Fiduciary Bonds: Definition, Types, Costs

Couple considers a fiduciary bond

A fiduciary bond, otherwise known as a probate bond, is a protective court bond that ensures a fiduciary will honor the expectations placed on them according to the law. The fiduciary bond upholds the interests and protection of the estate or trust owner. To understand who needs a fiduciary bond, how it works and the costs involved, here’s what you need to know.

What Is a Fiduciary Bond?

Fiduciary bonds are legal instruments that act as insurance to protect heirs, beneficiaries or other creditors when a fiduciary commits acts of fraud, embezzlement or other forms of dishonesty. To prevent damage, as a result, the court may require anyone with a fiduciary responsibility to another party to get a fiduciary bond.

Generally speaking, a fiduciary is an individual responsible for safeguarding the interest of another party. Fiduciaries may include trustees, guardians, financial professionals or another party with control over someone’s assets or property. Typically, a fiduciary will take control of someone’s assets when they are no longer able to manage them independently.

For example, a will may name a fiduciary to maintain the decedent’s assets. However, in the absence of a will, the spouse or children may take control, followed by relatives.

A fiduciary bond can range in price and ultimately depends on the value of the estate, as well as a few other factors. It may only be required to pay a portion to fund the bond, rather than the entire amount. For instance, if the fiduciary bond is $100,000, you may only need to pay about $400 to $600, depending on whether you receive approval.

Example of a Fiduciary Bond

Let’s say that John Smith is an elderly man who can no longer manage his property and assets. He didn’t appoint anyone to manage his finances, so the court appoints his daughter, Sally, to manage them in his place. To protect these assets, she may need to secure a fiduciary bond to guarantee she will meet her role’s duties and responsibilities.

The bond will help ensure that Sally won’t sell her father’s estate or embezzle money from him. If someone thinks Sally is not fulfilling the role of a fiduciary, they can make a claim against her. The company that issued the bond will then step in and fulfill the claim.

The company would likely reimburse John Smith for any money lost and then pursue Sally for the reimbursement of funds. If Sally no longer wants to be the estate’s fiduciary, she must find a suitable replacement and get approval from the court to resign. Until she does so, she is accountable for the duties and responsibilities of the fiduciary.

Who Needs a Fiduciary Bond?

A fiduciary bond isn’t always required. If it is mandatory, the fiduciary will receive a notification from the court.

In some cases, beneficiaries or creditors may request a fiduciary bond if they have concerns about the integrity of the fiduciary.

Usually, when banks, trusts or other corporate fiduciaries are in the mix, the courts don’t require a fiduciary bond. This is because there is less of a risk that a corporate fiduciary will compromise the payout.

Fiduciary Bond Types, Costs

Some of the common types of fiduciary bonds include:

  • Personal Representative Bond – This bond reassures the parties invested and connected to an estate that the fiduciary will manage the estate affairs in a responsible and ethical manner. The latter will also comply with local, state and federal laws and duties.
  • Executor Bond – This bond reassures the beneficiaries of an estate that even if the fiduciary doesn’t fulfill their duties, the bond will protect them and they will also receive compensation.
  • Guardianship Bond – This bond protects an individual who is receiving day-to-day care from a guardian. If the guardian fails to perform his or her obligations, someone can make a claim against the person.
  • Trustee Bond – It’s the trustee’s duty and responsibility to handle the trust’s property and assets. This bond ensures that the trustee fulfills his duties appropriately.
  • Administrator Bond – This bond ensures that the administrator of an estate distributes the estate assets according to local, state and federal laws.
  • Conservatorship Bond – A conservator handles the monetary matters of someone who needs to be cared for by a guardian. This type of bond ensures that the conservator upholds the duties and responsibilities of the role.

A fiduciary bond can range in price and ultimately depends on the value of the estate, as well as a few other factors. It may only be required to pay a portion to fund the bond, rather than the entire amount. For instance, if the fiduciary bond is $100,000, you may only need to pay about $400 to $600, depending on whether you receive approval.

Duties and Obligations of a Fiduciary

Financial advisor talks to clientsThere are many different types of fiduciaries; therefore, their duties and obligations vary. For example, an executor’s duties include taking control of a decedent’s property, collecting debts and arranging appraisals of assets. On the other hand, a trustee may have duties such as directing audits, challenging improper claims and determining claimants. In comparison, guardians and conservators may have the extra responsibility to care for an incapacitated individual or minor.

When fulfilling the role of a fiduciary, the individual must have a high level of loyalty since it’s one of the highest standards of care by either equity or law.

It’s important to note that anyone who gives financial advice or handles funds is also a fiduciary. However, if they work for a company, the company is required to obtain a fidelity bond, which differs from a fiduciary bond.

The Takeaway

Two men shake hands

A fiduciary bond protects individuals who have their estate or trust managed and handled by a fiduciary. While the court may not always require a fiduciary bond, there are some instances where it may make sense to protect an individual’s assets. A fiduciary bond is a crucial protection to aid those who may not have other forms of recourse. Bonded fiduciaries are often members of a person’s immediate family.

Estate Planning Tips

  • Consider talking to a financial advisor experienced in estate planning. Finding one doesn’t have to be hard. SmartAsset’s advisor matching tool can set you up with three personalized financial advisor options in just minutes. If you’re ready, get started now.
  • If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily plan ahead for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs or even set up a trust.

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How We Paid Off Over $45K of Debt in 11 Months

It seems pretty normal to me now but people still drop their jaws when I tell them we’ve paid over $45K on our loans in less than a year. We still have a year to go and most days I…

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Debt In The United States

This page may include affiliate links. Please see the disclosure page for more information. Let’s face it, debt in the United States is a problem. From our national debt, student loan debt, and consumer debt. Debt in the United States is a problem on all levels. Why is that? I’m a firm believer that it starts with…

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9 Ways We Paid Off $22,000 and Became Debt-Free in 22 Months

I spent my early 20s working hard and clumsily throwing money out the window. Then, I fell in love with a man who’d done the same, and we decided to get married. The excitement of…

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Different Types of Debt

Debt comes in all shapes and sizes. You can owe money to utility companies, banks, credit card providers, and the government. There’s student loan debt, credit card debt, mortgage debt, and much more. But what are the official categories of debt and how do the payoff strategies for these debts differ?

Categories of Debt

Debt is generally categorized into two simple forms: Secured and Unsecured. The former is secured against an asset, such as a car or loan, and means the lender can seize the asset if you fail to meet your obligations. Unsecured is not secured against anything, reducing the creditor’s control and limiting their options if the repayment terms are not met.

A secured debt provides the lender with some assurances and collateral, which means they are often prepared to provide better interest rates and terms. This is one of the reasons you’re charged astronomical rates for credit cards and short-term loans but are generally offered very favorable rates for home loans and car loans.

If the debtor fails to make payments on an unsecured debt, such as a credit card, then the debtor may file a judgment with the courts or sell it to a collection agency. In the first instance, it’s a lot of hassle without any guarantee. In the second, they’re selling the debts for cents on the dollar and losing a lot of money. In either case, it’s not ideal, and to offset this they charge much higher interest rates and these rates climb for debtors with a poorer track record.

There is also something known as revolving debt, which can be both unsecured and secured. Revolving debt is anything that offers a continuous cycle of credit and repayment, such as a credit card or a home equity line of credit. 

Mortgages and federal student loans may also be grouped into separate debts. In the case of mortgages, these are substantial secured loans that use the purchase as collateral. As for federal student loans, they are provided by the government to fund education. They are unsecured and there are many forgiveness programs and options to clear them before the repayment date.

What is a Collection Account?

As discussed above, if payments are missed for several months then the account may be sold to a debt collection agency. This agency will then assume control of the debt, contacting the debtor to try and settle for as much as they can. At this point, the debt can often be settled for a fraction of the amount, as the collection agency likely bought it very cheaply and will make a profit even if it is sold for 30% of its original balance.

Debt collectors are persistent as that’s their job. They will do everything in their power to collect, whether that means contacting you at work or contacting your family. There are cases when they are not allowed to do this, but in the first instance, they can, especially if they’re using these methods to track you down and they don’t discuss your debts with anyone else.

No one wants the debt collectors after them, but generally, you have more power than they do and unless they sue you, there’s very little they can do. If this happens to you, we recommend discussing the debts with them and trying to come to an arrangement. Assuming, that is, the debt has not passed the statute of limitations. If it has, then negotiating with them could invalidate that and make you legally responsible for the debt all over again.

Take a look at our guide to the statute of limitations in your state to learn more.

As scary as it can be to have an account in collections, it’s also common. A few years ago, a study found that there are over 70 million accounts in collections, with an average balance of just over $5,000.

Can Bankruptcy Discharge all Debts?

Bankruptcy can help you if you have more debts than you can repay. But it’s not as all-encompassing as many debtors believe.

Chapter 7 bankruptcy will discharge most of your debts, but it won’t touch child support, alimony or tax debt. It also won’t help you with secured debts as the lender will simply repossess or foreclose, taking back their money by cashing in the collateral. Chapter 13 bankruptcy works a little differently and is geared towards repayment as opposed to discharge. You get to keep more of your assets and in exchange you agree to a payment plan that repays your creditors over 3 to 5 years.

However, as with Chapter 7, you can’t clear tax debts and you will still need to pay child support and alimony. Most debts, including private student loans, credit card debt, and unsecured loan debt will be discharged with bankruptcy.

Bankruptcy can seriously reduce your credit score in the short term and can remain on your credit report for up to 10 years, so it’s not something to be taken lightly. Your case will also be dismissed if you can’t show that you have exhausted all other options.

Differences in Reducing Each Type of Debt

The United States has some of the highest consumer debt in the world. It has become a common part of modern life, but at the same time, we have better options for credit and debt relief, which helps to balance things out a little. Some of the debt relief options at your disposal have been discussed below in relation to each particular type of long-term debt.

The Best Methods for Reducing Loans

If you’re struggling with high-interest loans, debt consolidation can help. A debt consolidation company will provide you with a loan large enough to cover all your debts and in return, they will give you a single long-term debt. This will often have a smaller interest rate and a lower monthly payment, but the term will be much longer, which means you’ll pay much more interest overall.

Debt management works in a similar way, only you work directly with a credit union or credit counseling agency and they do all the work for you, before accepting your money and then distributing it to your creditors.

Both forms of debt relief can also help with other unsecured debts. They bring down your debt-to-income ratio, leave you with more disposable income, and allow you to restructure your finances and get your life back on track.

The Best Methods for Reducing Credit Cards

Debt settlement is the ultimate debt relief option and can help you clear all unsecured debt, with many companies specializing in credit card debt. 

Debt settlement works best when you have lots of derogatory marks and collections, as this is when creditors are more likely to settle. They can negotiate with your creditors for you and clear your debts by an average of 40% to 60%. You just need to pay the full settlement amount and the debt will clear, with the debt settlement company not taking their cut until the entire process has been finalized.

A balance transfer can also help with credit card debt. A balance transfer credit card gives you a 0% APR on all transfers for between 6 and 18 months. Simply move all of your credit card balances into a new balance transfer card and then every cent of your monthly payment will go towards the principal.

The Best Methods for Reducing Secured Debts

Secured debt is a different beast, as your lender can seize the asset if they want to. This makes them much less susceptible to settlement offers and refinancing. However, they will still be keen to avoid the costly foreclosure/repossession process, so contact them as soon as you’re struggling and see if they can offer you anything by way of a grace period or reduced payment.

Most lenders have some form of hardship program and are willing to be flexible if it increases their chances of being repaid in full.

Different Types of Debt is a post from Pocket Your Dollars.

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The Best Student Loan Companies For Refinancing

Refinancing your student loans can make good financial sense, and that’s especially true if your current loans are stuck at a high-interest rate. With a new loan at a lower APR, you could save a bundle of money on interest each month and ultimately pay your student debt off faster. Consolidating several loans into one new one can also simplify your financial life and make keeping up with bills a lot easier.

College Ave and Earnest topped our list, but since student loan refinancing is an incredibly competitive space, you’ll also want to spend time comparing student loan companies to see who offers the best deal. Many lenders in this space offer incredibly low APRs, flexible payment options, borrower incentives, and more. This means it’s more important than ever to shop around so you wind up with the best student loan for your needs.

What You Should Know About Refinancing Federal Student Loans with a Private Lender

The lenders on this list can help you consolidate and refinance both federal student loans and private student loans. However, there are a few details to be aware of before you refinance federal loans with a private lender.

Switching federal loans to private means giving up federal protections like deferment and forbearance. You also give up your chance to qualify for income-driven repayment plans like Pay As You Earn (PAYE) or Income Based Repayment (IBR). Income-driven repayment plans let you pay a percentage of your discretionary income for 20 to 25 years before ultimately forgiving your remaining loan balances, so this perk isn’t one you should give up without careful thought and consideration.

Best Student Loan Refinancing Companies of 2021

As you start your search to find the best student loan for your lifestyle, take the time to compare lenders and all they offer their customers. While there are a ton of reputable companies offering high-quality student loan refinancing products on the market today, there are also companies you should probably steer clear of.

To make your search easier, we took the time to compare most of the top lenders in this space in terms of interest rates offered, fees, borrower benefits, and more. The following student loan companies are the cream of the crop, so you should start your search here.

Our Top Picks:

  1. Splash Financial
  2. College Ave
  3. Earnest
  4. SoFi
  5. CommonBond
  6. LendKey
  7. Wells Fargo
  8. PenFed Credit Union

Student Loan Refinancing Company Reviews

1. Splash Financial

Splash Financial may be a newer company in the student loan refinancing space, but their offerings are competitive. This company lets you check your rate online without a hard inquiry on your credit report, and their variable rates currently start at just 2.25% APR.

Not only are interest rates offered by Splash Financial industry-leading, but the company has a 95% customer satisfaction rate so far. Their cutting-edge technology also lets you apply for your loan and complete the loan process online, meaning less hassle and stress for you as the borrower.

Check Out Splash Financial’s Low Rates

2. College Ave

College Ave offers student loan refinancing products that can be tailored to your needs. They offer low fixed and variable interest rates, for example, and you’ll never pay an application fee or an origination fee. You can even qualify for a discount if you set your loan up on autopay, and a wide range of repayment schedules are available.

College Ave also offers a wide range of online calculators and tools that can help you figure out how much student loan refinancing could help you save and whether the move would be worth it in the end. Considering their low variable rates start at just 2.74% APR, there’s a good chance you could save money by refinancing if you have excellent credit or a cosigner with great credit.

Get Started with College Ave

3. Earnest

Earnest is another online lender that focuses most of its efforts on offering high-quality student loans. This company lets you consolidate debt at a lower interest rate than you might find elsewhere, and you get the option to pick a monthly payment and repayment period that works with your budget and your lifestyle.

While you’ll need excellent credit to qualify for the lowest interest rates, loans from Earnest come with variable APRs starting at 1.81% and low fixed rates starting at just 3.45%. To qualify for student loan refinancing with Earnest, you’ll need a minimum credit score of 650 and a strong employment and income history. You also need to be current on all your bills and cannot have a bankruptcy on your credit profile.

Refinance and Save with Earnest

4. SoFi

Also make sure to check out student loan refinancing company SoFi as you continue your search. This online lender offers some of the best student loan refinancing products available today, including loans with no application fee, origination fee, or hidden fees.

SoFi lets you apply for and complete the entire loan process online, and they offer live customer support 7 days a week. You can also check your rate online without a hard inquiry on your credit report, which makes it easier to see how much you could save before you commit.

Get Pre-Approved with SoFi in Less than 2 Minutes

5. Commonbond

Commonbond is another online student lender who lets you check your rate online without a hard inquiry on your credit report. With student loan refinancing from Commonbond, you could easily save thousands of dollars on interest with a new fixed interest rate as low as 3.21%. Repayment terms are offered for 5 to 20 years as well, letting you choose a new monthly payment and repayment timeline that works for your needs.

You can apply for your new loan online and note that these loans don’t come with an origination fee or any prepayment penalties. Your loan could also qualify for forbearance, which means having up to 24 months without payments during times of financial hardship.

Apply Online with Commonbond

6. LendKey

LendKey offers private student loans and flexible student loan refinancing options to serve a variety of needs. You can repay your loan between 5 and 20 years, and their refinance loans don’t charge an origination fee.

You can use this company’s online interface to check your rate without a hard inquiry on your credit report, and variable APRs start at just 2.01% for graduates with excellent credit. LendKey loans also receive 9.3 out of 10 possible stars in recent reviews, meaning their customers are mostly happy with their decision to go with this company.

Save Thousands by Refinancing with LendKey

7. Wells Fargo

While Wells Fargo is mostly popular for their banking products, home mortgage products, and personal loans, this bank also offers student loan refinancing products. These loans let you consolidate student debts into a new loan with a low variable or fixed interest rate, and you can even score a discount for setting your loan up on autopay.

Terms for Wells Fargo loans are available anywhere from 5 to 20 years, meaning you can choose a repayment schedule and monthly payment that suits your needs. Wells Fargo also lets you check your rate online without a hard inquiry on your credit report.

Get Started with Wells Fargo

8. PenFed Credit Union

PenFed Credit Union offers unique student loan products powered by Purefy. You might be able to qualify for a lower interest rate that could lead to enormous interest savings over time, and PenFed lets you choose a repayment term and monthly payment that fits with your budget and lifestyle.

You can apply for student loan refinancing on your own, but PenFed Credit Union also allows cosigners. Low fixed interest rates start at just 3.48% APR, and you can check your rate online without a hard inquiry on your credit report.

Learn More about PenFed Credit Union

What To Look For When Refinancing

If you decide you want to refinance your student loans, you’ll be happy to know the refinancing market is more robust than ever. A variety of lenders offer insanely attractive loan options for those who can qualify, although you should know that student loan companies tend to be very finicky about your credit score. Some also won’t let you refinance if you didn’t graduate from college, or even if you graduated from an “unapproved” school.

While you should be aware of any lender-specific eligibility requirements before you apply with any student loan company, there are plenty of other factors to look out for. Here’s everything you should look for in a student loan refinancing company before you decide to trust them with your loans.

Low Interest Rate

Obviously, the main reason you’re probably thinking of refinancing your loans is the potential to save money on interest. Lenders who offer the lowest rates available today can potentially help you save more, although it’s important to consider that you may not qualify for the lowest rates available if you don’t have excellent credit.

Cosigner Requirements

Also consider that most lenders will offer better rates and loan terms if you have a cosigner with better credit than you have. This is especially true if your credit isn’t great, so make sure to ask family members if they’re willing to cosign on your new student loan if you hope to get the best rate. Just remember that your cosigner will be jointly liable for repayment, meaning you could quickly damage your relationship if you default on your loan and leave them holding the bag.

Low Fees or No Fees

Student loans are like any other loan in the fact that some charge higher fees or more fees than others. Since many student loans come with an application fee or an origination fee, you’ll want to look for lenders that don’t charge these fees. Also check for hidden fees like prepayment penalties.

Discounts Available

Some student loan companies let you qualify for discounts, the most popular of which is a discount for using autopay. If you’re able and willing to set up automatic payments on your credit card, you could save .25% or .50% off your interest rate depending on the lender you go with.

Rate Check Option

Many of the top student loan refinancing companies on this list make it possible to check your interest rate online without a hard inquiry on your credit report. This is a huge benefit since knowing your rate can help you figure out if refinancing is even worth it before you take the time to fill out a full loan application.

Flexible Repayment Plan

Also make sure any lender you go with offers some flexibility in your repayment plan and your monthly payment. You’ll want to make sure refinancing aligns with your long-term financial goals and your monthly budget, and it’s crucial to choose a new loan with a monthly payment you can live with.

Most lenders in this space offer repayment timelines of up to 20 years, which means you could spread your payments over several decades to get a monthly payment that makes sense with your income. Keep in mind, however, that you’ll pay more interest over the life of your loan when you take a long time to pay it off, so you may want to consider prioritizing a faster payment plan.

The Bottom Line

Student loan refinancing may not sound like a lot of fun. However, taking the time to consider all your loan options could easily save you thousands of dollars. This is especially true if you have a lot of debt at a high interest rate. By consolidating all your student loans into a new one with a lower APR, you could make loan repayment easier with a single payment and save a ton of money that would otherwise go to straight to interest without helping you pay off your loans.

The first step of the loan process is the hardest, however, and that’s choosing a student loan refinancing company that you trust. The lenders on this list are highly rated, but they also offer some of the best loan products on the market today.

  • Work with College Ave, our top pick, to refinance your student loan.

Start your search here and you’re bound to wind up with a student loan you can live with. At the very least, you’ll have a better idea of the loans that are available and how much you might save if you decide to refinance later on.

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How to Avoid Filing for Bankruptcy

The post How to Avoid Filing for Bankruptcy appeared first on Penny Pinchin' Mom.

The biggest obstacle to someone with a crushing debt burden is a lack of knowledge of how to get their arms entirely around the problem, and know how to go about making it right.

They do not understand what options are available to them, and if they do, they are unsure as to what the right first step for them is.  While many think bankruptcy is the answer, some alternatives may work better.

I can relate to the soul-crushing feeling of debt. I declared bankruptcy in 2010.  While it wasn’t my finest moment, I was able to learn from my mistakes and now live the financial life I want.  But, it wasn’t easy.  I had issues with my credit for years, and it followed me everywhere I went.

Had I known about some of these bankruptcy alternatives, I could have saved myself a lot of headaches.  Take the time to research your options before you pick up the phone to call an attorney.

 

HOW TO AVOID FILING FOR BANKRUPTCY

Debt Management Programs

Debt management programs, also called debt consolidation programs or credit counseling, is a way for people to pay off their unsecured debt using a third party debt relief company. A debt management program (DMP) works like this:

  • Customer enrolls in a DMP with a debt relief company providing them with information regarding the accounts to include in the program.
  • The debt relief provider negotiates a monthly payment and reduced interest rate with the creditor that results in the elimination of the debt in 3-5 years.
  • The customer makes a single payment to the debt relief provider, including a monthly administration fee based upon the amount of debt enrolled in the program. This fee usually ranges between $10 and $50 per month. The debt relief provider then disperses the agreed upon payment amounts to each creditor.
  • In exchange for a fixed monthly payment and reduced interest rate, creditors close the accounts so that you do not accumulate additional debt. While the act of enrolling in a debt management program does not affect your credit score, the closing of accounts will affect your debt to income ratio, as well as your credit history likely causing your credit score to dip in the beginning. However, by making consistent payments to the DMP, as well as to other financial commitments, a customer’s credit score usually rebounds quickly.

DMPs generally work well for people who are current with their payments but cannot make any progress on the balances due to high interest rates. By closing the accounts to avoid future debt, and having negotiated monthly payment and lowered interest rate, DMP customers can repay their unsecured debt within 3-5 years.

 

Debt Settlement Programs

A Debt Settlement Program (DSP) involves legal representation and for people who have a dier financial situation, but who still would like to try to avoid bankruptcy. People who enroll in a DSP go through the following process:

  • Customers stop paying the creditors enrolled in the program
  • Customers make monthly payments to the debt relief provider to fund an escrow account.
  • Over time, the customer’s accounts become severely delinquent. The lawyer assigned to the account will then reach out to creditors to negotiate a settlement of the account for less than the full amount.
  • The agreed-upon settlement is paid from the escrow account.

Debt settlement will have an adverse effect on a customer’s credit score since payments to the creditors are halted. Customers may also begin to receive collection calls from the creditor, at which time they are to inform the caller of the legal representation now handling the account. By law, this should stop the phone calls. There may also be tax implications for the amount of debt forgiven through a DSP.

DSPs are generally used by people who cannot meet all their monthly financial commitments and need to lower their monthly payments but want to avoid bankruptcy. By having the debt relief provider negotiate a settlement of less than the amount owed, customers can make progress on getting creditors off their backs in 3-5 years and then focus on rebuilding their financial future.

 

Negotiate directly with your creditors

Your creditor would much rather work with you than deal with bankruptcy.  If you have assets you can liquidate and use to pay down the debt, they may be willing to accept a lower amount.  Reach out and talk to your creditors to negotiate rates or even the balances to a more manageable amount.

If your creditors are harassing you, that is illegal and you can stop it.  Read more about how to stop collectors from calling you.

 

Just Keep Trying

If you are getting by and your budget works, there may not be a reason to give bankruptcy much thought.  Instead, work to create a debt repayment plan you can follow.  It may mean getting a second job or selling items, but there are many ways you can come up with more money to throw at your debt

The worst thing that will happen is your credit score will drop.  But, if you aren’t trying to get new credit for any reason, I would not stress about it in the short term.  Once your debt is paid down, you can do many things to increase your score quickly.

 

Debt consolidation

Check with your lender to see if there is a way you can consolidate your debts into a more manageable payment.  You usually need to provide collateral, such as your vehicle.  Alternatively, you might be able to tap into the equity in your home by getting a new mortgage for the balance owed PLUS the equity (where you can use the equity to pay off your loans).

If you’ve tried everything, but can’t see any other way but bankruptcy, make sure you know what you are getting into before you file.  It affects you and your family.

 

bankruptcy alternatives

 

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How Much Should You Spend on an Engagement Ring?

How Much Should You Spend on an Engagement Ring?

There’s nothing like falling in love and finding the person you want to spend the rest of your life with. But when it’s time to shop for rings, it’s easy to get discouraged by the price tags. Just how much should you spend on an engagement ring? We’ll dive into the topic and discuss ways to save on the big purchase.

Find out not: How much do I need to save for retirement?

What the Average Engagement Ring Costs

Maybe you can’t buy love. But if you’re in the market for an engagement ring, you’ll quickly realize that it won’t be cheap. According to the Knot’s 2016 Real Weddings Study, Americans spent an average of $6,163 on engagement rings, up from $5,871 in 2015. Wedding bands for the bride and engagement rings combined cost between $5,968 and $6,258.

If you want your wedding to happen sooner rather than later, keep in mind that on average, couples spend more than $30,000 to tie the knot. That’s roughly how much you can expect to pay for everything from your wedding reception and DJ to your cake and your photographer. Location matters when it comes to weddings, however, so you might be able to save some money by choosing a more affordable place to host your ceremony.

How Much Should I Spend?

How Much Should You Spend on an Engagement Ring?

Conventional wisdom says that anyone planning to propose to their partner should prepare to spend at least two or three months of their salary on an engagement ring. But spending too much isn’t a good idea for various reasons.

A recent study conducted by Emory University connected pricey rings to divorce rates. Men who spent more money on rings for their fiancees were more likely to end their marriages. That’s a possible long-term consequence of overspending on an engagement ring. In the short term, using a large percentage of your money to buy a ring might prevent you from using those funds to pay bills or stay on top of your debt, which can hurt your credit score.

If the marriage doesn’t work out and your ex-spouse decides to sell their diamond engagement ring, its value won’t be nearly as high as it was when it was first purchased. That’s why diamond rings can be such bad investments.

So exactly how much should you spend on an engagement ring? It’s a good idea to make sure that the price you pay doesn’t prevent you or your partner from accomplishing whatever you’re planning to achieve in the future, whether that’s buying a house or having a child. Rather than following an old-school societal notion that says you should spend x amount of money on a ring, it’s best to spend an amount that won’t compromise your financial goals or jeopardize the status of your relationship.

How to Save on the Ring

If you don’t want the engagement ring you’re buying to break the bank, it’s a good idea to learn as much as you can about the rings and what makes some more expensive than others. Diamonds are the gems most commonly used in engagement rings, and if you’re buying one for your significant other, it’s important to familiarize yourself with what jewelers refer to as the four C’s: clarity, cut, color and carat weight.

In terms of clarity, the best diamonds are flawless, meaning that they don’t have any blemishes when viewed under a microscope with 10 power magnification. Since no one’s eyesight is that powerful, you can get away with choosing a diamond with a lower clarity grade that costs less. Getting a diamond that has fewer carats (meaning that it weighs less) or getting one that isn’t completely colorless can also lower its overall price.

Or don’t get a diamond at all. Your partner might be just as happy with a simple band, a white sapphire or an emerald ring and it probably won’t cost as much as a diamond engagement ring. Shopping for your ring at a vintage store, looking for one online rather than in-person and getting a ring with a series of smaller stones surrounding the center stone (also known as a halo ring) are a few additional ways to save when buying a ring.

Final Word

How Much Should You Spend on an Engagement Ring?

There’s no need to spend a fortune on an engagement ring. And you don’t have to feel guilty about cutting corners in order to find one that you can afford to buy.

Like any other major purchase, it’s a good idea to take time to save up for a ring. If you have to take on more credit card debt or a personal loan in order to buy an engagement ring, it’s a good idea to find out how long it’ll take to pay off your debt. It isn’t wise to begin a marriage by digging yourself (and your partner) into a deep financial hole.

Tips for Getting Financially Ready for Marriage

  • If you haven’t already, start talking about money. It’s important to establish an open dialogue and make sure you understand and respect each other’s money values.
  • You might also consider sit down with a financial advisor before the big day. A financial advisor can help you identify your financial goals and come up with a financial plan for your life as a married couple. A matching tool (like ours) can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

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The post How Much Should You Spend on an Engagement Ring? appeared first on SmartAsset Blog.

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How to Save for Retirement in Your 20s, 30s, 40s, 50s and 60s

You probably don’t need us to tell you that the earlier you start saving for retirement, the better. But let’s face it: For a lot of people, the problem isn’t that they don’t understand how compounding works. They start saving late because their paychecks will only stretch so far.

Whether you’re in your 20s or your golden years are fast-approaching, saving and investing whatever you can will help make your retirement more comfortable. We’ll discuss how to save for retirement during each decade, along with the hurdles you may face at different stages of life.

How Much Should You Save for Retirement?

A good rule of thumb is to save between 10% and 20% of pre-tax income for retirement. But the truth is, the actual amount you need to save for retirement depends on a lot of factors, including:

  • Your age. If you get a late start, you’ll need to save more.
  • Whether your employer matches contributions. The 10% to 20% guideline includes your employer’s match. So if your employer matches your contributions dollar-for-dollar, you may be able to get away with less.
  • How aggressively you invest. Taking more risk usually leads to larger returns, but your losses will be steeper if the stock market tanks.
  • How long you plan to spend in retirement. It’s impossible to predict how long you’ll be able to work or how long you’ll live. But if you plan to retire early or people in your family often live into their mid-90s, you’ll want to save more.

How to Save for Retirement at Every Age

Now that you’re ready to start saving, here’s a decade-by-decade breakdown of savings strategies and how to make your retirement a priority.

Saving for Retirement in Your 20s

A dollar invested in your 20s is worth more than a dollar invested in your 30s or 40s. The problem: When you’re living on an entry-level salary, you just don’t have that many dollars to invest, particularly if you have student loan debt.

Prioritize Your 401(k) Match

If your company offers a 401(k) plan, a 403(b) plan or any retirement account with matching contributions, contribute enough to get the full match — unless of course you wouldn’t be able to pay bills as a result. The stock market delivers annual returns of about 8% on average. But if your employer gives you a 50% match, you’re getting a 50% return on your contribution before your money is even invested. That’s free money no investor would ever pass up.

Pay off High-Interest Debt

After getting that employer match, focus on tackling any high-interest debt. Those 8% average annual stock market returns pale in comparison to the average 16% interest rate for people who have credit card debt. In a typical year, you’d expect a  $100 investment could earn you $8. Put that $100 toward your balance? You’re guaranteed to save $16.

Take More Risks

Look, we’re not telling you to throw your money into risky investments like bitcoin or the penny stock your cousin won’t shut up about. But when you start investing, you’ll probably answer some questions to assess your risk tolerance. Take on as much risk as you can mentally handle, which means you’ll invest mostly in stocks with a small percentage in bonds. Don’t worry too much about a stock market crash. Missing out on growth is a bigger concern right now.

Build Your Emergency Fund

Building an emergency fund that could cover your expenses for three to six months is a great way to safeguard your retirement savings. That way you won’t need to tap your growing nest egg in a cash crunch. This isn’t money you should have invested, though. Keep it in a high-yield savings account, a money market account or a certificate of deposit (CD).

Tame Lifestyle Inflation

We want you to enjoy those much-deserved raises ahead of you — but keep lifestyle inflation in check. Don’t spend every dollar each time your paycheck gets higher. Commit to investing a certain percentage of each raise and then use the rest as you please.

Saving for Retirement in Your 30s

If you’re just starting to save in your 30s, the picture isn’t too dire. You still have about three decades left until retirement, but it’s essential not to delay any further. Saving may be a challenge now, though, if you’ve added kids and homeownership to the mix.

Invest in an IRA

Opening a Roth IRA is a great way to supplement your savings if you’ve only been investing in your 401(k) thus far. A Roth IRA is a solid bet because you’ll get tax-free money in retirement.

In both 2020 and 2021, you can contribute up to $6,000, or $7,000 if you’re over 50. The deadline to contribute isn’t until tax day for any given year, so you can still make 2020 contributions until April 15, 2021. If you earn too much to fund a Roth IRA, or you want the tax break now (even though it means paying taxes in retirement), you can contribute to a traditional IRA.

Your investment options with a 401(k) are limited. But with an IRA, you can invest in whatever stocks, bonds, mutual funds or exchange-traded funds (ETFs) you choose.

Pro Tip

If you or your spouse isn’t working but you can afford to save for retirement, consider a spousal IRA. It’s a regular IRA, but the working spouse funds it for the non-earning spouse. 

Avoid Mixing Retirement Money With Other Savings

You’re allowed to take a 401(k) loan for a home purchase. The Roth IRA rules give you the flexibility to use your investment money for a first-time home purchase or college tuition. You’re also allowed to withdraw your contributions whenever you want. Wait, though. That doesn’t mean you should.

The obvious drawback is that you’re taking money out of the market before it’s had time to compound. But there’s another downside. It’s hard to figure out if you’re on track for your retirement goals when your Roth IRA is doing double duty as a college savings account or down payment fund.

Start a 529 Plan While Your Kids Are Young

Saving for your own future takes higher priority than saving for your kids’ college. But if your retirement funds are in shipshape, opening a 529 plan to save for your children’s education is a smart move. Not only will you keep the money separate from your nest egg, but by planning for their education early, you’ll avoid having to tap your savings for their needs later on.

Keep Investing When the Stock Market Crashes

The stock market has a major meltdown like the March 2020 COVID-19 crash about once a decade. But when a crash happens in your 30s, it’s often the first time you have enough invested to see your net worth take a hit. Don’t let panic take over. No cashing out. Commit to dollar-cost averaging and keep investing as usual, even when you’re terrified.

Saving for Retirement in Your 40s

If you’re in your 40s and started saving early, you may have a healthy nest egg by now. But if you’re behind on your retirement goals, now is the time to ramp things up. You still have plenty of time to save, but you’ve missed out on those early years of compounding.

Continue Taking Enough Risk

You may feel like you can afford less investment risk in your 40s, but you still realistically have another two decades left until retirement. Your money still has — and needs — plenty of time to grow. Stay invested mostly in stocks, even if it’s more unnerving than ever when you see the stock market tank.

Put Your Retirement Above Your Kids’ College Fund

You can only afford to pay for your kids’ college if you’re on track for retirement. Talk to your kids early on about what you can afford, as well their options for avoiding massive student loan debt, including attending a cheaper school, getting financial aid, and working while going to school. Your options for funding your retirement are much more limited.

Keep Your Mortgage

Mortgage rates are historically low — well below 3% as of December 2020. Your potential returns are much higher for investing, so you’re better off putting extra money into your retirement accounts. If you haven’t already done so, consider refinancing your mortgage to get the lowest rate.

Invest Even More

Now is the time to invest even more if you can afford to. Keep getting that full employer 401(k) match. Beyond that, try to max out your IRA contributions. If you have extra money to invest on top of that, consider allocating more to your 401(k). Or you could invest in a taxable brokerage account if you want more flexibility on how to invest.

Meet With a Financial Adviser

You’re about halfway through your working years when you’re in your 40s. Now is a good time to meet with a financial adviser. If you can’t afford one, a financial counselor is typically less expensive. They’ll focus on fundamentals like budgeting and paying off debt, rather than giving investment advice.

A woman waves her hands in the air as she overlooks a mountainous view in Alaska.

Saving for Retirement in Your 50s

By your 50s, those retirement years that once seemed like they were an eternity away are getting closer. Maybe that’s an exciting prospect — or perhaps it fills you with dread. Whether you want to keep working forever or retirement can’t come soon enough, now is the perfect time to start setting goals for when you want to retire and what you want your retirement to look like.

Review Your Asset Allocation

In your 50s, you may want to start shifting more into safe assets, like bonds or CDs. Your money has less time to recover from a stock market crash. Be careful, though. You still want to be invested in stocks so you can earn returns that will keep your money growing. With interest rates likely to stay low through 2023, bonds and CDs probably won’t earn enough to keep pace with inflation.

Take Advantage of Catch-up Contributions

If you’re behind on retirement savings, give your funds a boost using catch-up contributions. In 2020 and 2021, you can contribute:

  • $1,000 extra to a Roth or traditional IRA (or split the money between the two) once you’re 50
  • $6,500 extra to your 401(k) once you’re 50
  • $1,000 extra to a health savings account (HSA) once you’re 55.

Work More if You’re Behind

Your window for catching up on retirement savings is getting smaller now. So if you’re behind, consider your options for earning extra money to put into your nest egg. You could take on a side hustle, take on freelance work or work overtime if that’s a possibility to bring in extra cash. Even if you intend to work for another decade or two, many people are forced to retire earlier than they planned. It’s essential that you earn as much as possible while you can.

Pay off Your Remaining Debt

Since your 50s is often when you start shifting away from high-growth mode and into safer investments, now is a good time to use extra money to pay off lower-interest debt, including your mortgage. Retirement will be much more relaxing if you can enjoy it debt-free.

FROM THE RETIREMENT FORUM
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Re-locating
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Saving for Retirement in Your 60s

Hooray, you’ve made it! Hopefully your retirement goals are looking attainable by now after working for decades to get here. But you still have some big decisions to make. Someone in their 60s in 2021 could easily spend another two to three decades in retirement. Your challenge now is to make that hard-earned money last as long as possible.

Make a Retirement Budget

Start planning your retirement budget at least a couple years before you actually retire. Financial planners generally recommend replacing about 70% to 80% of your pre-retirement income. Common income sources for seniors include:

  • Social Security benefits. Monthly benefits replace about 40% of pre-retirement income for the average senior.
  • Retirement account withdrawals. Money you take out from your retirement accounts, like your 401(k) and IRA.
  • Defined-benefit pensions. These are increasingly rare in the private sector, but still somewhat common for those retiring from a career in public service.
  • Annuities. Though controversial in the personal finance world, an annuity could make sense if you’re worried about outliving your savings.
  • Other investment income. Some seniors supplement their retirement and Social Security income with earnings from real estate investments or dividend stocks, for example.
  • Part-time work. A part-time job can help you delay dipping into your retirement savings account, giving your money more time to grow.

You can plan on some expenses going away. You won’t be paying payroll taxes or making retirement contributions, for example, and maybe your mortgage will be paid off. But you generally don’t want to plan for any budget cuts that are too drastic.

Even though some of your expenses will decrease, health care costs eat up a large chunk of senior income, even once you’re eligible for Medicare coverage — and they usually increase much faster than inflation.

Develop Your Social Security Strategy

You can take your Social Security benefits as early as 62 or as late as age 70. But the earlier you take benefits, the lower your monthly benefits will be. If your retirement funds are lacking, delaying as long as you can is usually the best solution. Taking your benefit at 70 vs. 62 will result in monthly checks that are about 76% higher. However, if you have significant health problems, taking benefits earlier may pay off.

Pro Tip

Use Social Security’s Retirement Estimator to estimate what your monthly benefit will be.

Figure Out How Much You Can Afford to Withdraw

Once you’ve made your retirement budget and estimated how much Social Security you’ll receive, you can estimate how much you’ll be able to safely withdraw from your retirement accounts. A common retirement planning guideline is the 4% rule: You withdraw no more than 4% of your retirement savings in the first year, then adjust the amount for inflation.

If you have a Roth IRA, you can let that money grow as long as you want and then enjoy it tax-free. But you’ll have to take required minimum distributions, or RMDs, beginning at age 72 if you have a 401(k) or a traditional IRA. These are mandatory distributions based on your life expectancy. The penalties for not taking them are stiff: You’ll owe the IRS 50% of the amount you were supposed to withdraw.

Keep Investing While You’re Working

Avoid taking money out of your retirement accounts while you’re still working. Once you’re over age 59 ½, you won’t pay an early withdrawal penalty, but you want to avoid touching your retirement funds for as long as possible.

Instead, continue to invest in your retirement plans as long as you’re still earning money. But do so cautiously. Keep money out of the stock market if you’ll need it in the next five years or so, since your money doesn’t have much time to recover from a stock market crash in your 60s.

A Final Thought: Make Your Retirement About You

Whether you’re still working or you’re already enjoying your golden years, this part is essential: You need to prioritize you. That means your retirement savings goals need to come before bailing out family members, or paying for college for your children and grandchildren. After all, no one else is going to come to the rescue if you get to retirement with no savings.

If you’re like most people, you’ll work for decades to get to retirement. The earlier you start planning for it, the more stress-free it will be.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com