Building good credit in college is one of the best financial moves students can make. Having good credit allows them to qualify for loans, rental applications, auto insurance, phone plans and can help them get a job.
Being responsible with credit is the best way to establish and improve a credit score. For college students without much credit history, there are small but important steps they can take to build up their score.
Obtaining a Student Credit Card
Some credit cards are marketed to students and others who don’t have much borrowing history. Federal laws restrict issuing credit cards to anyone under 21 unless the applicant has the independent ability to repay debt or has an adult co-signer who accepts joint liability for the account.
Student credit cards may have low credit limits, such as $1,000, but they are otherwise indistinguishable from other credit cards. They may even have features such as cash back, no annual fees and budget management tools.
Using Credit Cards Wisely
After getting a credit card, students can start using it slowly and for occasional, small purchases that can be paid for on time. This will help build credit history and help them stay out of debt.
Students shouldn’t let a new card sit in their wallet. They must use it or risk the bank closing it due to inactivity. Putting small, recurring charges on it, such as a Netflix account or other website subscription, is an easy way to maintain use at a low cost.
Students shouldn’t make any big purchases unless it’s an emergency. Having low debt levels on their credit card will allow them to have enough of a credit line available in an emergency, and will increase the credit utilization part of their credit score.
Building Credit With Student Loans
One of the last things college students want is to default on their student loans, as this affects credit.
Borrowers should make at least the minimum payment each month and do it on time. They should borrow only what they need to go to school, instead of using the funds to buy a car or dine out. Once they graduate, they may want to consolidate their student loans to get a better interest rate.
On-time payments and paying off student loans will improve the credit score over time. If students run into problems making payments, they should contact their student loan provider and ask for forbearance. Federal student loans also offer Income-Driven Repayment plans that base payments on a borrower’s income.
It may seem like there’s always something going on as a homeowner, from silencing a squeaky hinge to unclogging a temperamental toilet. But many household problems can be easily fixed without calling a repair service.
A can of WD-40, a toilet plunger and a bottle of vinegar are great basics to keep on hand for easing sticky fittings, clearing the toilet and making short work of common stains. Here are some simple fixes for common home problems that even the non-handy can handle:
Banish that annoying squeak by sprinkling a little talcum powder over the noisy area and brushing it into the cracks.
Removed stubborn stains by combining equal amounts of cream of tartar and baking soda with enough lemon juice to make a paste. Rub the mixture into the stain with your fingers or a soft cloth. Let sit for a half hour, then rinse well with water.
Stuck Sliding Windows
Loosen stuck windows by spraying a little silicon spray lubricant (found at hardware stores) onto a rag, then wiping along the tracks, whether metal, wood or plastic.
Dry and Worn Cutting Board
Revive a worn board by warming a bottle of mineral oil (available at drugstores) in a bowl of hot water, then wiping the oil onto the surface with a soft cloth. Wipe off the excess four to six hours later.
Take care of scuff marks by rubbing the spot with white toothpaste and a dry cloth, or spraying WD-40 on a towel and rubbing lightly. Later, degrease the area with liquid dishwashing soap and water.
Poor Toilet Flush
Before you call a plumber, look for the water valve behind the toilet, on the wall or the floor. Turn it counter-clockwise as far as you can. Once it’s fully open, the tank will get its optimal water fill and power up your flush.
Torn Window Screen
If tiny tears are letting bugs in, apply clear nail polish to any tiny holes. For larger rips or tears, look for new and effective screen repair patches at the hardware store.
For $600 or so a year, plus a service fee of around $75 every time you ask for repair, a home warranty can be an inexpensive way to have peace of mind as a new homeowner.
Home warranties cover breakdowns in a home, from HVAC systems to appliances. A broken water heater can be repaired within hours, but if it can’t be fixed, a home warranty can pay for a new one to be installed.
For homeowners with an older house, they may want more things covered than a newer home would need—such as older appliances—and will likely pay more for it. If you just bought new appliances and have a manufacturer’s warranty for a year or more, you won’t need this coverage. You may be able to exclude new appliances from a home warranty to cut down on costs.
Things that can be covered by a home warranty include ductwork, electrical, plumbing, dishwashers, refrigerators, ovens, stoves, clothes washers and dryers, and water heaters.
Things that are unlikely to be covered include expensive items such as septic tanks, wells, heating systems, pools, garage doors, windows and doors, sprinkler systems, pre-existing conditions, and walls. Coverage for such items may cost more. Roofs may also be exempt, though some home warranty companies sell plans to fix leaking roofs.
A big factor in deciding if a home warranty is worth buying is cost. Basic coverage can start at about $300 and go up to $600 or more.
Some home warranties charge for a service call, such as $75 or so, while others allow unlimited service calls. Contractors are screened and sent out by the company.
To determine if a home warranty cost is worth it, start by learning how old your appliances and home systems are and if the original equipment manufacturer warranties still cover them. Find out what the expected lifespan of each item is to help you figure out if a home warranty is needed.
Some home warranty companies require annual maintenance on appliances and home systems to keep the warranties valid. Some may ask how long you’ve had them. Don’t expect the home warranty company to pay for the annual maintenance of your appliances or home systems.
Read the contract carefully to make sure that old appliances are covered in the home warranty. Some don’t cover old appliances, such as anything more than 10 years old.
Any home, whether old, new or somewhere in between, will have things break sooner or later. Appliances and home systems only last so long. For $50 a month or so, a home warranty can provide peace of mind when things eventually fail.
While world peace is a great idea, if you want to add a touch of calm to your life, begin with your bedroom. Your room isn’t merely the place to rest your head, it’s where you wake, and the vibe of your room can set the tone for the rest of your day. Below are five tips for bringing a peaceful vibe to your bedroom.
Choose calming colors. While red or orange may be your favorite fiery hue, when picking shades for your room, choose soothing, calm colors like light blue or a gentle gray.
Pick minimal patterns. Keep the fun, funky patterns for the living room throw pillows. Busy patterns can make us feel crowded and overwhelmed, so minimize zany patterns in your sleep space.
Clear the room of clutter. Create a sanctuary in your bedroom by keeping it clear of clutter, from laundry to oversized furniture. Spend a few minutes before bed each day storing any items you pulled out, close the closet doors, put the books back on the shelves and dive into bed with a clear head and space.
Bring in nature. Houseplants can boost mood and pump more oxygen into the room. Choose a few easy-to-care for plants, like a fern or a ficus, and place them where you can see them when you wake.
Select the right lighting. While blackout shades can be great for blocking disruptive light, it can also negatively impact your sleep patterns by keeping your body from waking at its natural time. Find a set of blackout curtains that filter light but allow you to wake in the morning naturally.
Opening mail from your credit card company is never fun. If it isn’t a bill or marketing letter, it’s often an update to the terms of the credit card agreement, including changes to the annual percentage rate, or APR, that determines the interest rate paid on revolving balances.
Credit card interest rates are tied to the benchmark rate set by the Federal Reserve, so if you’re paying attention to what the Fed does then you might get an idea of upcoming increases. Or if you wait to receive a letter from your credit card company, the notification will usually come 45 days in advance, giving you at least one billing cycle to pay down your balance or find a better credit card.
When You Won’t Be Notified
However, you may not get such explicit notice if you incur a penalty APR for missing payments. The APR increase is immediate and is explained in the terms and conditions you originally received with the card. The contract will also list how you can get back to the original interest rate. Promotional rates are for a fixed period and you likely won’t get notified of when they’ll end.
If your APR is variable and tied to interest rates set by the Fed, then you may also not be notified early. Your credit card company may notify you anyway, but it isn’t required.
What to do About a Rate Hike
If you receive a credit card rate increase notice, your best solution is to ask the bank to lower your rate. It just takes a phone call and can often get you a reduction if you have good credit history and always make payments on time. You can also shop around for a better credit card elsewhere—be sure to let your bank know of better offers that it should at least match.
If you have a large balance, a balance transfer card can help you avoid the higher interest rate that’s coming soon. Balance transfer cards often offer 0-percent interest for a year or so, giving you time to pay it off before having to pay interest.
The best solution is to pay your credit card balance in full each month to avoid paying interest. Not carrying a balance is one of the best things you can do to raise your credit score.
If you’re nearing retirement and haven’t saved much for it, you’re not alone.
Forty-eight percent of workers age 55 or older say they have less than $100,000 in savings and investments, according to a 2016 retirement confidence survey by the Employee Benefit Research Institute.
They may not want to rely on Social Security to fund their retirement. Social Security will replace 39 percent of pre-retirement income for the average worker retiring at 65, according to the Center for Retirement Research at Boston College.
If you’re nearing retirement in 10 years or so, there are still some moves you can make to help ensure you’ll have enough money. Here are four ideas:
1. Save more
This isn’t as easy as it sounds, but it’s the best way to lessen the gap. Federal law allows people 50 and older to “catch up” in retirement savings accounts by increasing the limits on tax deferred savings to a 401(k) plan of $24,000, and $6,500 to an IRA. If your children are out of the house and you’re no longer paying for college, put that extra money into savings.
2. Collect Social Security later
Social Security benefits can be claimed at age 62, but waiting until you’re 70 can increase the monthly benefits by 8 percent for every year you wait when adjusted for inflation.
Almost half of American workers file at age 62. Waiting can especially help married couples, giving a surviving spouse up to 100 percent of a deceased spouse’s benefit.
3. Work longer
Working beyond age 62 helps in many ways. It gives you more time to earn money and contribute to retirement accounts, reduces how long you’ll need to rely on savings before taking Social Security at age 70, and delays claiming Social Security.
Retirement at ages 65 or 67 is becoming more common, and online, part-time jobs can make working later in life easier.
4. Spending less in retirement
A rule of thumb when saving for retirement is that 80 percent of pre-retirement income is needed to maintain your standard of living when retired. But that goal may be overstated.
You may need as little as half of your pre-retirement income, based on data that people spend less over the course of retirement. You may take a few big trips when you first retire, but chances are you’ll spend less as you get further into retirement.
Retirees can save money by moving to a smaller home or a less expensive location, and can save if they no longer have a mortgage.
I hope you found this information helpful. Please contact me for all your real estate needs today!
How does the gift tax work when using gift funds to buy a home?
$17,000 ANNUAL EXCLUSION
The federal government gives each of us an allowance to gift anybody $17,000 per year without incurring any gift tax. This $17,000/year replenishes every year, and it’s $17,000 per person. So, theoretically, I could gift every person that I know $17,000 today, and then another $17,000 next year and the year after, and there would be NO gift tax. This $17,000 limit is up from $16,000 in 2022.
$12,920,000 LIFETIME EXCLUSION
What most people don’t realize, is that there’s a second allowance of $12.92mm! This is up from $12.06mm in 2022. In other words, let’s say that I want to give you $117,000. That’s $100,000 more than what I can give you out of my $17,000 annual bucket. That’s not a problem at all because I also have the $12,920,000 bucket. The $12.92mm bucket is called my “Lifetime Exclusion.” If I use any of it during my lifetime, I simply reduce my estate tax exclusion by that amount.
So in our example, if I gift you $117,000, I would take $17,000 out of my annual bucket and $100,000 out of my lifetime bucket. My annual bucket replenishes each year. But my lifetime bucket does NOT replenish. In fact, I must reduce my lifetime bucket by $100,000, so now my lifetime exclusion is “only” $12.82mm instead of $12.92mm.
Now, if my estate is less than $12.92mm, this would not be a problem at all, because my heirs would have no estate tax anyhow. However, if my estate is more than $12.92mm then my heirs would have to pay estate taxes on anything inherited above $12.92mm. In other words, the lifetime exclusion bucket is used for both gift and estate tax purposes. So every time I use it to not pay gift taxes, I’m also reducing my estate tax exclusion… that’s how and why the gift tax and the estate tax are related to one another.
That's the lifetime gift tax exclusion in 2023.
Contrary to popular belief, mortgage interest is not always tax-deductible.
Do you itemize your tax deductions?
You cannot take the mortgage interest deduction if you are taking the standard deduction. In 2023, the standard deduction is $13,850 for single taxpayers, $20,800 for heads of household, and $27,700 for married taxpayers filing a joint return. (Please see a CPA for details.)Is your home a qualified residence?
Mortgage interest is only deductible if the mortgage is attached to a "qualified residence". Taxpayers can generally deduct the mortgage interest on two qualified homes: one primary home and one vacation home.
Is your mortgage classified as "acquisition indebtedness"?
Your mortgage or home equity line of credit is considered "acquisition indebtedness" if it was used to buy, build, or improve a qualified residence. Generally, you can deduct the interest on mortgage balances up to $750,000 of Acquisition Indebtedness. Here are two examples:
$1MM ACQUISITION DEBT LIMIT ON PRE-2017 LOANS.
Your acquisition debt limit is $1 million if you closed on your home loan prior to December 16, 2017, and the loan qualified as acquisition indebtedness at that time. You can keep that $1 million limit if you refinance that home loan as long as you do not increase the current balance on the loan. For example, if your current balance is $950,000, the new loan you’re refinancing into can’t be more than $950,000. This is also true when consolidating or refinancing a home equity loan or line of credit taken out prior to December 16, 2017, as long as you used that home equity loan to buy, build or improve a qualified residence. In that case, your combined aggregate total limit would be $1 million, whether you keep both loans separate, or whether you consolidate them into a single loan.
DISTINCTION BETWEEN A QUALIFIED RESIDENCE AND AN INVESTMENT PROPERTY.
Everything mentioned above pertains to a mortgage transaction involving a primary home or vacation home that is elected as a “qualified residence” for tax purposes. If your transaction involved an investment property, see IRS Publication 527.
Number of the Week: $750,000
You can deduct the interest on mortgage balances up to $750,000. (If you follow the rules outlined above.) Source: Momentifi
WHEN IS INTEREST ON HOME IMPROVEMENT LOANS TAX DEDUCTIBLE?
1. THE IMPROVEMENTS MUST BE "SUBSTANTIAL."
In order to deduct the interest on the mortgage as acquisition indebtedness, the IRS requires the project to be a "Substantial Improvement" that:
2. YOU HAVE A 24-MONTH LOOK-BACK PERIOD.
If you are pulling cash out to reimburse yourself for improvements already made, those improvements must have occurred within the past 24 months in order to qualify for the acquisition indebtedness deduction.
3. YOU ONLY HAVE 90-DAYS AFTER WORK WAS COMPLETED.
You must take out the mortgage or home improvement loan within 90 days after the work is completed in order to qualify for the tax deduction. The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage.
DON'T GET TRIPPED UP BY THESE COMMON MISTAKES!
1. HIGHER THAN EXPECTED "CARRY COSTS"
A "carry cost" is the cost to "carry" the property, such as the mortgage payment, property taxes, utilities, maintenance, and other expenses. For example, if you buy a house with the intention of selling it within a year, what are the total costs you will incur during that time to "carry" the property? It's important to accurately estimate those costs so that you don't get tripped up by them later on.
2. HIGHER THAN EXPECTED "COSTS OF SALE"
In most cases, you’d need to sell the house for at least 8% - 10% more than what you paid for it just to break even and cover the real estate commissions and transfer taxes. It's important to take that into account when you run your numbers so that you can accurately forecast your potential rate of return on investment.
3. VACANCY RISK AND EVICTION COSTS
What if the tenant defaults on the rent and you have to hire a lawyer or go through a costly eviction process? Or, what if you can’t find a tenant? That's why it's important to consider risk reduction techniques like non-refundable deposits, sale/leasebacks and/or rent-to-own strategies.
4. LACK OF LIQUIDITY
What if you need access to your capital and you can’t sell the house? That's why you should never be 100% invested in real estate. This means that if your budget for real estate investments is $500,000, you should keep part of that cash in the bank, sitting on the sidelines. This way you won’t get into trouble if the property sits vacant for a few months. Also, a cash cushion allows you to quickly take advantage of other investment opportunities when they arise.
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