Your Qs, A-ed
For many people, trying to understand the ins and outs of their finances can feel like taking a test that they forgot to study for. The thought of even trying to balance a checkbook can cause shivers.
Luckily, personal finance is not a test. There’s no teacher hovering at your shoulder, no clock ticking off the seconds till “pencils down”, and there is nothing stopping you from asking for the right answer. You just need to make sure you’re asking the right person.
And who better to ask then real personal finance professionals? Personal finance might not be a test, but it can still help to have a “cheat sheet.”
1. Howard Dvorkin, CPA, @HowardDvorkin – Chairman of Debt.com
Hands down, the question I’m asked most often is, “Are those credit counseling agencies a scam?”
Americans these days are rightly skeptical of offers that sound too good to be true, and many have been burned by them. But credit counseling agencies are nonprofits, they’re regulated, and they’ve been around for decades. The reputable ones charge nothing for a debt analysis by a certified credit counselor, and they work directly with the credit card companies to reduce your interest rates by up to 30 or even 50% – and they can stop all late fees. Look for one that’s been around at least 20 years and has an A-plus rating from the Better Business Bureau, and you’ll quickly learn it’s a legitimate way to climb out of debt.”
2. Abby Eisenkraft, EA, ATA, ATP, CRPC – Choice Tax Solutions Inc.
Many clients are confused about self-employment.
They mistakenly believe that if they did not receive a Form 1099-Misc from a customer, that the income received is not reported. There is no such thing as “off the books” or “under the table” when it comes to the IRS. Taxpayers are required to report their worldwide income, regardless of whether or not it is taxable (some cases have allowable exclusions, etc., but it does not escape reporting).
The result is under-reporting on your tax return, and there are many ways to get caught. Clients are always shocked when the IRS or State catches it. They try to blame the vendor for not sending the form, but the IRS states that regardless of whether or not it was received, all income must be declared.
3. Daniel Vaturi, Mortgage Loan Originator – FM Home Loans
The most common, but flawed, question I receive from borrowers on a weekly basis is “what is the highest mortgage that you can get me approved for?”
The question really should be, “what is the most that I can afford?” Unfortunately, too often, borrowers over extend on the mortgage because they can get approved for it, without fully looking at the whole picture and expense of a home. The greatest example is utilities such as electric, gas, water, and heat. Borrowers coming into a house from an apartment more often than not, do not take into account the increase in utility bills as it is often an overlooked expense. By not properly taking this into account, a borrower can find themselves with an unrealistic monthly obligation. While these things are not taken into account for the purpose of the debt to income ratios used to determine maximum eligibility, it is imperative the take these factors into account when buying a home to make sure a borrower can actually afford what they are getting into rather than simply being able to be approved for what they are getting into.
4. Linda M. Conti, Geoffrey M. Tomes and Bruce Wayne Gaylord – Conti Wealth Management Group at Noyes
1. Should I look to pay off my mortgage or invest?
We get this type of question often, with clients asking if they should pay extra on their mortgage each month, pay it off entirely, or buy another house outright. Our answer to this question has changed in light of interest rates moving further downward. If low rates are locked in for a substantial matter of time, it can be very advantageous to invest rather than pay off the debt faster. It is prudent to measure the pros and cons of a 15-year mortgage versus a 30-year mortgage. Take that a step further and investigate what kind of returns you can expect based on your age and risk tolerance, and you’ll have enough information at your fingertips to make an informed decision. A financial planner can help work through these scenarios with you.
We also discuss the fact that debt can be very personal to some people, so if it makes you feel better to pay it off completely or much earlier, do that. We always want their money to work for them, whatever that entails.
2. I’m not rich, so why do I need to worry about Estate Planning?
Estate Planning is not just for the wealthy. Estate Planning involves making sure all your end-of-life matters have been addressed. Items to consider are making sure your will is up-to-date and accessible, that your IRA/401(k) beneficiaries are current (you likely don’t want your ex-spouse as your primary beneficiary anymore!). Consider a Healthcare Power-of-Attorney should you become completely incapacitated. People often overlook the fact that the person they elect to take care of their children doesn’t have to be the same person that handles the finances upon their death. People in your life have different skills, so be sure to think about that when making sure your affairs are wrapped up.
3.Here’s an important thing to consider before retirement:
People often have a general idea about where their spending is going, but once they retire, making more money doesn’t happen as freely as before, so consider “living your budget”, from six months to a year before you retire. Overspending won’t necessarily derail the initial years in retirement, but it can have a catastrophic effect in those later years when you get into your late 80s and 90s, as you could be in a situation where your assets have diminished and you can no longer work to increase them. “Living your budget” before retirement can help prepare someone before the “fixed-income lifestyle” becomes the norm.
4. Is it too late for me to start saving for retirement?
It’s never too late to start planning for your future. Work with a financial planner. They can help you establish a program to begin investing in an efficient manner and can help prepare you for retirement. Perhaps you’re in better shape than you thought, or perhaps it means retirement may have to wait a few more years. In either case, it’s better to know than lay awake at night worrying about it.
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The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.