Finance

Tips For Buying A New Used-Car

November 6, 2017 By Twila Van Leer

Those who buy used cars know that it’s a crap shoot. You can luck out with a diamond or end up with a lemon. There are no guarantees, but some guidelines may minimize your chances for ending up with the lemon.

Begin by assessing your needs. If you commute and want something with good mileage, that’s a different thing from wanting a vehicle with four-wheel drive and traction control. If you have a camper, jet skis or boat to tow, there is another list of must-haves.

Know up front what you are looking for and what you can eliminate from the search before you hit the lots.

Know what your budget will allow and don’t buy something you can’t easily afford. A time-tested guideline suggests that your total monthly auto expenses should not exceed 20 percent of your monthly income, hopefully less. A number of useful auto expense calculators are available online. Edmunds offers a “How Much Car Can I Afford” calculator, for instance.

Get pre-approved. You can simplify the shopping process by knowing in advance how much your lender is willing to finance. Being able to pin down that amount may give you some bargaining leeway when you begin the search and possibly lower the interest rate you’ll be paying.

Don’t overlook fees and the down payment you’ll need up front (usually 10 percent of the cost.) Fees include sales tax, document preparation and registration. Request a breakdown of fees and ask questions before signing. Don’t forget to add the cost of car insurance, which is required the minute you leave the lot.

Don’t be in a hurry. Shop around, either online or at the local lots. Check out the private owners and dealers in your area by perusing their websites. Your best chance of avoiding the lemon scenario is to plan well, be realistic about the financial commitment and take awhile so you avoid buyer remorse.

Ways to Save On Taxes

November 3, 2017 By Twila Van Leer

There are some entirely legitimate tax maneuvers that can save you money when it is tax time.

The first involves state-based college savings plans. Those plans are best if you have a long time to let your contributions grow. But even if your student is about to head off to college, you may be able to wring a last-minute benefit. Most states offer deductions or credits on your taxes if you are saving for higher education, and they don’t limit the amount of time you have to build your fund. You can put money in and take it out again shortly to reap the benefit. A few states require that you have the money in the education account for at least a year before qualify for the deduction. Contact your plan or go to SavingForCollege to get the specifics.

Health Savings Accounts, designed to help pay the consumer’s share of medical costs, also have a built-in tax break. The contributions are deductible as you pay them and stay tax-deferred as the account builds; withdrawals are tax-free as long as they are used for the qualified medical expenses. Some experts suggest a health savings account even if contributions to a 401(k) fall short of the full amount matched by the employer. The trick, though, it to leave the health savings account alone so it can grow the maximum amount possible. That leaves you to pay deductibles and copays out of pocket. Do the math and see where the break-even point comes.

Roth IRAs give you the ability to withdraw money tax-free in your retirement. That’s a huge advantage if you have kept your IRA intact and let it grow through compounding. There is a limit, however, on IRAs. The limit is $133,000 for an individual (as of 2017) and $196,000 for married couples filing jointly. Taxpayers can get around those limits by contributing first to a traditional IRA and then converting to Roth IRAs, since there is no limit on Roth conversions. Income taxes generally apply to conversions, but the bill could be low, even zero, if you don’t take a deduction and don’t have much money in IRAs outside the one being converted. The IRS bases the tax on a conversion on the proportion of the taxpayer’s IRA holdings that have not yet been taxed.

There are additional IRA manipulations you can do to maximize your tax advantage, but the maneuvering becomes more complex. A visit with a tax accountant might be advisable when he being to contemplate “mega backdoor Roths.”

Should You Refinance Your Car

November 1, 2017 By Twila Van Leer

Car Refinancing — Should you look at redoing your car loan? There are some reasons that it is a good approach.

When your finances get pinchy, refinancing your larger loans is a tempting idea. Should you, for instance, look at redoing your car loan? There are some reasons that it is a good approach.

Your own situation, lifestyle and other financial commitments should all be considered before you dive into a refinance, but here are some tips:

Car purchases in general have a lot of options. If, on second thought, you think you may have made the wrong choice, reconsider. Paying off the loan more quickly can save as much as $1,000 over the term of the loan. It makes it worth the initial stress of making slightly larger monthly payments.

If interest rates have dropped while you have been paying on the vehicle, refinancing is a good idea. If the deal originally called for a interest rate higher than 6 or 7 percent, you almost certainly will see a savings at a lower rate. Getting your financing through a financial institution rather than through the dealer may get you a better deal. Do a little comparative shopping and see where you can get the best interest.

If during the time you have been paying monthly installments your credit score has improved, you have a bargaining chip for better terms, especially if the car payments, in particular, have been regular and on time. If getting out of debt has been a target you have faithfully zeroed in on, you can reward yourself by looking at a car refinance that will lessen the pressure a bit.

If you have leased a vehicle and the lease is about to expire and you are debating whether to purchase the car or trade it in on something else, consider carefully. The car industry has reported a glut in leased car returns and you may be able to capitalize on that fact. Don’t jump into a new arrangement until you have done some research.

If, in the end, your objective is to have more free money, then a refinance extending the term of the loan, with smaller monthly payments, may be what you need. The negative, of course, is that you will be on the hook for a longer period of time, but freeing up more money will help take away the sting.

Pay Off Student Loans Faster

October 31, 2017 By Twila Van Leer

One of the main reasons Millennials don’t invest more money toward retirement is that they are saddled with education debt. The average amount of student loans in 2016 was a record $37,172. That’s a 6.05 increase over the previous year, according to Cappex.com, a college scholarship website.

Bankrate.com studied the issue and came up with these suggestions to help those with student debt to get out from under the load faster:

Treat the loan as you would a mortgage, making larger payments to reduce the principal faster. A student loan of $25,000 with 6.8 percent interest and a 10-year payback period would cost $288 a month. Upping the payment to $700 per month would clear off the debt in three years.

Make payments twice a month instead of monthly. That would help even out an increased payment. After the initial push to get the loan paid, the money that had been absorbed in student debt then becomes available for other things, including a mortgage and savings toward retirement. Or it could be used to help a child through college, saving him or her the same burden of student debt.

Many experts advise those with student loans to create a plan for paying off in three to five years. Seeing the plan in black and white gives a better sense that this is something that can end. It becomes the basis for a goal that the individual can commit to.

The example is a couple who have $50,000 in combined student debt. They earned about $100,000 a year jointly. They established a budget and cut back on spending. They had bonuses from their jobs that they dedicated to the drive to become debt-free and they put $800 per month into the loan payment. They had paid off the loans in two years where it would have taken eight years if they had made only minimum payments.

Having money put into savings automatically bysteps the temptation to spend everything you earn. Don’t use checking and/or savings accounts you already have. Keep a separate account for the purpose of student debt reduction.

Minimizing the amount of loan assistance you need to complete college by working part-time is a counter step to be considered at the outset. Planning ahead, being willing to sacrifice to keep loans at the lowest possible figure and keeping focused on long-range personal finances will help. Falling off the budgetary wagon when personal wants and desires get first attention will lead to future problems.

The very best advice: live within your means and be conscientious about saving.

Millennials Shun Investment Markets

October 30, 2017 By Twila Van Leer

Millennials Investing — Millennials tend to shy away from the usual investment markets to a greater degree than other age groups

When it comes to personal finances, today’s Millennials tend to shy away from the usual investment markets to a greater degree than other age groups, according to research by Wells Fargo.

The bank surveyed more than 1,700 individuals relative to financial literacy and opinions about the investment markets. Twenty percent of those in the Millennial age group (20 to 36) said they would never invest in the markets. Another 53 percent said they would be uncomfortable making such investments.

That raises concern among the experts that the Millennials won’t be ready for retirement when it rolls around. The prevalence of student loans in the age group is a factor. The average debt is now $34,144, up 62 percent over the past 10 years. Repayment often runs well into the prime earning years.

Wells Fargo devised a Positive Financial Indicator to determine how well an individual is faring financially. The five attributes of those in good financial shape are: Having enough money to put some into savings; saving specifically for retirement; a perception of being in control of finances; taking an active role in setting and achieving goals; and the ability to pay monthly expenses without strain.

Those who score higher on the indicator tend to be happier and more confident about finances, the bank found.

The survey also indicated more healthy attitudes among the Millennials who communicate with parents and grandparents on financial issues.