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Monthly Archives: August 2018
What you need to know before lending (or borrowing) money from family
In the midst of a financial crunch, most people consider borrowing money from a family member to be a better option than a bank or credit union, a good friend, their 401(k) plan, or even a low- or no-interest credit card. While most people look to their family as the non-judgmental, do-anything-to-help, ideal solution to their financial dilemmas, there are pros and cons to entering into this arrangement for both the lender and the borrower.
It seems like a simple transaction
From the borrower’s perspective, the application process is simple—just ask. Other than explaining why it’s needed, there are typically no other requirements to meet, not even a credit check. Even better, family members are often generous enough to loan money for free. Most don’t charge any interest, or if they do, it’s much lower than the best rate a bank or credit union could offer.
Family members are often eager to help, but if they’re lending money, they should understand their motivation behind their offer and the risks they assume in doing so.
The details define the loan
When a family member loans money to another family member, details need to be documented, and specific expectations must be set. Conversations around money are tough and sometimes extremely awkward. Think of this as the price you pay for borrowing money from a relative.
Discussions should address the reason for the loan and whether or not the lender is expecting to be repaid. A repayment schedule should be agreed upon, including dates, amounts, and method of repayment, and steps that will be taken if the borrower defaults on the loan.
The borrower should be able to provide the plan for repaying the loan and address the possibility of missed payments. Discussions should also define any rights that are granted to the lender until the loan is repaid in full, like approving large purchases or vacation plans, reviewing a monthly budget, or monitoring bank accounts.
The more detail discussed before the loan is issued, the better chance of preserving the family relationship. Many family loans are successful, but, in order to avoid tensions, communication must be continuous, clear, and in writing. While some family members might consider this too formal, it’s for the protection of both parties.
Lenders need to protect themselves
Any time you lend money, there’s a risk that the borrower will not be able to repay the loan. While you may have every confidence that the borrower will be true to their word, lenders should consider collateral to secure the loan. In the case of default, the sale of any named asset could help recover the outstanding balance.
Speak with your attorney to discuss any additional risks that you should address in order to protect yourself. You can also ask your attorney to draft the written agreement that includes the agreed upon details of the loan and its repayment.
Tax implications to consider
In addition to ironing out the details of the loan, there are serious tax issues to consider. The transfer of large amounts of money can alert the IRS. Even without any wrongdoing, it could trigger an audit into your finances.
There are also rules that address the minimum interest rates that can be charged on personal loans and a potential gift tax that can be assessed in some cases. There may be other tax implications that you hadn’t yet considered, so be sure to talk with your tax advisor before you set an interest rate, sign any documents, or transfer any funds.
Single in the City: Financial tips for flying solo in Atlanta
Being single has some real advantages, like the ability to sleep starfish style, the freedom to come and go as you please, and never having to worry about someone else hogging the remote. But, there’s also a lot less built-in accountability. When you’re working with a single income, your saving and spending habits not only need some guardrails, but they need a reality check once in a while.
Singles in the city have more opportunity for dining out, shopping, and entertainment, which can easily translate into serious spending. We’re not saying that you need to pay your rent, binge-watch Netflix, and eat ramen noodles until you win the lottery, but if you incorporate a few of these helpful tips, you’ll find that your finances and your future will be substantially less stressful and a lot more fun.
Create a budget
A budget is the foundation for financial success. Whether you’re running a business or managing your weekly paycheck, you need to know where to allocate your resources. Monthly bills, retirement savings, your emergency fund, trendy wardrobe, and caramel latte addiction are all vying for financial attention. And those tickets to see Drake at Phillips Arena aren’t far behind.
A budget will allow you to pay your monthly expenses on time, stash away some savings, and know exactly how much discretionary income you have to spend. It will inevitably make you decide if those Lululemon leggings are more important than running through the Starbucks’ drive-thru every morning or if your weekly visit to DSW is the best use of your lunch hour.
Enlist a money mentor
Accountability is a big part of accomplishing almost anything. Everyone needs someone to gently counsel them and help them talk through important decisions, like buying big-ticket items. Find someone you trust who’s a little older and wiser, and can speak from experience. Allow them to keep you accountable and know that even when it’s uncomfortable, you’ll be better for it in the end.
Create your monthly budget, meet for coffee, and then talk through your financial plan for the month. Give them permission to ask the tough questions and allow yourself to answer them honestly. Listen to their feedback and recommendations. They’ll inevitably help you avoid their past mistakes and help you work toward financial success.
Recognize impulse buying
Ever find yourself mindlessly surfing online retailers like Amazon, H&M, or Nordstom Rack? You don’t need another pair of skinny jeans, but there they are, and they’re on sale! Boom—there’s a quick $60 you’ll never see again. If you thought about it for more than a few minutes, you probably would have passed.
Ever add another item to your cart so you can qualify for free shipping? Sure, spend another $35 on a shirt you’ll probably never wear just to avoid the $7.99 shipping cost. It makes you feel like a savvy shopper when really, you just got duped into spending more than you intended. Why can’t you leave Target without spending $100 every time you walk through the door? We feel your pain. Work from a list, shop with intention and avoid surfing the web to pass the time.
Find some free or cheap entertainment
When you live in a busy city, there’s always something to do. Fun doesn’t have to cost you anything, especially in Atlanta. Every Wednesday night, Centennial Olympic Park has Wednesday Wind Down and free music. Visit the National Archives and trace your family tree. Run, walk, or bike through Piedmont Park or visit the Atlanta Farmer’s Market. Make plans for the Grant Park Summer Shade Festival or take in a Singles Event at Buckhead Church.
If you want to pack a lunch and head OTP, you can hike the Indian Seats Trail, visit Toccoa Falls, shoot the Hooch, or relax on Lake Altoona. Avalon in Alpharetta hosts a live band on the lawn every Friday night in the summer, and their Athleta store offers free yoga classes. Grab a friend and go!
Some things you don’t even have to leave home to enjoy. Invite some friends over to watch your favorite TV show or host a game night. The possibilities are endless.
Shop consignment stores
Consignment shops and vintage clothing are all the rage. If you haven’t ventured in, you’re missing some great bargains. Not all the items will match your style, but you can snap up some gently used, designer clothing, purses, and accessories at affordable prices. You’d be surprised at how many people want to offload last season’s styles. It’s always an adventure. You never know what you’ll find, and the thrill of the hunt is part of the fun.
Here’s an extra bonus: If you’re a fashionista and have items that no longer fit or flatter you, consider a consignment shop as a way to purge your closet and make a few extra dollars.
These are just a handful of ideas that can help you stick to your budget without feeling the pinch. Atlanta is never short on entertainment, so do some research, find some things you’ll enjoy, and consider some new experiences. C’mon, it’ll be fun!
Geckos, double-checks, good hands? How to know which insurance is best for you.
You may love that goofy little gecko with the cockney accent, or Flo, the quirky, always happy-to-help checkout girl, but is that the reason you buy their insurance product? Those beloved mascots are well known, but there are other factors to weigh when choosing your insurance coverage.
It may be a daunting process, but some well-spent time comparing companies against your insurance needs and expectations could save you from future hassles or unnecessary spending. We all want great coverage for the most affordable price, so here are some tips for finding the perfect policy:
Decide what you need
Although insurance requirements vary by state, almost all states require a minimum amount of car insurance to cover damage or injuries caused by your car in the event of a collision. Liability insurance, personal injury protection or medical payments, and uninsured or under-insured motorist coverage are typically required. If you finance your purchase or lease a vehicle, there may be other requirements like collision and comprehensive coverage or gap insurance. Still, there are other extras that you may or may not need. Rental car reimbursement, roadside assistance or towing insurance, and full glass coverage are just a few. Each adds a cost to your coverage so know what features are important to you before you ask for a quote.
Choose a reputable insurance company
It takes repeated quality performance, a high level of customer care, and considerable time to develop a solid reputation. There’s a reason that companies brag about customer satisfaction. And, while you can’t please everyone all of the time, reputable companies are more reliable, work harder to provide excellent care, and pay close attention to the client’s experience. Review satisfaction rates surrounding claims, speed of payments, and resolution of non-claim issues, too. Some reputable companies will be better than others, so prioritize what’s most important to you.
Seek out independent reviews
While a company can control what’s reported on their website and in their marketing material, the good, the bad, and the ugly make its way out in one way or another. Talk to family and friends about their car insurance experiences. Check out comments and interact with insurers on Twitter, Facebook, Insta, and other platforms, and find out how they stand with the Better Business Bureau (BBB). The BBB rates companies from A+ to F and reports information like the length of time in operation and customer complaints and resolutions. These outlets together should paint an accurate picture of how they treat their customers and the level of service they provide.
Decide on an appropriate deductible
A higher the deductible will lower your insurance premium, so why consider anything else? Because, in the event of an accident, you’ll need to foot the bill for your deductible before your coverage kicks in. Consider the trade-off. If you’re a safe driver and have a good driving record, the extra risk may be worth it to you. But, we all know that even with cat-like reflexes, accidents happen to the best of us. Are you able to afford to pay your deductible if that were the case?
Compare repair services
Some insurers require you to choose from their network of repair shops. In most cases, that arrangement offers discounted costs to the insurance company in exchange for repair volume. That savings ideally trickles down to you in the form of affordable premiums. In some cases, however, repair shops rely on cheaper replacement parts instead of those from the manufacturer (OEM parts). While some parts may be comparable, tests have found that non-OEM parts are more prone to rust, may fit poorly, or don’t necessarily meet safety standards. The quality of a repair shop’s parts and labor deserve serious consideration.
Consider available discounts
You can’t compare insurance rates without considering driver discounts. If you’re of a certain age, married, or have a safe driving record, you may be classified as a low-risk driver and qualify for a reduced rate. Anti-theft and other safety features in your car can also reduce your premium, as can bundling your auto and home insurance policies with the same company. Does an insurer offer a student away at school discount, a loyalty and legacy program, or a family plan? If you choose to pay your annual premium in full or you’re a good student, there are discounts for those, too.
Work with an agent or broker
Unless you’re comfortable evaluating your insurance needs and comparing different quotes, you may want to work with an insurance agent or a broker. An agent works with a particular company and can help you find the best coverage and rate from among their offerings. If you’ve already decided on an insurance provider, an agent may be the way to go. A broker, on the other hand, can help you do the same, but across several companies. If you’re not set on any one provider yet, a broker can present more diverse options. They may, however, charge a broker fee for their service.
With a little legwork, you’ll be able to find both the level of coverage that works for you’re insurance needs and a rate that fits within your budget.
12 terrific ways to teach your kids about money
Educating your child about money and financial responsibility is a big job—and an overwhelming one at that. The lessons they learn early in life will teach them the value of a hard-earned dollar and serve as the foundation for their future spending and savings habits. No pressure there, right?
Money is such a broad topic that it can be incorporated into almost any conversation or daily routine. The trick to corralling your kid’s interest and having them learn a lesson, however, revolves around FUN. Here are some simple, entertaining, and painless ways to start investing in their financial education:
1. Invest in a coin-counting bank
Gone are the days of the pink ceramic piggy bank with the curly tail. We’re going high-tech here. Purchase an automatic coin-counting bank so your child can keep track of how much money they’re saving and spending. It’ll help with addition and subtraction skills, and they’ll love the pride and satisfaction they feel when they can actually see their progress. Next time they have a few dollars or some extra change, they just might decide to choose saving over spending.
2. Stick to a budget
Have your child grab a calculator (or your smartphone) and head to the grocery store together. Before you leave the house, though, set a budget for your shopping trip. As you walk up and down the grocery aisles together and put items in your cart, ask your child to add the cost of each item to your running total, being mindful of your budget. Compare brands and pricing and explain the benefit of buying items on sale.
Let your child see you add their favorite snack to the shopping list if you’re spending less than expected or put an item back on the shelf if you’re getting close to your max budget. Think out loud so they understand your thought process and then eventually ask them to help make similar decisions.
Did you bring your coupons? Ask your child to match them with the appropriate items and then add up all the money you saved. What was the goal and was it more or less than last week?
3. Use coin riddles
One of our favorites is “What’s in your wallet?” Grab a coin purse and a handful of coins. Next, write the clues to different coin combinations on some index cards. For example, I have three coins that equal 40 cents. Which coins are they? Take turns writing the clues and guessing the answers. It’s super easy and can be a spur-of-the-moment activity while waiting in the carpool line, at a restaurant, or in the doctor’s office.
4. Visit your local financial institution
Schedule an afternoon outing to your local bank or credit union. Kids are curious and we’re betting the drive-thru is far less interesting than what’s inside. Schedule a short tour and think about opening a savings account for your child when you’re done. Georgia’s Own’s Coindexter Club® is a great way to start learning about money and interest. An account for a child under the age of 13 can begin with an initial investment as low at $5.00 and will start earning interest at $5.01.
5. Take it online
Given the increasing amount of time kids spend online, games that focus on money and managing finances could make it less mindless, more educational, and just as much fun.
Try Peter Pig’s Money Counter. It’s an interactive game from Visa that teaches counting skills and savings strategies to kids from ages 5-8. Money Metropolis is a game that lets 7-12-year-old kids manage their own virtual bank account, and the Mt. Everest Money Simulation game lets 8-13-year-olds plan an awesome adventure on a budget. For your sport-loving kids who are ages 11 and up, check out Visa’s World Cup-themed soccer game and the Financial Football game, both of which focus on money management.
6. Let ’em earn it
Do you have a child that loves to vacuum or fold the bath towels? Do they watch you mow the lawn or water the plants? Get them involved in age-appropriate chores and give them an allowance so they understand how money is earned. They’ll think it’s fun and you might get a little help around the house.
We know you don’t always get to do the things you enjoy when you’re earning a salary, so toss in a not-so-favorite chore every now and again as they get older. While not as much fun, it’s a good reality check!
Are there other chores that need to be done in the house? Make a list of things that need doing and assign a payment amount to each one. If your child is saving for something special or wants a side hustle to supplement their allowance, they can choose an additional chore and get paid for completing it.
7. Find their entrepreneurial spirit
Is your child a crafter or an artist? Can they make lemonade or bake brownies? There are tons of opportunities to sell things in the neighborhood, supervised, of course. Try setting up shop at the home swim meets, during the neighborhood garage sale, or at the Holiday Craft Show. Discuss the cost of the ingredients and supplies, the price of the items, and how to calculate a profit. If you have an older child, help them design a colorful flyer to drum up some dog sitting, lawn mowing, or mother’s helper opportunities.
8. Make it Family Game Night
Board games are fun activities you can enjoy with the whole family while secretly teaching them about money. Buy some property and build some hotels in Monopoly Jr., go to college and choose a career in The Game of Life, and get to the next month without blowing your entire paycheck in Pay Day. Each one requires wise financial decisions and includes a surprise monkey wrench or two along the way!
9. Create a “great big board of food”
Eating out is expensive for a family, but for special occasions, or when mom or dad has had a long day, it’s always a treat. Designate a wall, board, or even the side of your refrigerator for restaurant coupons. Buy one entrée get the second free, a complimentary appetizer or dessert, or 15% off your total bill goes a long way. Keeping a list of “kids eat free” nights is a great idea, too. If you’re headed out for dinner, ask your child to choose a restaurant from the board and talk about how much you can save with your coupon. As your child gets older, you can even start teaching them about calculating the tip!
10. Teach your gamer how to game
Have a gamer? There’s a huge market for pre-owned video games. Talk to your child about buying certain items new or used and the savings opportunity it can offer. If you’re making the purchase, you might even consider giving your child the amount you saved a time or two as a way to emphasize the impact.
Discuss selling items, like old video games, toys, and electronics as a way to make some extra money and clear out that clutter. Explain to your child that when they sell items that they no longer use, the funds could be reinvested into something else they’ve been swooning over —or they can save it in that nifty coin-counting bank! As the adult, you’ll want to list the items for sale on the resale sites, but have the kids help take pictures, make up descriptions, and set prices.
11. Set out on a hunt
In the spring and summer, there are garage sales every weekend. Give your child a specific dollar amount and let them know they can buy whatever they’d like, but they have to stay within budget. They’ll learn to consider each potential purchase and decide whether it’s worthy enough to spend their cash. They might even decide to save it. As they get older, teach them how to politely negotiate with sellers. After all, haggling is all part of yard sale fun!
For older kids, head to a consignment or thrift shop to find some fantastic deals and incredible prices. Talk about evaluating the condition of the item, quality, and price. They’ll be quick to understand that one man’s discards are another man’s treasure!
12. Pay it forward
Teach your children to be generous. While healthy spending and saving are important, the value of generosity trumps them both. Whether it’s with money, time, or talent, it’s important to give back to the community. You can volunteer together to pack lunches for the homeless, visit a nursing home, or fold clothes at a thrift shop. Whether they bake chocolate chip cookies for a mom with the flu or make an effort to play with the new kid in the neighborhood, cultivating their generous nature will always ensure they have a rich heart!
The 411 on 529 Plans: When and how to start savings for your kid’s college
If you have a newborn or a toddler, you’re probably more concerned with getting a solid 3 hours of uninterrupted sleep than saving for your child’s college education. After all, college is 18 years away, so you’ve got time.
If you’ve ever heard the saying, “the days are long, but the years are short,” take heed. It’s the truth. Blink and your child is throwing their graduation cap in the air and packing the car with dorm room essentials.
Now that we’ve established the fact that you don’t have as much time as you think, what can you do about it? With the skyrocketing cost of tuition, some parents are wondering if they’ll ever be able to afford their child’s college education.
What is a 529 College Savings Plan?
The key to building a solid financial foundation to help support your child’s academic future is to start early and save regularly. A 529 plan is one of the most popular, hassle-free, college savings vehicles available in the market today.
A 529 plan is a state-sponsored, tax-advantaged, education savings plan that is designed with features and benefits that encourage early investing for your child’s future education. It’s offered to help families establish a stronger financial strategy that will ultimately help their children—or another named beneficiary—continue their education. Any citizen or taxpayer can open an account, and almost anyone can help by contributing funds, including grandparents, other family members, and friends. It’s the perfect place for monetary gifts for birthdays, graduations, and holidays to grow with purpose.
While contributing to a higher education savings plan can help make education more affordable, it also provides valuable tax benefits. The majority of states offer at least one 529 plan and the majority of states also offer full or partial state income tax deductions or other credits for contributions. Plan features and investment options can differ by plan and by state, and residents are not required to invest in their home state’s plan, nor attend an in-state school.
The IRS doesn’t specify a maximum dollar amount for annual contributions to a 529 college savings plan. However, contributions to the plan are considered gifts for tax purposes and can be included in the 2018 annual exclusion of up to $15,000 per beneficiary. Any earnings accumulated in a 529 plan are exempt from federal income and capital gain taxes.
529 plan balances cannot exceed the total cost of the beneficiary’s higher education. Plan balance limits, which vary by state and range from $235,000 to $520,000, represent each state’s best and highest estimate of the cost of attending college and graduate school.
Qualified and non-qualified withdrawals
Tax-free withdrawals from the plan can be used to satisfy tuition for most accredited universities, colleges, technical and vocational schools in the U.S. as well as many abroad. The benefit also allows up to $10,000 per year and per beneficiary for private, public, or religious elementary and secondary schools. Additionally, account funds can be used to pay for some room and board costs, supplies, books, computers, printers, and internet access. Other fees and necessary equipment may also qualify under the plan.
Any withdrawals used for non-qualified expenses, like transportation, student loan costs, or sports and activities, will result in a taxable event. These non-qualified withdrawals will be subject to federal and state taxes and an additional 10% penalty tax, but only on the earnings in the account. If, however, your student beneficiary receives a scholarship, dies, or enrolls in a U.S. service academy, the 10% penalty is waived. Unless you’re able to change the beneficiary to another student, you will, however, be taxed on the earnings in the account.
Take your first step
Saving for college is an important step in your overall financial plan. Start early with a 529 Plan and you can earn years of compounding, tax-free growth, and annual tax credits. If your children are headed for college—or you’re looking to go back to school—talk with your local investment advisor.