Stay focused if you did any holiday shopping at Target, said Gregory Wallace in CNN.com. The big box retailer suffered a pre-Christmas hacking scandal in which credit and debit card data from 40 million accounts was stolen from its computers. The purloined data includes names, card numbers, expiration dates, security codes, and encrypted PINs for millions of customers who shopped between Nov. 27 and Dec. 15. If that could be you, look for a notice from Target, which is offering compromised customers free credit monitoring, a telephone hotline, and storewide discounts. Monitor your statements vigilantly for unauthorized transactions, and call Target, your bank, and your credit card company if you see any. In the meantime, “request a replacement card—if one isn’t already on the way—and change your PIN.”
Tips for preparing your 2013 return
Tax season is approaching quickly, said Beth Braverman in TheFiscalTimes.com. The IRS will begin accepting 2013 tax returns at the end of January, so “now’s the time to start thinking about and preparing” your annual paperwork. To avoid costly tax mistakes, start by putting down the pen and paper. The roughly 20 percent of filers who still fill out their returns the old-fashioned way are “much more likely to introduce math errors or simple mistakes.” If you hire a tax preparer, “look for someone who’s either a certified public accountant (CPA) or an enrolled agent (EA).” And don’t drag your heels if you’re eager for your tax refund. “Early filers get their refunds more quickly than laggards; plus, starting early gives you a time cushion if you discover missing documents or need to verify information.”
Cleaning up your credit score
A bad credit score can cost you, said Kelley Holland in CNBC.com. Experts say that a poor credit rating can cause a consumer’s interest rates to soar, adding tens of thousands of dollars to the cost of mortgages and other big loans. In fact, “a truly low score can make it impossible for you to obtain credit at any rate.” Insurance companies can refuse to issue policies, and employers still use credit scores to evaluate job applicants. To clean up your score, start by obtaining a copy of your own credit report. Write to the credit bureaus to correct any errors, and improve your financial habits. Pay bills on time, don’t carry a balance, and use no more than 30 percent of your available credit.
Personal loans go online
Need a loan? You might want to consider a peer-to-peer lending site, said Ann Carrns in The New York Times. Several new sites, including Prosper, LendingClub, and Karrot, offer loan seekers an online alternative to banks and pricey payday lenders by bringing together “borrowers who need financing and investors who have cash to lend.” The sites offer loans up to $35,000 with fixed interest rates, ranging from just over 6 percent to 35 percent, for terms of either three or five years. But consumers should keep in mind that these startups are aimed at “borrowers with credit scores that are considered prime,” or at least 640. Origination fees of 1 to 5 percent may also apply, and like most lenders, these companies report your record to the credit bureaus. “While the peer-to-peer label may suggest a friendlier approach,” you still need to take your payment deadlines seriously.
Tax credits for college grads
Recent college graduates would be wise to study up on tax breaks, said Daniel Huang in The Wall Street Journal. There are a number of “money-saving features in the tax code” that can offer them serious savings. Filers paying interest on student loans, for instance, may qualify for a deduction of up to $2,500. For those still in school, the lifetime learning credit “works as a ‘nonrefundable’ dollar-for-dollar reduction of one’s tax bill,” up to $2,000. And for grads who are relocating for a new job, some moving expenses can be written off as a deduction, though “the details can be tricky—and those taking it must meet stringent conditions imposed by the IRS.”
How to survive between jobs
If you are close to retirement age but between jobs, think twice before tapping into your retirement savings, said Liz Weston in Bankrate.com. Once older workers lose a job, they “tend to be unemployed longer than younger workers” and must often take a pay cut to find a new gig. If you do decide to withdraw some of your savings, calculate the withdrawals carefully. It’s best to choose more conservative withdrawal rates, because if new work doesn’t come along as fast as you hope, you might otherwise “put a major dent in your savings.” A good approach is to withdraw 3 percent of your total portfolio in that first year. That could translate into “a big cut in pay, yes, but it may be enough for you to live comfortably while you look for either parttime or full-time work.”
Insurance you don’t need
Sometimes it makes sense to skimp on insurance, said Aaron Crowe in DailyFinance .com. “You could almost insure every step you take in life,” but that doesn’t mean you should. Getting life or health insurance is a no-brainer. But in other cases, it might make more sense to start an emergency fund instead. Buying rental car insurance from the rental agency is often redundant—and expensive—since your credit card or auto insurance may cover you anyway. And speaking of cars, if you’re all paid up on an old car, skip the collision insurance. “If a car is totaled in an accident, insurers only pay the current value of the vehicle.” If your old clunker isn’t worth much, “you’re better off putting that collision premium in a fund to help you buy a new car when you need one.”
The consolidation conundrum
Debt consolidation loans can be a catch-22, said Gerri Detweiler in Credit.com. They’re a helpful “lifeline” for people with bad credit, but you need good credit to get one. Lenders typically factor in how much of your available credit you use, your debt-to-income ratio, and your payment history before approval. The first step toward improving your odds is to evaluate your credit reports “to see where you stand.” Once in the market, avoid products like payday loans, which carry high interest rates, and home equity loans, which may not be helpful if your equity in the home is low. Personal loans are a good bet, but “just make sure you are dealing with a reputable company.” And if all else fails, consider signing on with a credit-counseling agency. “You’ll only have to make one payment a month to the counseling agency, which in turn will pay all your participating creditors.”
Count expenses like calories
Are you making a basic budgeting blunder? asked Hank Coleman in DailyFinance.com. Believe it or not, even the most diligent bookkeepers can fail to track all their expenses. And one of the trickiest things to monitor is cash, which “has a way of leaking out of your pocket. You don’t remember where it went, and it’s easy to toss or misplace receipts.” The best way to keep your spending in line is to count expenses like you would calories. That means writing every transaction down in a notebook or on a spreadsheet. Once you’ve mastered the habit and gathered enough data, “analyzing several months of bank statements will show you where your money is going.”
The catch of co-branded cards
Steer clear of retail credit cards, said Jason Steele in Credit.com. These days, “nearly every retailer wants you to sign up for its cobranded credit card,” incentivizing sign-ups by offering discounts or interest-free financing. While “these cards can really work if you leverage the rewards and discounts,” they can also get customers into trouble if they don’t pay them off in full. So before signing up for a co-branded card, check out other options. Some banks offer even better credit financing, and some major cards offer points, miles, or cash-back rewards that dwarf retail cards’ sign-up discounts. And if you do decide to get a retail card, perhaps to purchase a big-ticket item, shop around first. Different stores may offer better promotional financing, so be sure to ask for a written application and “review the offer later at home.”
Protecting against lawsuits
Are your assets safe from lawsuits? asked Jonathan Clements in The Wall Street Journal. While getting sued may not be on everyone’s list of “financial fears,” the “risk can loom large” for small-business owners and the wealthy. But there are some precautions you can take. For example, small-business owners should incorporate, as that will make it “harder for creditors to take your share of the business to satisfy a personal debt.” And for wealthy individuals, consider putting your money into an asset-protection trust, where “distributions are at the discretion of a trustee, who could stop payouts” if you lose a lawsuit. Thanks to homestead exemptions, losing a legal battle won’t leave you on the street, but while some states have “robust” protections, “other states might protect only a portion of your home’s value.”
Dealing with problem employees
For bosses with subpar workers, these tips may help get them motivated, said Will Yakowicz in Inc.com. First, “don’t wait.” Experts say “underperformance is like an infection,” and a good boss must “treat it and help it heal, or else it will spread.” The key is to identify “specific improvements and goals” and create a framework for how to achieve them. “Agree on measurable actions and start tracking their progress,” but be realistic and “make sure you give ample time.” Finally, follow up. For workers who “turn their performance around, you should reward them.” But if improvement is nowhere in sight, it may be time to cut your losses.
Sprint’s half-off bills
Sprint has “kicked the wireless industry’s price war up a notch,” said Ryan Knutson in The Wall Street Journal. The carrier said last week it will let AT&T and Verizon subscribers pay half what they currently pay “in perpetuity if they switch from those carriers.” The half-off Sprint plans “would offer unlimited text and talk and however much data the subscribers were buying” from the rival telecoms. While there’s plenty of fine print—customers must turn in their old phones and buy new ones, for example—the move signals how desperate the country’s third-largest carrier is to “add subscribers after years of losing customers and money.” It also “ratchets up the pressure” on other carriers to slash prices and offer promotions of their own.
Resisting retailers’ credit cards
Don’t let yourself get bullied into opening a store-branded credit card you don’t need this holiday season, said John Wasik in Forbes .com. Retailers push these deals a lot this time of year and sweeten the sign-ups with discounts, betting that “many of us can’t resist this chance to save money.” But nearly half of consumers say they later regret their decision to open store cards. That’s no surprise, since the cards carry fees and interest rates that are often higher than those of ordinary credit cards, “so whatever money you would’ve saved on a purchase is consumed in interest on your monthly balance.” When considering a store card, stick to retailers where you shop “on a regular basis” and don’t open one if you plan to apply for a mortgage or car loan in the next six months. You can also compare retailers’ offers at Credit.com.
The drawbacks of mobile deposits
Depositing a paper check via a smartphone has become “one of the most popular features of mobile banking,” said Ann Carrns in The New York Times, but there are a few downsides. Some banks, for instance, don’t allow immediate access to the funds or cap how much you can deposit as a way to limit fraud. While such fraud is rare, it can be a headache. Consider endorsing your checks with the phrase “for mobile deposit only,” which “helps reduce the chance that someone could—intentionally or by accident—try to cash or redeposit the check.” Be careful with the leftover paper checks, too: Consult your bank’s rules about how long to keep them after making a mobile deposit, and put them in a safe place to guard against loss or theft.
Saving on a low income
Earning a small salary doesn’t mean you can’t build a sizable nest egg, said Emily Brandon in USNews.com. Putting money in an IRA not only allows you to sock away money for retirement, but it also helps you reduce your tax bill. For instance, “a worker in the 15 percent tax bracket who contributes $500 to a traditional IRA will save $75 in federal income taxes.” Low-income workers are also eligible for the saver’s tax credit, which can be worth up to 50 percent of your retirement account contributions, depending on your salary. Roth IRAs are another good option, because they let you pay taxes on your contributions at a lower rate now instead of in the future, when a higher-paying job might place you in a higher tax bracket.
Mortgage mistakes to avoid
Failing to do all of your homework when you are securing a mortgage “can prove especially damaging” to your financial future, said Chris Birk in Credit.com. Before you sign on the dotted line, get a handle on your credit. Check your credit reports for errors and know where you stand, because a better credit score can help you win a better deal from your mortgage lender. Investigate whether you qualify for any federal, state, and local home-buying assistance programs, such as those for veterans or rural residents. And remember to conduct a home inspection. They “aren’t mandatory,” but you can use the results “as a pivot point to renegotiate with the seller or walk away from the deal” if there’s a problem.
Firing your financial adviser
Breaking up is never easy, said Liz Moyer in The Wall Street Journal, even if it’s just with your financial adviser. But sometimes, it’s the best option for your portfolio. You might need new advice, for instance, “if your income and assets grow substantially or your family goes through major events such as a divorce.” Your investments’ performance should be another key benchmark: Ask how your portfolio is doing compared with the major indexes, and don’t hesitate to demand that fees be disclosed in writing. If you do decide to fire your adviser, be a “savvy client” and take stock of your needs before hiring a new one. “Think hard about what else an adviser can do beyond choosing investments,” such as helping you “prevent rash decisions” in a downturn or sticking to long-term savings goals.
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