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Real Estate Is an Investment

Photo by Tierra Mallorca on Unsplash

While people have always taken on joint real estate ventures, the idea of sharing the costs to purchase a property may seem especially attractive now in a time of uncertainty. We are not necessarily referring to when spouses by a house together, although that is also a joint real estate venture. We are talking about people buying real estate with a friend or family member. The rules are different when spouses buy property together.

A man wrote to The Moneyist column about the dilemma he was facing after buying property with his brother and then moving out of state while his brother remained in the house. While he provided documentation for the first time his brother refinanced the mortgage, he wants his brother to buy him out now that the brother wants to refinance again. The brothers disagree about how much the brother who wants to give up his share of ownership in the house should get.

As a younger person, the man who wrote the columnist couldn’t foresee that work would take him to another state or that his brother who stayed would want to refinance. The columnist discusses what he thinks would be a fair way to end the disagreement. But one of the most important things he wrote was “You both decided to invest $10,000 in this house rather than in the stock market…”  Although your choices for what to do with your money are not limited to either the stock market or real estate, you do have to consider that putting a chunk of money into something is an investment. Some people do not think of buying a house as an investment, especially if they are going to live in it.

A Fee-Only financial planner can help you decide which type of investments are likely to fit in with your lifestyle and help you reap the most benefit.

The Importance of Saving in Uncertain Times

A Be the Budget article on the importance of saving states there are “countless” reasons to save since savings offer protection and greater financial freedom. However, it can be difficult to take saving from being a notion to it being a regular habit.

There are a number of rather serious reasons to save money on a regular basis. An emergency fund can be a lifesaver when something unexpected happens. You can save money for big-ticket items, and this does not only include a car or a house; you can also think of a college education as a big-ticket item, even if it isn’t a physical object.

Some people find it easier to save when they think about how they want to be able to afford the things they enjoy in life. You can save specifically for things like a vacation or an expensive piece of clothing or jewelry, but this only makes sense once you have set aside money for emergencies. If the desire to get to the fun stuff motivates you to put aside money for practical reasons first, then let this idea help you move forward to increase your savings

The article brings up some reasons for putting money aside that are not typically included when people talk about the importance of saving. Many people want to save money and secure their finances to leave something substantial for their heirs. There are other people who may not only be thinking about their heirs but also about charitable causes that really matter to them. There are different ways to leave a financial legacy, but it really isn’t possible if you do not have your own finances in order.

In the last minutes of this CNBC report, an investment manager discusses how economic uncertainty is likely to cause people to save more.

Be the Budget concludes: 

“Saving money is important because it provides security, stress relief, and freedom. And while there are countless reasons to save, you just need to find a reason that resonates with you.”

Back to school jitters—parents, students, and employers

Photo by Oliver Hale on Unsplash

Whether you think we have been in one long pandemic, or you are counting waves or phases, the latest news on the spread of COVID-19 may make you nervous. In some states, children have already started a new school year; in other states, children will start at the end of the month or after Labor Day. Some people are worried that children may become ill or that the school year will be disrupted while others are ready to resume pre-pandemic life with no fears.

Parents in the U.S. have been discussing (and joking) that they are keeping all receipts and keeping tags on some of the items they bought in anticipation of the school year. All jokes aside, this is not a bad idea. Even if the school year proceeds normally, parents can still consider returning items because many of us already have more than we need. And we are referring to things like clothes and shoes. You can hold on to school supplies like notebooks and writing tools. Unless you went overboard there too…in that case you can donate to a school supply drive or to some other organization that distributes school supplies to students in need.

If you are an employer, you may also be concerned because of the effects the pandemic  and possible school closures have had and may continue to have on your workforce. With so many different kinds of businesses and organizations out there, there is no one piece of advice to guide employers through uncertain times. And people may be tired to hearing about flexibility, but it is key. Flexible work arrangements, payment plans, and other things some businesses may not have had before may be needed now. Flexibility and creativity are helpful whether you maintain your business as it is or reinvent it.

Everyone—parents, employers, and in some cases even students, need to have cash reserves on hand. If you have never saved before, this is a good time to start an emergency fund. Savings can help you feel more secure even if you never use them.  Having savings can also save the day in some instances. Contact a Fee-Only financial planner if you want help outlining a plan to steady your finances.

Don’t Stop Your Retirement Before It Starts

Kiplinger.com outlined retirement killers that could get in the way of you really enjoying life after working hard for so many years and they include:

Not putting your plan on paper: The article observes that many people are terrified of running out of money in retirement but just as terrified of writing out a plan for their money. They live with the fear as they wing it through retirement. With no idea of how much you have coming in, how much you are spending, and how long you can expect that money to last, you may be putting yourself on a path to make your fears a reality. 

Perhaps some people are afraid that if they put an income plan in print, it will be set it stone. The article says, “A written income plan is like a compass: If you use it correctly, you’ll always know where you are and where you’re going.” You will need to make changes to your plan, but you would do better to have one instead of just seeing what happens.

Being too frugal: There is something finite about retiring and some people worry about spending too much, so they don’t spend anything. To avoid seeing a dip in their retirement savings, some retirees don’t spend much at all. They stay in, don’t travel, and eat small meals. However, the article points out that this strategy could mean that “…20 years into retirement, they turn 85 and realize as time has ticked away, they haven’t done a thing.” Rather than have all of your retirement funds in one pot, you can allocate one part for living in the now and another part that is less liquid for down the road. This really is not very different from what people do when they are working.

Giving it away to the kids: Adult children who depend on older parents (when they do not need to) can drain away retirement savings. On the other end of the spectrum are parents who want to give their heirs some money early and then find themselves without enough to live on in retirement. Kiplinger.com brings out the “put your mask on first” metaphor that we all have heard but may forget to put into practice. Before supporting your children or gifting them sizable sums of money, make sure that you have sufficient money set aside to last you through retirement.

Details About the 2021 Child Tax Credit

By now, you are probably aware that under the American Rescue Plan parents with children are eligible for a tax credit that will arrive in the form of monthly checks or deposits that they will receive for the rest of the year. Kiplinger.com offered some specifics about the July to December child tax credit payments since because it is not as simple as it sounds.

For one thing, it is not just payments that are being given; it is a tax credit. Rather than have people who are in financial distress wait until they file taxes next year to get they relief, the government decided to offer up to half of the credit via monthly payments for the rest of 2021.

As much as we all welcome more money, there may be situations in which the tax credit payments will not improve someone’s financial outlook because of overpayment—

>> If you think you are doing well financially and would prefer to get the entire tax credit on your 2021 taxes.

>> If your income increased in 2021 (since payments are based on 2019 or 2020 taxes).

>> If you are divorced and claim your child on your taxes every other year.

>> If your adjusted gross income exceeds certain amounts, you will be expected to pay the government back if you receive too much money. (Others whose income is under certain thresholds will not have to pay back any overpayments under a “safe harbor” rule.)

If you think that you may be in the group that would receive overpayments, the IRS has an online tool you can use to opt out of these payments. That way you can take the complete tax credit on your 2021 taxes. Also important to know: each individual in a married couple must opt out of receiving the payments. If only one spouse opts out, the household will still get one-half of the payments the couple would have received.

Read Credit Card Agreements Carefully

When we decide to use credit cards, we are almost always required to sign an agreement…and some of us don’t even read what is in these agreements. However, whether you skim or review each part carefully, you still may not fully understand the agreement you are making with the credit card company.

News Center Maine spoke with a credit counselor who said that even she was confused by the fine print in a complicated credit card agreement. After taking advantage of a 0% financing offer, she paid the card off before the promotional year ended and when she went to use the card again, a retailer told her the account was closed for non-use…except it wasn’t. When she contacted the credit card company, they told her the account was still open and that the purchase she had just paid for herself was on the account. She was able to straighten out the issue but someone who didn’t follow up may have paid twice (with interest!) for the same item.

Even if you don’t read every word in a credit card contract, you should still be aware of some of the most important stipulations when you sign up for one.

Know your deadlines and time limits: You need to be clear how long special offers like 0% interest rate will last. And take note of how much time there is to make payments before you start to accrue interest.

Understand your APR (Annual Percentage Rate): If the APR is fixed, it will remain the same. However, if you sign on for a card with a variable APR, the changes to the interest rate on your credit card are beyond your control. 

Know that in general, the lender has the upper hand: You are signing an agreement with a credit card company that they have composed, and they are going to set things up to their advantage. As the women interviewed by News Center Maine learned, a company can close you credit card for any number of reasons (and they won’t necessarily notify you because that topic was probably included in the agreement you signed.) It is up to you to make sure you reap the benefits you want from a credit card. 

Individuals and Industries Need to Work to Increase Retirement Savings

Earlier this year, Yahoo! Money looked at the results of the Retirement in America report from PwC and found that people in the U.S.seriously lack retirement savings. Twenty-five percent of Americans do not have any retirement savings and those that do are not saving enough. Younger people were the least likely to save for retirement, since 42% of 18-to-29-year-olds do not have any savings. Still, the 13% of people over 60 who do not have retirement savings is a cause of concern for financial experts.

An expert told Yahoo! Money that people who are saving some money for retirement might have enough to give them about $1000 per month once they stop working. This estimate was based on the findings that “…the median retirement account balance for 55-to-64-year-olds is $120,000. When divided over 15 years, that would generate a modest distribution of less than $1,000 per month…”

If you are fortunate enough to have steady income and can save for retirement, this is something you need to start doing right away (if you are not doing so already). Do not wait until after you take a vacation or make some large purchase. Start to build your retirement fund now. 

Those who work and conduct financial research know that the industry has room for improvement as well. Workers would benefit if there were ways to apply technology to their financial goals. You get reminders about everything else, why not get notifications and reminders about saving for retirement? There also needs to be more ways for people who work for small businesses to save for their golden years. Employees of large companies have plans that their employers set up. An expert quoted on the article thinks that small businesses should pool resources so their employees can have the same kinds of benefits.

Whether your employer offers a comprehensive retirement plan or not, there is nothing stopping you from getting the information you need. Get in touch with a Fee-Only financial planner who can offer personal guidance about saving for retirement.

Getting an Education in Finance In or Outside of School

Students in U.S. schools already had uneven access to financial education before the pandemic began last year. The fact that many school systems ended in-person learning in favor on virtual school threatened to make it even more difficult for students to get a handle on financial planning in academic setting but some schools found ways to adapt.

 CNBC.com discusses this in “The pandemic has upended personal finance education in schools.”  While one teacher they interviewed was unable to have the financial expert who usually comes in to help teach finance classes be there in person, another found it was easier to get guest speakers to appear in class via Zoom than it had been to arrange for a guest speaker to visit a physical classroom. That same teacher who was able to get experts into her classes via Zoom also found that her children were interested in learning more about finances. She was teaching at home and her children were also attending school at home so they were aware of her lessons and ended up getting their own custodial investment accounts.

The other part of this is that while some schools have found that it was challenging to hold students’ interest with lessons in finance delivered online or through a hybrid system where the teacher is teaching students in-person and online, there are many students learning more about money management from real life. Some are reading and seeing news about the how the pandemic changed the economy and personal finance. Others may be living out these lessons as the pandemic changed their family finances (for better or for worse).

The upending of our customary way of life has lessons for everyone. Many adults have had to go back to the basics of budgeting and building an emergency savings fund. Some families have learned how to barter. Others have benefited from the generosity of neighbors. The pandemic has highlighted the fact that many people do not understand money management basics but there is still time to learn. If you would like help in creating a plan and a roadmap for your financial future, contact a Fee-Only financial planner.

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