Category: Opinion

Practical Money Matters – August 16, 2017

By Jason Alderman
Should You Become Executor of Someone’s Estate?
One of the most important decisions you’ll make when writing your will is determining who should be named executor of your estate. Even if you’re just leaving behind household goods and a small savings account, someone, whether appointed by you or the state court, must settle your affairs.
Some people consider it an honor, or duty,  to take responsibility for ensuring that their loved one’s final wishes are carried out. But serving as an executor can be onerous and time-consuming, even for those with a strong financial or legal background. In a worst-case scenario, executors who act imprudently or in violation of their duties can be sued by beneficiaries and creditors.
Plus, you’ll likely have to deal with the dreaded probate, a court-supervised process of locating and determining the value of the deceased’s assets, paying final bills and taxes, and distributing what’s left to the heirs.
Before you agree to serve as an estate’s executor, make sure you understand what will be required of you. Major responsibilities often include:
Manage paperwork on behalf of the estate, including the will, trusts, insurance policies, bank, investment and retirement account statements, birth and death certificates, marriage, prenuptial agreement or divorce papers, military service records, real estate deeds, tax records, etc.
If the estate is complicated or likely to be contentious, you may want to hire a lawyer and/or accountant to help navigate the maze of paperwork.File a certified copy of the will with the local probate court, which will determine if probate is necessary.
If the probate court confirms you as executor, you’ll be issued a document called “letters testamentary,” which gives you legal authority to act on the estate’s behalf, including opening a bank account in the name of the estate to pay outstanding debts (loans, utilities, medical bills, credit card balances, etc.)
Notify all interested parties of the death. These might include: government agencies (Social Security, Veterans Administration, Medicare, U.S. Post Office, DMV); financial institutions; creditors; current and former employers; retirement plan administrators; investment firms; insurance companies; doctors and other professionals; landlord or tenants; utilities, etc.
You’ll often need to send a copy of the death certificate to close out accounts, claim insurance benefits, change ownership of assets or accounts to the estate or a beneficiary, so order ample copies through the funeral home or county health department.
Locate assets, including personal property, bank accounts and safe deposit box contents, and ensure that they are protected until sold or distributed to inheritors. This may involve updating home and car insurance, changing locks, overseeing appraisals of property that must be sold, etc.Collect money owed to the estate, such as outstanding wages, insurance benefits, retirement plan benefits and rents.
Notify heirs about their bequest.
File the deceased’s final federal, state and local tax returns, as well as federal and state estate tax returns, if applicable.Once probate has closed, you will distribute the remaining assets to named beneficiaries.
Because acting as an executor can be very time-consuming (often taking months or years), you are allowed to charge the estate a fee for your time – usually a percentage of the estate’s value, as dictated by state law.
In short, both parties should thoroughly understand what’s required of an estate’s executor to make sure it’s a good fit. There’s no shame in saying no if it’s beyond your abilities, and plenty of professional help is available, and advisable, if you do need assistance.
 

Practical Money Matters – August 9, 2017

By Jason Alderman
Have the ‘Good Debt’ vs. ‘Bad Debt’ Rules Changed?
Before the Great Recession of 2008 overturned many long-held financial beliefs, it wasn’t uncommon for people to differentiate between “good debt” and “bad debt.” The thinking was that certain kinds of debt were worth taking on because you come out ahead in the long run. Buying a home and financing a college education were two notable examples.
But when home values plummeted and the cost of a bachelor’s degree soared into five or six digits, those once-safe investments in your future suddenly seemed risky or unattainable.
Now’s a good time to step back and examine the concept of good debt vs. bad debt and why, in certain cases, acquiring debt may still make sense – provided you plan carefully and don’t exceed what you can reasonably expect to repay.
This simple distinction still applies: Taking on so-called good debt can help boost your credit rating or allow you to buy something that will increase in value over time, whereas bad debt often fuels the purchase of items that are disposable, unnecessary or rapidly depreciable.
One of the best ways to build strong credit history is to show lenders you can pay off debt responsibly. You’re more apt to qualify for a mortgage, car loan, or other large debt if you’ve demonstrated sound repayment behavior. Just remember: Carrying multiple loans or high-limit credit cards could harm your rating, since lenders might worry you’re taking on more debt than you can repay.
Student loans. The average college graduate earns $47,422 a year, compared to $26,349 for high school graduates – a difference of $21,073. Using simple math, some calculate the difference in total earnings over a 40-year work life as more than $800,000.
However, such estimates don’t factor in the crippling student loan debt many graduates face or their inability to find work in a chosen field during difficult times. But still, the unemployment rate among college grads is roughly half that of high school grads – 4.5 percent vs. 8.4 percent. College is still a worthwhile investment for many people if they don’t go overboard on loans and choose a degree with good earnings and employment potential.
Mortgages. Before the real estate crash, homeownership was considered good debt because historically, when someone finally paid off their mortgage, their home was usually worth much more than the purchase price. For many, this probably still will be true, unless they bought during the market upswing or are forced to sell before prices can recover. After all, mortgage interest rates are historically low and interest and mortgage points are still tax-deductible.
Just don’t buy more house than you can afford. Factor in expenses like property tax, primary mortgage insurance, homeowners dues, utilities and repairs – and if you get an adjustable rate mortgage, calculate how high rates could climb.
Bad debt. What qualifies as bad debt hasn’t changed since the recession, but budget-conscious consumers are paying more attention now. Meals out, excessive vacations, and unnecessary clothing or electronics – wants vs. needs – all qualify if you’re spending beyond your means. Basically, if you can’t pay the bill in full within a month or two, reexamine whether it’s a worthwhile expense; particularly if you don’t have at least six to nine month’s pay stashed in an emergency fund or you’re trying to save for a car or home.
 

ViewPoint: Seven Ways to Make Mornings Less Hectic

Make school and work mornings less harried with some easy tips to add to routines.
Many families find the rush is on to make it to school and work on time each morning. Feeling rushed in the morning is a recipe for added stress. Rushing through things is a poor way to begin a day, and those feelings of uneasiness can put a damper on the rest of the day ahead.
Making mornings less hectic involves a few different strategies that parents and kids can easily incorporate into their daily routines.
1. Wake up slightly earlier. Getting up earlier than normal, even if it’s just 15 to 20 minutes before you’re accustomed to getting out of bed, can help reduce morning stress. Resist the temptation to hit the snooze button over and over again. A few extra minutes each morning can make you feel more relaxed and make for a smooth, stress-free start to the day.
2. Get some work done the night before. Prepare lunches the night before and have them ready in the refrigerator. In addition, lay your clothes for the following day out each night. This saves time and takes a couple more things off your morning to-do list.
3. Ease back into a routine. As a new school year dawns or a long vacation comes to an end, begin going to bed earlier and start waking up earlier as well. This can make the transition from carefree mornings to busy mornings go more smoothly.
4. Prep backpacks in the evening. Look through folders, sign paperwork, check assignments, and do whatever is you need to do the night before to save your family from having to scramble in the morning. This ensures those permission slips get signed and items make it back into school bags.
5. Opt for school lunch a few times. Look ahead on the school lunch menu and speak with children about which meals they enjoy. Let kids purchase school lunch on those days to give yourself a day off from lunch detail.
6. Have quick breakfast foods available. Smoothies, cereal bars, oatmeal, and whole-grain cereals are fast and nutritious ways to start the day.
7. Carpool whenever possible. Busy families can save themselves extra work by proposing a neighborhood carpool. Sharing school drop off detail frees time up for parents once or twice a week, and kids may enjoy traveling to school with their friends. Mornings can be tricky when family members are getting ready for school and work at the same time. By practicing a few daily rituals, it’s possible to curb the rush and start the day happier and more relaxed.

Practical Money Matters – August 2, 2017

By Jason Alderman
Why Was Your Credit Card Transaction Denied?
We’ve all had these moments: You’re at a romantic restaurant and the evening went great. But just as you and your date are readying to leave, an embarrassed waiter appears and whispers, “I’m afraid your card has been denied.” So much for romance.
The same thing can happen at the grocery store, when shopping online or worst of all, when you’re traveling and don’t have a back-up means of payment. Why do credit card transactions get denied and what can you do to prevent it?
Banks and other credit card issuers have developed complex algorithms that track credit card behavior and highlight unusual usage patterns commonly associated with card theft or fraud.
“Unusual activities” that jump out to card issuers include
:When you ordinarily use your card rarely, but suddenly make several charges in one day.
Making multiple purchases at the same store (or website) within a few minutes of each other.An unusually large purchase – say for a major appliance, furniture or jewelry. Alert your card issuer before making large purchases.
One small purchase quickly followed by larger ones. Thieves will test the waters to see if a small purchase is denied; if it’s not, they’ll quickly run up major charges.
Exceeding daily spending limits. Some cards limit how much you can charge per day, even if you have sufficient remaining credit.
Making large purchases outside your geographic area.
Multiple out-of-town purchases in short succession. Always tell your card issuer when you’ll be traveling.
International purchases, whether online or while traveling. Some card issuers automatically decline international transactions because of the high potential for fraud, so learn your issuer’s policy before attempting one.
Other common triggers for credit card denials include:
Outdated or incorrect personal information. Always alert your card issuer whenever you move.
Expired card. Always check the card’s expiration date. You should receive a replacement card several weeks beforehand. It’s often mailed in a plain envelope, so be careful what you toss. If the new card doesn’t arrive, contact the issuer to ensure it hasn’t been stolen.
You’ve reached your credit limit. For the sake of your credit score, try to keep your overall and individual card credit utilization ratios (credit available divided by amount used) as low as possible – ideally below 50, or even 30, percent.
A temporary hold has been placed on your card – say for a rental car or hotel reservation that puts you over your credit limit. Always ask whether a hold will be placed, how much and for how long, and factor that into your remaining balance calculations.
You miss a monthly payment. Card issuers may let this slide once or twice, depending on your history with them, but eventually if you don’t make at least the minimum payment due, your card will probably be frozen.
The primary cardholder made changes on the account and forgot to tell other authorized users. Examples include reporting the card stolen, removing other cardholders from the account or lowering the account’s credit limit.
One last thought: If your card is denied, don’t shoot the messenger – he’s only following instructions. Rather, call the card issuer and find out what happened. Embarrassment aside, it’s nice to know that someone is trying to ensure your card isn’t being used fraudulently.
 

Practical Money Matters – July 26, 2017

By Nathaniel Sillin
Could a Gap Year After High School Make Financial Sense?
In some parts of the world, a gap year – a year-long break between high school and college – is the norm. It’s starting to catch on in the U.S. as well.
It’s a chance for recent high school graduates to earn money, challenge themselves, explore the world and build their resume while experimenting with different career paths.
Those who take full advantage of the opportunity often find the experience to be rewarding and beneficial. And colleges report that students who start school after a gap year tend to earn higher grades, are more involved with campus life and graduate within four years at a higher rate than their non-gap-year peers.
Lessons you could learn along the way. Many people spend at least part of the year traveling, working or volunteering away from home. During the year, they may discover that what they originally wanted to study isn’t a good fit, or may come away with a newfound passion.
Entering college with this knowledge can help them focus on a major, plan their classes and graduate early. Or, at least avoid changing majors and extending their schooling. In either case, they can save tens of thousands of dollars.
During a gap year, young adults also often take a more direct role in their day-to-day finances. They can develop a greater appreciation for earning, and spending, money. In turn, this can give them a framework when taking out student loans and an extra push to apply for scholarships.
Finding structure for your gap year. To avoid squandering the year, you can look into formal programs that can help you achieve or define your personal, academic or career goals. According to the American Gap Association (AGA), a nonprofit based in Portland, Oregon, over 80 percent of gap year students say the skills they acquired helped them be successful in their career after school.
Many choose service-oriented work. The federally backed AmeriCorps programs place volunteers throughout the U.S. to help communities in needs. Once you complete a full-time 10- to 11-month commitment, you may be eligible for a scholarship worth up to $5,815 (in fiscal year 2017). Some colleges and universities will also match a portion of the award.
Working for a local business could be another great option. You can earn money, see if you truly enjoy the work, network and may be able to line up work during school or for future summer jobs. The industry connections and mentorship you receive can also be valuable for your post-graduation job search.
Another resource for finding a program is the USA Gap Year Fairs, which profiles a broad range of gap year experiences. Privately run programs may not offer compensation, but sometimes you can work in exchange for room and board. The experience can also serve as a foundation for cover letters when you apply for jobs or college admissions essays.
Funding your gap year. There are gap year options for students from all socio-economic backgrounds.
The AGA maintains a list of financial aid opportunities that can help you fund a gap year. The mix of merit- and need-based scholarships could cover the cost of a program or offset the cost of traveling or volunteering. If you have a particular program, ask the organization for recommendations.
Also, inquire with your university to see if it recommends or runs any programs. Some schools offer scholarships to admitted students who take a gap year, and a few will give you college credit for completing certain programs.
Once you start your college education, you can try to capitalize on your year off. There are many scholarships available to continuing college students and your experience could be a good jumping-off point for an essay.
Bottom line: Taking a gap year between high school and college is increasingly popular, although still not as common as it is in some other parts of the world. While jumping right into college and getting a degree is the traditional path towards employment, some parents and students see the benefit of taking a year off to better define one’s goals and gain real-world experience before going to college. 

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