggers who want their net worth broadcast on the internet, even if they married someone who is that). Well, this month, instead of a Marriage Bonus, there came A RECKONING.

This month, we moved money from my name to my husband’s name. We opened a new Insight Card with attached 5% savings account in his name, and I kerplunked most of the tax refund into the new account.

Why put that tax refund into a savings account instead of investing it inside an IRA or something like that? Especially when one of my goals for this year is to max out our IRAs but “put a bunch o’ money in a savings account this year” is not on the goals list? A few reasons, one of which is aw dang that FDIC-insured 5% return is pretty hard to say “no” to.

Another reason is that I’m not sure which type of IRA will be best for us this year—Roth or Traditional? Bit o’ both? I don’t want to mess around with recharacterizing IRA contributions (urgh, that phrase alone is super boring and complicated, no thanks). I’d rather just park it in a mega-high-yield savings account until we get a better idea how this tax year is going to shape up.

There’s a third, crazypants complicated reason, but that has to deal with two of the categories on the Debts side of my net worth, so let’s just keep moving and we’ll get there faster.

Retirement: +$3,786 (Even though the markets are down. That’s good, right? Right?)

Okay, so if the stock market is down but my retirement accounts are up… what the heck? Why would I be up when the markets are down?!? I invest in broad index funds that should be a near-perfect match for what “the market” is doing!

Because I made a over $5,500 in contributions to my 2017 retirement accounts (Traditional IRA and the employer side of my Solo 401(k)), that’s why.

Are you putting together why I’m not super-duper happy about my accounts being up? Because I put in over $5,500 and the accounts only went up by $3,786. Because, wait for it… aw dangit the markets are down and they stole mah money$$$$$.

Nah, it’s okay. I’m not really upset. More slightly perturbed at how it makes my numbers look. Like there isn’t enough other crazy stuff happening this month, eh? But I always know that in the long run it’s better for me if the markets are down while I’m investing (buying stocks on sale). Yeah, yeah, yeah.

Other: -$6,382

This was just my tax refund going from “this is money owed to me” to becoming real money that I had in hand (Cash category). You know, for a hot second. Before I did all the stuff to it. But we’ve already tackled that, so moving on…

Student Loans: -$4,403 / Credit Card: +$4,164

You: Stephanie wtf happened here did you put a bunch of your student loans on a credit card what kind of a crazy person are you?

Me: Yes that is a thing that happened. And I’m this kind of a crazy person: this is only about a third of what I did. The rest will hit next month because credit card companies and student loan servicers are both really sloooow at processing things.

You: Whaaaaaaaaaat?

Back to me for the rest of the post because this is not about you: I don’t want to get too deep into this right now because it’s going to be a separate blog post likely three separate blog posts because I used three different methods to do this. But the real-real-short version is that I successfully transferred a bunch of my student loan debt (previously 4.75% interest) to a promotional credit card offer (0% interest with no balance transfer fee, for 15 months).

And that’s why we put the tax refund into savings accounts instead of locked up in a retirement account – the tax refund is earmarked to pay off the credit card balance right before the 15 month promo period ends.

And that’s the (really short version of the) story of how, just when I had finished paying off my last wacky refinance-a-student-loan-to-a-0%-credit-card stunt (recall that last time, I did it by buying a couch!), I started it all over again. Now with even more craziness! But fewer couches.

Other Debts: -$232

Well this feels like a bit of an anti-climactic end, of course, after everything else. It mostly consists of “I paid the car insurance premiums for the next 6 months.” Yup. Exciting stuff!

Milestone Progress

$100,000 Net Worth: Okay so normally, I promise that I will reward milestones with gifs but there are gifs in this entry even though we made negative progress this month. But I contend that I only used Debbie Downer gifs and not fun celebratory gifs and that’s totally different.

Anyway, last month it was looking like I needed $1,461 of growth each month to get to $100k Net Worth by the end of the year. Since I slid backward so much this month (and another month passed), I now need $2044 each month to get there by December 31st. Okay, that’s… doable still. Right? Can still be done?

I like to think that all this craziness this month was worth it, because it will enable greater net worth climbs in the months to come. For example, I calculated that my student-loan-to-credit-card-refinancing will save me $50 in interest this coming month. That’s $50 that will go to loan principal instead of interest, raising my net worth by $50 more than it would have been. So that’s 2.5% of what I need right there! Hey, progress!

Was your March as insane as mine was? Please do tell! And if it wasn’t, please regale me with your tales of normalcy, because goodness knows I could probably use that. I will live vicariously through your steadiness.

If you’d like to see how I stack up against other personal finance bloggers, be sure to check out The Ultimate List of Blogger Net Worths over on the Rockstar Finance directory!

The post Net Worth Update: March 2018 appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

I’ve been a long-time renter, and for years I kept hearing the phrase “renting is throwing your money away,” I resisted really hearing it. I didn’t want it to be true. I ran the numbers and some calculator told me that renting was a better deal than buying in my situation, so I felt pretty smug that renting couldn’t possibly be throwing money away if it was cheaper than owning… right?

But I always had this nagging feeling that maybe the people who told me I was throwing my money away were right.

Artist depiction of me, paying my rent, blissfully unaware of the truth And now, I’m going to admit it: they are right. And I can prove it. Here we go, with all the reasons why renting is truly just throwing your money into the void:There’s Never Been a Better Time to Buy a Home

You know it’s true because my realtor told me this, and that’s someone who works in this field and completely understands the ins and outs of the housing market. Also, not to brag, but she is a little bit psychic. She has an uncanny ability to predict the future (for example, she knew when we were going to hit bad traffic or have weather issues while looking at condos), and that’s pretty much the reason we decided to go with her. We need someone who can predict the future of the housing market to get an edge on everyone else!

Renters Miss Out on Tax Breaks*

*Yes yes, I know, the tax laws just changed and this isn’t the same as it used to be. But stick with me, because there are still tax deductions homeowners get to take while sucka renters miss out:

Capital Gains Taxes on the Sale of Your Primary Residence (aka Your Home)

When you sell a stock that’s gained value, you have to pay capital gains taxes. But when you sell your primary residence and it’s gone up in value, you can exclude $250,000 ($500,000 for a married couple filing jointly) of that gain from capital gains taxes!

How much of a tax savings could that be? Well, for a single taxpayer earning up to $38,600 or a married couple earning up to $77,200, they have to pay 0% taxes on long-term capital gains (stocks they held for a year or more before selling). Should have put that money into your primary residence instead of investing it in stocks, sucka renters! Now you gotta pay taxes! And if you make more than $38,600 (or $77,200 for a couple) you have to pay 15% on the amount of capital gains above those income cutoffs. Or if you’re really super rolling in it making more than $400,000 per year, you gotta pay 20% to Uncle Sam on those capital gains!!!

The Mortgage Tax Deduction Still Exists

You can still take the mortgage tax deduction on your taxes – it didn’t go away! The cap did go down a bit to only include the first $750,000 of mortgage, but unless you live in an expensive housing market like the San Fransisco, Los Angeles, New York City, or Washington DC metro areas—hey wait a minute I live in one of those! Well, alright, as long as you’re not me or one of the millions of other people that live in these areas, that part won’t be a problem.

Real estate listing photo of a $750,000 home, probably

All you have to do is itemize your taxes, which is totally easy and you really should be doing it once you become a homeowner because it’s the only way to claim the deduction. The great thing about itemizing is that you get to claim deductions above and beyond the lazy-ass standard deduction. For the 2018 tax year, a married couple can only claim $24,000 if they can’t be bothered to itemize.

Let’s use the $750,000 cap as an example of how much $$$ you can save on taxes by taking on a mortgage:

  • $750,000 mortgage x 4% interest rate = roughly $30,000 in the first year (it’s a little less than that, but amortization tables make me sleepy)
  • $30,000 in interest minus the $24,000 you could deduct just for existing = an extra $6,000 you get to deduct!
  • You’d have to be making at least $187,500 to afford a $750,000+ loan (based on the 4x gross salary rule-of-thumb I just found by Googling), so you’d be in the 24% tax bracket
  • 24% of $6,000 = $1,440 saved on your taxes! Just by taking on a mortgage and paying $30,000 in interest that year (but you gotta spend money to make money). Oh, and itemizing, of course. See, itemizing is magic!
Property Tax Deduction

Everyone was all up in arms about the new tax law putting a cap on the so-called “SALT” (State and Local Tax) deduction. And with good reason—property taxes are included in that deduction! But the cap placed on the SALT deduction is only $10,000, so it’s really nothing to worry about, because your property tax bill (plus any other state and local tax) is probably not that high. Unless your property value is really high or you live in a high-tax state like California or New York or even Virginia which—why does the place I live keep coming up? I’m starting to feel personally victimized by the new tax law, folks.

Real estate listing photo of a $750,000 home in San Fransisco, LA, NYC, or DC, probably A Home Is an Investment

And you all know how I feel about investing! Frankly, it’s been killing me for years that we couldn’t afford to get in on the real estate game. Your personal residence is the easiest way to add real estate to your investment portfolio (see below).

What makes a home such a great investment? Simple, common sense fact: you can’t build more land. (Until we colonize Mars, but come on, so far Mars is only inhabited by robots and those near-sighted scrap piles keep biting the Martian dust.) Since more land won’t be created until we get Mark Watney up to the red planet and making those pootatoes, the demand for land down here on Earth will only rise, bringing real estate prices up with it. It’s simple supply-and-demand, Earthling!

Not only do housing prices always go up, but the nature of your primary residence as an investment is pure genius. See, there are two very big problems with other types of investments (stocks, bonds, certificates of deposit, and even savings accounts):

  1. No one is forcing you to save with other types of investments. With your house, the equity you build up is like a forced savings account, which is great because America sucks at saving.
  2. Other forms of investment are “liquid” which means you can access them at any time. Which means you can panic and sell them at the wrong time. Or take that money out to buy a mint-condition Black Lotus. You can’t be trusted with your own money, so you really need to tie it up in your home equity so that you only get it when you sell your house. And when you do sell and get all those tax-free capital gains from the investment that always goes up? That Black Lotus will be yours.
Shocking footage of what stock brokers do with your “liquid” investments. Put that money into your home equity to keep it safe from wolves! Leverage!

Wouldn’t it be awesome if you could buy investments using other people’s money? Actually, you can. It’s called “buying on margin” when you do it with stocks. The upside is glorious – if the stock doubles, but you only had to put in a 10% down payment, then you are up 1900% on your initial investment! But stocks are super-duper risky – if the stock goes bankrupt and the bank issues a “margin call” (asks you for the money you borrowed back), you could be on the hook for everything you borrowed, with no asset to sell and make the payment. Yikes!

It might actually be better to literally throw your money away than to buy risky stocks on margin

But with home-buying, you can invest in your home without any of that risky “margin” business. Instead of borrowing on margin, you borrow the bank’s money to buy the home, and therefore it’s totally different. Well, not totally different. After all, you still want (and get) that sweet, sweet upside: if your home skyrockets in value, you get to keep all that extra equity. And you only needed to put in a tiny down payment—and pay your monthly mortgage, of course, but since you’re building equity instead of throwing money away, that’s not a big deal.

As for downside risk? See above (There’s Never Been a Better Time to Buy a Home and A Home Is an Investment). In a booming real estate market—which you and your psychic real estate agent should easily be able to predict—this isn’t really something you need to worry about.

Buying a Home Is Easy

This is a major reason why it’s just “throwing your money away” to be renting – you could so easily just buy a home!

Don’t listen to know-it-alls who try to keep you a sucka renter by telling you that you need to save up 20% of the purchase price for a down payment before you buy. You can buy with as little as 3.5% down in most cases, and sometimes even 0% down! Will you have higher monthly payments, higher interest, forced private mortgage insurance, and the possibility of owing your lender a buttload of money if your local housing market declines and you have to sell? Yes. But that’s the price you pay for not saving up the 20% and becoming a homeboner homeowner the fast and easy way.

Similarly, don’t listen to people who whine about how stress-inducing the home-buying process is. There are 19 things more stressful than taking on a mortgage on the Holmes-Rahe Life Stress Rating Scale, so it’s pretty far down the list. Weird, though, that just below it is “foreclosure on a mortgage or loan.” Getting a mortgage more stressful than having one foreclosed on? Must be a typo.

And people love to whine about all the paperwork involved in getting a mortgage, but come on. You don’t read any EULAs when you agree to them, and you’re not gonna read any of that mortgage paperwork, either. Yes, you gotta spend a day or two signing your name over and over again until you’re not sure that’s really your name anymore and your signature starts to look like a Christian Rosa-Pappi Chulo painting. Better toughen up that signing hand, buttercup, if you don’t want to be throwing your money away as a renting sucka forever…

Homeownership Is Eventually Free—Renters Pay Forever

After 30 years of making mortgage payments (or fewer years if you’re a badass and pay it off quickly), you’re free! Your mortgage expense goes bye-bye while sucka renters are stuck still paying to have a roof over their heads. You have to live somewhere, so sucka renters will never escape their rent expense if they don’t eventually buy, and meanwhile you’ll be sitting pretty in a paid-off house! No payments ever again!

Debbie Downers will pop out to say that you still have to pay your property taxes and your homeowners insurance, and for any maintenance on the house. But those are small prices to pay for free housing!

Pay to fix the furnace or throw money into the furnace—your call And When You Are Making Payments, Owning a Home Means a Steady Housing Payment

Sucka renters are subject to their landlords raising the rent on them. Or getting kicked out and having to shop around for a new place at a potentially higher price. They can pretty much expect rent increases year over year, every year, forever. Sure, every once in a while you find that person who claims their landlord never raised the rent for 9+ years (this did happen to my ex, actually) but they are rare or maybe even lying. Because “real estate always goes up,” so do rents.

Owners sign up for a mortgage, and that’s exactly what they pay until the mortgage is paid off. It doesn’t go up with the market changes. Yeah, sometimes you find that person spinning a tale of their property taxes and homeowners insurance increasing every year. Or of rising HOA/condo fees, climbing utility bills, or changing city ordinances, but again: rare or maybe even lying.

Owning a Home Makes You an Adult

Buying real estate takes guts. (But also, it’s really easy – see above.) It’s a big responsibility! And nothing says “I’m officially an adult” like putting on your big girl/boy pants and taking ownership over a piece of property. There’s this little thing called “Pride of Ownership” and you absolutely cannot be a real adult without it.

Sucka renters may feel like real adults because they’ve hit other adult milestones, or because they are upstanding renters who always take good care of the place they live in and make timely payments. But if there’s a monetary reward for taking care of your space (getting your security deposit back) and that space is not actually yours (or on the way to becoming yours in 30 years when you finish paying off the mortgage), then you are just playing adult.

Paying property taxes, dealing with an overflowing toilet or a flooded basement yourself, negotiating with your neighbor’s insurance after a tree from your property falls over onto their house, paying for new siding or a new roof, working through half the contractors on Yelp to get the darned HVAC system fixed—these are the things that make a grownup out of you.

But your mortgage payments don’t just provide internal validation that you’ve become an adult, but external validation as well. The “You’re Approved” stamp the bank gives you for your mortgage may as well say “You’re an adult!” After all, banks must protect their money and only lend it to responsible adults with good credit and the means to pay the money back. Banks would never hand out mortgages willy-nilly, so you’ll be able to wear your mortgage approval as a badge of honor that proves—emphatically—that you are a grownup.

See, renting isn’t just throwing your money away literally, it’s also throwing your money away figuratively because you’re spending your money on something useless (housing and convenience) rather than spending your money on becoming a grown-up and accepting real responsibility.

Stop Paying Someone Else’s Mortgage For Them

Who gets the last laugh when a sucka renter throws their money away on rent? Their landlord, of course. The renter is paying their landlord’s mortgage and that landlord is just laughing their way to the bank.

This is the argument that really hit it home for me: a few friends pointed out to me that renting could never be a better deal than owning. Why? Because landlords would not rent out homes if they were losing money on the deal.

This makes so much sense that I honestly felt really stupid when my friends pointed it out. Your landlord must be making money. Every single person who gets into rental real estate knows to treat their properties like a business and how to estimate the costs associated with owning a rental. To be a landlord, you have to be quite savvy and a Real Adult (see above) so a landlord would never overestimate the value of their property just because they already own it and therefore keep renting it out because they are reluctant to sell it at a loss.

Isn’t It Time You Stopped Throwing Money Away Renting?

Take this poor sap, Mortimer. He thinks he can’t afford a mortgage, so he’s throwing away $1600 in rent every single month. All he gets for that money is the temporary use of 2 bedrooms and 2 full bathrooms (and a fitness center and a pool).

But his landlord could raise the rent on him. Or kick him out at the end of the lease. Or decide to sell the place and maybe the new owners are terrible landlords.

Or maybe Mortimer gets a new job right in the middle of his lease and then what? It costs money to get out of a lease if he has to move, unlike owning, where you make money when you move because of all that sweet, sweet equity you’ve built up. There are absolutely no costs whatsoever associated with moving when you own, and all houses sell quickly at all times for their asking prices, so Mortimer is really missing out.

Mortimer dutifully making his monthly rent payment Get it together Mortimer, and buy yourself a place. Become a real adult. Make an investment. You’ll get a steady housing payment and then you’ll live rent-free forever. It’s easy, you get to use leverage, and you get great tax breaks. It’s time to stop paying your landlord’s mortgage for them, because there has never been a better time to buy a house.

Photo credits: Gary Chan, Daniel von Appen, Daniel Barnes, Erda Estremera, Breno Assis

The post Renting Is Just Throwing Your Money Away appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Whether you’re saving for a new car, to buy a house, to start a business, to become debt free, for retirement, or for anything else, you could almost certainly use a little more cash toward your savings goal.

America Saves Week is a national effort to set a savings goal, make a savings plan, and save automatically. Join me and the millions of others who are taking time this week to start or grow our savings.

It all starts when you make a commitment to yourself to save. I’m a big fan of making a public commitment to save, because it’s one of the little steps that made a big difference early on in my savings journey. I pledged to pay off my credit card debt, and when I was done with that, I pledged to work on some savings goals. I could only commit to saving a mere $5/month toward retirement. But in less than 10 years since I first made that pledge, my retirement savings have swelled to over $90,000! It all grew from that little $5 seed and the savings habit that I made.

Let America Saves help! Take the first step today and take the America Saves pledge to save money, reduce debt, and build wealth over time. America Saves will keep you motivated with information, tips, and reminders to help you reach your savings goal. Think of them as your own personal support system.

Share Your Savings Goal for a Chance to Win up to $750 in the #ImSavingForSweepstakes

To celebrate the 2018 America Saves Week (Feb. 26-March 3, 2018), America Saves is launching the #ImSavingForSweepstakes. It’s easy to enter. Just tell America Saves your savings goal and make a plan to reach it for your chance to win $500 toward your goal, then boost your potential prize by an additional $250 by sharing your savings goal, story, or tip on Facebook, Instagram, or Twitter. (Plus, be entered to win an additional First Prize $100 gift card, just by entering here through Poorer Than You!)

How to enter:
  • Take a photo, draw a picture, or make a collage illustrating your savings goal
    • OR Make a short video featuring your savings goal by answering at least one of these questions: What are you saving for? What is your savings story and how can it help other people? What is your favorite savings tip or trick?
  • Share your video or illustration on Facebook, Instagram, or Twitter with the hashtag #ImSavingForSweepstakes
  • Take the America Saves Pledge and tell America Saves what you’re saving for and make a simple savings plan to reach your goal
    • When you make the pledge through one of the links on this page, you’ll be entered to win the grand prize of up to $750 toward your savings goal, and you’ll also be entered to win a bonus first prize $100 gift card! (And yes, you could win both!)
Get creative!
  • Keep it simple by taking a video or picture in front of the item you’re saving for – like a new car or house
  • Use a video or photo editing tool to put yourself in the frame with your goal – like a trip to the Grand Canyon or Mount Rushmore
  • Use an app to add a caption or some character to your submission

Take the Pledge!
No Purchase Necessary. Sweepstakes ends 4/6/18. See Official Rules.

More Cash Prizes for Saving and Sharing

I’m so excited to see what you are saving for! Feel free to tag me in your social media post (@Stephonee on Twitter, @PoorerThanYou on Facebook, or @Stephoneek on Instagram) or just tell me about your goal in the comments below!

The post What Are You Saving For? Win up to $850 With the #ImSavingForSweepstakes! appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Hey, that’s me in that story!

My personal finance story was recently profiled in the article “Financial Struggles During College Taught Stephanie About Saving” in Debt.com’s Very Personal Finance series. I really enjoyed being interviewed by Brian Bienkowski for this piece. He was very interested in what happened early on in my money journey, so it was a trip down memory lane for me.

If you’re just joining us here at Poorer Than You from the Debt.com profile, welcome! You’ve had a pretty good introduction to the beginning of my story from the article. Now, here’s some more in-depth posts for you to sink your teeth into:

If you enjoy what you see, I hope you’ll stick around. You can subscribe to new updates in a feed reader like feedly, or sign up to get new posts delivered to your email inbox. You can also find me on Twitter as @Stephonee, follow me on Pinterest, or like Poorer Than You on Facebook. I’m also on Google+ I guess, but does anyone else really use that?

And because I loved my trip down memory lane so much, I invite you to take your own in the comments below! How did you get started on your financial journey?

The post Profiled in a Debt.com “Very Personal Finance” Story appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Your tax forms are rolling in! Including one for the health insurance premiums from your Affordable Care Act marketplace plan: the 1095-A form. You look it over. Names and social security numbers for you and your dependents look good (hopefully). The amount you paid in premiums is correct. But – what’s this? Your 1095-A Column B is zero all the way down? It can’t be right that the Second Lowest Cost Silver Plan premium costs $0! The form is wrong! What now?

My 1095-A (well, Part III of it anyway) with all zeros in Column B

Please note: I’m not a tax expert and this should not be taken as tax advice. I’m just a lovely lady on the internet, a citizen like you, who also had an Obamacare health insurance plan last year, and who also received a 1095-A where my column B was all zeros. This post is for educational purposes only, showing you what I learned and what I did to deal with this issue. If you are concerned about your tax situation, please consult with a real tax professional.

What Is Part III Column B of the 1095-A For, Anyway?

Part III Column B should show the cost of the “second lowest cost Silver plan” (SLCSP) premium. In other words, the not-quite-least-expensive Silver Plan that you could have signed up for. This number is used to calculate the health insurance premium tax credit (“Obamacare subsidy”) that you could receive, based on your income.

Tip: Even if your total income was too much for the premium tax credit, you may qualify for it anyway, because certain actions (such as contributing to a 401(k) or other employer retirement account, or contributing to a Health Savings Account) lower your income for the purposes of the tax credit calculation. Run your numbers through tax software to check – but you’ll need to make sure you have the right numbers on your 1095-A Column B, first!

The way that the subsidy is calculated is super confusing, but you don’t need to know the exact specifics. What matters is: if your income (minus those 401(k) and HSA contributions) is low enough, the subsidy consists of the difference between the second-lowest cost Silver plan premiums and a certain percentage of your income. So the cost of the second lowest cost Silver plan is absolutely necessary for the calculation.

What It Means to Have All Zeros in Column B

The instructions on the back of your form 1095-A are less than helpful:

See the instructions for Form 8962, Part II, on how to use the information in this column or how to complete Form 8962 if there is no information entered. If the policy was terminated by your insurance company due to nonpayment of premiums for one or more months, then a -0- will appear in this column for the months, regardless of whether advance credit payments were made for these months.

Well it says to see the instructions on Form 8962, Part II if there is no information entered, but it also says that zeros will appear in this column if you didn’t pay your premiums. If you’re like me and paid all your premiums in full and on time, this is confounding. And enraging.

So I put out the call to Twitter to help me figure out why Column B would be all zeros, and Harrison from Financial Awkward helpfully found an answer hidden in the H&R Block community forums:

When there is no amount in columns B and C of the Form 1095-A this means that you did not receive any advance payments of the premium tax credit (APTC). This generally occurs when the Marketplace determines you are ineligible for the premium tax credit at enrollment because your income was outside of the eligibility range or if you declined to receive APTC instead preferring to claim the credit on your return.

Ah, there it is. Personally, I wasn’t sure whether I’d qualify for the subsidies. I declined to receive them as discounts on my insurance premium (APTC), just in case. But the Health Insurance Marketplace decided to not include the information needed on my 1095-A because… reasons? Alrighty.

How to Get the Correct Numbers for Column B

To even see if you could possibly get the tax credit, you need the right information for Column B. Most tax software won’t let you enter all zeros for Column B anyway. Thankfully, it’s rather easy. No need to file a request for a “corrected” form or fill out any complicated paperwork (thank goodness).

Forget about “Form 8962, Part II” from the 1095-A instructions, and instead hop on over to this helpful page of Healthcare.gov (why they don’t just say this in those instructions, I’ll never know): Healthcare.gov Health Coverage Tax Tool

Here you’ll find a tool to “Figure out your premium tax credit: Get your ‘second lowest cost Silver plan’ (SLCSP) amount. You’ll use it to fill out IRS form 8962, Premium Tax Credit.” YES! Okay. Awesome.

To use the tool, you’ll just need some very basic information:

Answer questions about who in your household qualifies for a premium tax credit and information on each person, including date of birth, location(s) they lived in for the year, and months of marketplace coverage.

It took me about 2 minutes to fill in the information and get the real numbers for my Column B. And you can scroll to the bottom to print, email, or save a PDF of your numbers. I highly recommend you do at least one of those, and keep a copy of it with your 1095-A.

Finally! The real numbers that should have shown up in my 1095-A Column B! What Difference Does It Make On Your Taxes?

If the second lowest cost Silver plan premiums really were $0.00 (ha!) or the $0.01 that H&R Block’s forums suggest you use instead, then you would get no subsidy at all, even if you qualified for one. It’s better to use the real numbers, because you could be in for a big fat tax break!

Using TurboTax, you can do your entire tax return online without giving any payment information. Which makes it great for seeing how much of a difference the tax credit can make:

My TurboTax screen right before entering in the 1095-A information. TurboTax has imported the 1095-A at this point, but not done any calculations with it. Note my federal refund at this point is a whopping $10.

TurboTax was able to import my 1095-A from the PDF I got from my Healthcare.gov account. But when it did, Column B ended up a little wonky:

Where did it get $458.97 from? That number didn’t appear anywhere on my form. But even with that (incorrect) number, my refund estimate jumped up to $2315!

To TurboTax’s credit, their Help section refers you to the Healthcare.gov Health Coverage Tax Tool. I keyed in my correct numbers, and submitted the information to see what my tax credit would be:

$5,702 tax credit! Woohoo! (And I got an additional bump in federal and state, but that’s because the premiums are tied to my businessing.)

So what difference does it make? Potentially thousands of dollars of difference. I don’t know about you, but there are a lot of things I can do with that extra $5,702. Like, funding an entire IRA for the year with money left over. Or taking another Disney World vacation. Or 23 year-long-subscriptions to the Oreo of the Month subscription box (er… for 23 friends. yes. for friends.). (In reality, it’s already earmarked for the IRA.)

But come on, there could be Oreo-inspired hats, games or mugs in there! Winner Winner Chicken Dinner?

Not everyone who got all zeros on their 1095-A Column B is entitled to a $5,702 tax credit. No siree! This is just an example. Your income has to be high enough to qualify for a Marketplace plan (versus Medicaid in some states). But your income also has to be low enough to qualify for the subsidy, after deductions like 401(k)s and HSAs. And the amount of the tax credit will depend on the premiums you paid, and the SLCSP for your situation.

Still, the Healthcare.gov Health Coverage Tax Tool takes less than 2 minutes, and tax software like TurboTax can do all the calculations for you in just a few minutes. So the whole process to check takes what, 5 minutes? That’s like earning $68,424 per hour in my example. And if you don’t qualify? You only wasted 5 minutes and you have the peace of mind of having accurate information.

Key Takeaways
  • If you got a 1095-A where Column B is all zeros, don’t panic.
  • But do get the right numbers, because it could mean big money.
  • Use the Healthcare.gov Health Coverage Tax Tool to get the correct numbers.
  • Use tax software like TurboTax to quickly see what a difference the right information could make.

Happy tax season, everyone!

The post What to Do If Your Obamacare 1095-A Column B is Zero appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

We rang in the new year with a bang and some sniffles… not from sadness or joy but from, you know, cold viruses. And that really set the tone for the whole month: all three of our family members spent some amount of time being sick this January. So I really wasn’t expecting much out of this month when I ran the numbers, because we had to take a lot of time off and couldn’t really hustle for extra cash this month. So how’d it end up going? Let’s see those numbers…

Change: +$5,609 or +7.33%

January Net Worth TOTAL: $82,109

Well hello! I certainly was not expecting that. But, I feel like I can’t take credit for much of it. Or really, any of it.

Retirement – It Wasn’t Me!

Does anyone else remember that Shaggy song? Oh, the early 2000s… I saw Shaggy preform at a Summer Jam concert back then, and he told an adorable story about a little kid that loved his song but wanted to know what “banging on the bathroom floor” meant… awkward… but Shaggy just told the kid he meant “banging on the bathroom door, you know, knocking!”

Anyway.

I had no hand in the increase of my retirement accounts this month. At least, not directly. Obviously I put the money in there in the first place and chose the investments, but I made no contributions this month, and yet, the accounts are up more than $3,000 overall. Simply because the market has been on a huge tear this month.

I’m super not expecting this party to continue, but if it did keep up like this all year, my retirement accounts would earn $38,328 over the course of a year which is like a real person’s salary. Hey! My retirement accounts have a grownup job!

Credit Card (“Refinanced” Student Loan) PAID OFF!

Well I guess I can take credit for this one! My credit card balance is now zero again. Three years ago, my husband saved up to buy an expensive couch. Then instead of spending the savings on the couch, we got 36 month 0% interest financing and threw the saved up money at one of my student loans. This effectively “refinanced” that student loan onto a 0% credit card with no fees for doing so.

For most of those three years, I paid only the minimum payment on the credit card because, hey, no interest! A few months ago I started adding just enough to the payment to pay the card off 1 month early (thus avoiding any accidental or “gotcha!” interest charges) and now… here we are! This month, the final payment was sent, before the promo rate expires next month.

What will I do with the extra $95 per month that’s not going to that credit card anymore? To the retirement accounts, of course! An extra $1,140 every year will definitely help with my goal of maxing out all of our retirement accounts (HSA, 2 Traditional IRAs, and a Solo 401(k) for my side hustle income).

And the couch? It’s doing great three years in. We’ve rearranged it (it’s a Lego-like LoveSac Sactional that can be configured in pretty much any way you can think of) in a backwards L-shape so that there’s a low soft corner to help our toddler learn to toddle. Absolutely no regrets on buying an expensive piece of furniture, since it has so well adapted right along with our drastically-changing lives.

A picture I stole from a LoveSac store’s website of a configuration that’s sort of like our couch right now. (I’m sure they won’t mind the free advertising.) I’d take a picture of my own couch but, you know, toddler living room. It’s more toys than furniture now… “Other” Debts – Tax Burden Further Reduced

Ah, the nebulous “Other” category under Debts in my net worth. This is where I track my tax burden for my side hustles (minus any estimated payments I’ve already sent). And this month, it went down, a lot. Receiving a lot of tax paperwork for this year in the mail allowed me to better calculate the actual 2017 burden rather than my rough estimate, and as usual, I had been overestimating.

Not that overestimating your tax burden is a bad thing. The upside is that I had a lot of cash on hand to pay a tax burden, and now I can put that cash back into my business. For more businessing. Like attending FinCon this year – the financial media conference. I’ve always wanted to go, but last year the blog made more money (y’all seemed to love my Amazon Fresh review and like a bazillion people took advantage of the free Dash Wand) so I pulled the trigger on getting a ticket. Plus, FinCon is in sunny Orlando and falls on my birthday sooooo… birthday trip to Florida for me! For businessing, of course.

Milestone Progress

$100,000 Net Worth: Not there yet! (So no gifs.) To get there by the end of 2018, I calculated that I need a little under $2,000 in net worth growth each month. So this month, I made over 2.5 months of progress! Now, recalculating it, I need $1,626 of growth each month to get there by the end of the year. Let’s do it!

Tools in the toolbox for getting there by the end of the year:

  • Maxing out contributions to my Health Savings Account ($6,900)
  • Maxing out contributions to my Traditional IRA ($5,500)
  • Maxing out contributions to my Solo 401(k) ($18,500+, depending on how much money my side hustles make)

That would be more than enough to hit the goal, but if I have any extra once the IRA is maxed out (since the HSA will be coming out of my paycheck this year, and I can only contribute to the Solo 401(k) as side hustle money comes in), I guess I’ll… throw it at my student loan principal? Huh. That’s a new one for me.

If you’d like to see how I stack up against other personal finance bloggers, be sure to check out The Ultimate List of Blogger Net Worths over on the Rockstar Finance directory!

The post Net Worth Update: January 2018 appeared first on Poorer Than You.

Read Full Article
Visit website
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Separate tags by commas
To access this feature, please upgrade your account.
Start your free month
Free Preview