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Guide to Managing Finances for Deploying Service Members

Life in the military offers some distinct experiences compared to civilian life, and that includes your budget and finances. The pre-deployment process can feel overwhelming, especially when you’re organizing your money and bills. 

It’s important you provide your family with everything they need to keep you and any dependents comfortable and stable. This means gathering paperwork, making phone calls to service providers, creating new budgets, and organizing your estate. The more you prepare ahead of time, the less you have to worry about the state of your investments and finances when you return home. 

To help make the process easier, we’ve gathered everything you need to know for deployment finances. Read on or jump to a specific category below:

Pre-Deployment Needs

  • Review Your Estate
  • Reassign Financial Responsibilities
  • Update Your Services
  • Build a Budget
  • Prepare a Deployment Binder

Deployment Needs

  • Protect Yourself From Fraud
  • Adjust Your Savings
  • Financial Assistance

Post-Deployment Needs

  • Update Your Budget
  • Pay Off Debt
  • Review Legal Documents

Before Your Deployment

There’s a lot of paperwork and emotions involved in preparing for deployment. Make sure you take plenty of time for yourself and your loved ones, then schedule time to organize your finances for some peace of mind. 
investments, and dependents. It’s an important conversation to have with your partner and establishes:

  • Power of attorney
  • Living will
  • Last will and testament
  • Long-term care
  • Life insurance
  • Survivor benefits
  • Funeral arrangements

Anyone with property, wealth, or dependents should have some estate planning basics secured. These documents will protect your wishes and your family in the event you suffer serious injury. There are several military resources to help you prepare your estate:

  • Defense Finance And Accounting Services’ Survivor Benefit Plan and Reserve Component Survivor Benefit Plan
  • Department Of Defense’s Military Funeral Honors Pre-arrangement 
  • Service Member’s Group Life Insurance
  • Veterans Affairs Survivor’s Benefits
  • The Importance Of Estate Planning In The Military
  • Survivor Benefits Calculator

Servicemembers Civil Relief Act (SCRA) allows you to cancel a housing or auto lease, cancel your phone service, and avoid foreclosure on a home you own without penalties. Additionally, you can reduce your debt interest rates while you’re deployed, giving you a leg up on debt repayment or savings goals. Learn more about the SCRA benefits below:

  • Terminating Your Lease For Deployment
  • SCRA Interest Rate Limits
  • SCRA Benefits And Legal Guidance

 

Build a Deployment Budget

Your pay may change during and after deployment, which means it’s time to update your budget. Use a deployment calculator to estimate how your pay will change to get a foundation for your budget. 

Typically, we recommend you put 50 percent of your pay towards needs, like rent and groceries. If you don’t have anyone relying on your income, then you should consider splitting this chunk of change between your savings accounts and debt. 

Make sure you continue to deposit at least 20 percent of your pay into savings, too. Send some of this towards an emergency fund, while the rest can go towards your larger savings goals, like buying a house and retirement. 

Use these resources to help calculate your goals and budgets, as well as planning for your taxes:

  • My Army Benefits Deployment Calculator
  • My Army Benefits Retirement Calculator
  • Mint Budget Calculator
  • IRS Deployed Veteran Tax Extension
  • IRS Military Tax Resources
  • Combat Zone Tax Exclusions

 

Prepare a Deployment Binder

Mockup of someone completing the deployment checklist.

Illustrated button to download our printable depployment binder checklist.

It’s best to organize and arrange all of your documents, information, and needs into a deployment binder for your family. This will hold copies of your estate planning documents, budget information, and additional contacts and documents. 

Make copies of your personal documents, like birth certificates, contracts, bank information, and more. You also want to list important contacts like family doctors, your pet’s veterinarian, household contacts, and your power of attorney. 

Once you have your book ready, give it to your most trusted friend or family member. Again, this point of contact will have a lot of information about you that needs to stay secure. Finish it off with any instructions or to-dos for while you’re gone, and your finances should be secure for your leave. 

While You’re Deployed

Though most of your needs are taken care of before you deploy, there are a few things to settle while you’re away from home. 
Romance and identity scams are especially popular and can cost you thousands. 

  • Social Media Scams To Watch For
  • Romance Scam Red Flags
  • Military Scam Warning Signs

 

Adjust Your Savings 

Since you won’t be responsible for as many bills, and you may have reduced debt interest rates, deployment is the perfect time to build your savings.

While you’re deployed, you may be eligible for the Department of Defense’s Savings Deposit Program (SDP), which offers up to 10 percent interest. This is available to service members deployed to designated combat zones and those receiving hostile fire pay.

Military and federal government employees are also eligible for the Thrift Savings Plan. This is a supplementary retirement savings to your Civil Service Retirement System plan.

  • Savings Deposit Program
  • Thrift Savings Plan Calculator
  • Civil Service Retirement System
  • Military Saves Resources

 

Additional Resources for Financial Assistance

Deployment can be a financially and emotionally difficult time for families of service members. Make sure you and your family have easy access to financial aid in case they find themselves in need. 

Each individual branch of the military offers its own family and financial resources. You can find additional care through local support systems and national organizations, like Military OneSource and the American Legion. 

  • Family Readiness System
  • Navy-marine Corps Relief Society
  • Air Force Aid Society
  • Army Emergency Relief
  • Coast Guard Mutual Assistance
  • Military Onesource’s Financial Live Chat
  • Find Your Military And Family Support Center
  • Emergency Loans Through Military Heroes Fund Foundation Programs
  • The American Legion Family Support Network

After You Return Home

Coming home after deployment may be a rush of emotions. Relief, exhaustion, excitement, and lots of celebration are sure to come with it. There’s a lot to consider with reintegration after deployment, and that includes taking another look at your finances. 

 

Update Your Budget

Just like before deployment, you should update your budget to account for your new spending needs and pay. It’s time to reinstate your car insurance, find housing, and plan your monthly grocery budget. 

After a boost in savings while deployed, you may want to treat yourself to something nice — which is totally okay! The key is to decide what you want for yourself or your family, figure if it’s reasonable while maintaining other savings goals, like your rainy day fund, and limit other frivolous purchases. Now is not the time to go on a spending spree — it’s best to invest this money into education savings, retirement, and other long-term plans.

In addition to your savings goals, make sure you’re prepared to take care of yours and your family’s health. Prioritize your mental health after deployment and speak with a counselor, join support groups, and prepare for reintegration. Your family and children may also have a hard time adjusting, so consider their needs and seek out resources as well. 
FTC | NFCC 

The post Guide to Managing Finances for Deploying Service Members appeared first on MintLife Blog.

Source: mint.intuit.com

9 Things I Love and Have Learned After 9 Years Of Blogging

I still remember the month I started my blog. I don’t really remember the exact first day, but I remember the first month and how excited I was.

In August of 2011, I started Making Sense of Cents.

That was exactly 9 years ago!

Back then, I had no idea what I was doing, and I also had no goals for my blog.

I didn’t even really know what a blog was, or that they could make money.

I also didn’t even like to write at that time!

In the past 9 years, so much has changed for me.

It’s crazy to think that I started my blog nine years ago, especially when I consider all of the amazing things it has done for my life.

It was something I started and worked on in addition to my full-time day job as a financial analyst, and around two years after I started this blog, I quit my day job to blog full-time.

Some numbers on Making Sense of Cents:

  • My first blog post was published on August 10, 2011. You can read it here.
  • I have published 1,878 articles here on Making Sense of Cents. That number was higher about a month ago, but I recently deleted several hundred articles that I thought weren’t good enough.
  • I have 70,816 comments on my blog posts.
  • I’ve personally replied to 21,080 comments.
  • It took me 6 months to earn my first $100 from Making Sense of Cents.

First, a little backstory on how I began.

You may have heard this from me before, but the funny thing is that I created my blog on a whim after reading about a personal finance website in a magazine. It started as a hobby to track my own personal finance progress, and I honestly didn’t even know that people could make money blogging!

I knew NOTHING about running a website.

At that time, I was working as an analyst at an investment banking and valuation firm. I chugged along working the 8-5, Monday through Friday grind and didn’t see myself having an enjoyable future there. I had a stressful job filled with lots of deadlines and responsibilities that just didn’t interest me. Yes, I know this is the norm for some people, but I just couldn’t imagine myself living like that for 40+ years.

Blogging was an outlet for my stressful day job, and my interest quickly grew, even though it was just a hobby. It gave me space to write about my personal finance situation, have a support group, to keep track of how I was doing, and more. I did not create Making Sense of Cents with the intention of earning an income, but after only six months, I began to make money blogging.

A friend I met through the blogging community connected me with an advertiser, and I earned $100 from that advertisement deal.

That one deal sparked my interest in taking my blog more seriously and learning how to make even more money blogging.

I now earn a great living from my blog, and it all started on a whim, not even knowing that blogs could make money.

Blogging completely changed my life for the better, and I urge anyone who is interested to learn how to start a blog as well.

Blogging has allowed me to take control of my finances and earn more money. It means I can work from home, travel whenever I want, have a flexible schedule, and more!

Related content:

  • How I Successfully Built A $1,000,000+ Blog
  • Welcome To Paradise – We’re Living On A Sailboat!
  • How To Start a Blog Free Course
  • Should I Start A Blog? Here Are The Top Reasons You Will Love Blogging
  • What is a blog post?

And, all of this happened because I started some random blog nine years ago.

I made so many mistakes, and I still make mistakes today. But, I continue to learn and improve, which has shaped this blog into what it is today.

I was so afraid to quit my job when I did, especially for a blog.

So many people thought I was absolutely crazy and making the worst decision of my life. Especially since my husband quit his job at the same time!

Today, I want to talk about the the 9 things that I love and have learned about blogging over the years. I feel like what I enjoy about blogging as well as what I’ve learned go hand in hand.

Oh yeah, if you haven’t yet – please follow me on Instagram.

Here’s what I love and have learned about blogging.

 

1. I love being my own boss.

When I first started my blog and realized I could make an income from it, I quickly learned how much I love being my own boss.

I love being in complete control of what I do, and becoming self-employed may allow you to feel that way as well. I enjoy deciding what I will do each day, creating my own schedule, determining my business goals, handling everything behind the scenes, and more.

I actually have a rule in my life/business where I don’t do anything unless I want to. While I still say yes to many amazing opportunities, I’m not doing anything that feels like a total drag or is against my beliefs. This has really helped improve my work-life balance, which is great because being able to choose how you earn a living amounts to making sure you love everything you do.

I honestly love each and every service I provide – writing online, promoting, networking, interacting with readers, and more.

Running an online business (and being your own boss) may not be for everyone, but it’s something I enjoy.

 

2. A flexible schedule is one of my most favorite things.

One of the best things about working for yourself and being a blogger is that you can have a flexible schedule.

I can work as far ahead as I want to, I can create my own work schedule, and more.

I love being able to work for a few hours in the morning, do something fun during the day (such as a hike), and then work later at night when I have nothing planned. I can also schedule appointments during the day and it’s really no big deal.

I can work at night, in the morning, on the weekends – I can work whenever.

But, this can also be something to be careful with as well, as it can be difficult to have a good work-life balance.

 

3. Location independence is AMAZING.

Being location independent for so many years has been great.

I love being able to work from wherever I am, and it’s allowed me some of the best experiences I’ve had, like living in an RV and now on a sailboat. All I need is an internet connection and my laptop.

The only problem with being location independent is that it can be hard to separate work from the rest of your life. You may find yourself working all the time, no matter where you are, and while that may seem great, being able to take a true vacation can be a hard task.

However, I’m not going to complain because the work-life balance I’m rocking right now is great.

 

4. Remember, success takes time!

Many bloggers quit just a few months in.

In fact, the statistic that I’ve always heard is that the average blogger quits just 6 months in.

I completely understand – starting a blog can be super overwhelming!

But, good things don’t come easy. If blogging was easy, then everyone would be doing it.

It took me 6 months for me to earn my first $100 from Making Sense of Cents. If I would have quit at that time, I would have missed out on so many great things!

Remember, success takes time!

 

5. Don’t write when you feel forced.

One thing I have definitely learned about myself over the years is that I write best when I’m not forced – i.e. when I’m on a deadline.

Instead, I always try to write content ahead of time.

I used to write content for Monday on the night before (Sunday!), and I found that to be super stressful. Even a week in advance was too stressful for me.

I like to be at least a month ahead, as then I can truly write when I feel inspired and happy to write.

 

6. Get ready to learn.

Pretty much everything about having a blog is a learning process.

Blogging is not a get rich quick scheme, and anyone who tells you that it is (or acts like it is) is lying.

Blogging is not easy.

And, you won’t make $100,000 your first month blogging.

Blogging can be a lot of work, and there is always something to learn. Something is always changing in the blogging world, which means you will need to continue to learn and adapt to the technology around you. This includes learning about social media platforms, running a website, growing your platform, writing high-quality content, and more.

This is something that I love about blogging – it’s never stale and there’s always a new challenge.

 

7. Stop seeing other bloggers as competition.

Okay, so this isn’t exactly something that I’ve learned, but I want everyone else to learn!

I have always had this mindset – that there is plenty of room for everyone in the blogging world. However, not everyone feels the same.

So many bloggers see other bloggers as enemies or competition, and this is a huge mistake.

I mostly see this in newer bloggers, and this can really hold them back.

Networking is very important if you want to create a successful blog. Bloggers should be open to making blogging friends, attending blog conferences, sharing other blogs’ content with their readers, and more.

Networking can help you enjoy blogging more, learn new things about blogging, learn how to make money blogging, make great connections, and more. If you want to make money blogging, then you will want to network with others! After all, networking is the reason why I learned how to make money blogging in the first place!

The key is to be genuine and to give more than you take, which are the two main things I always tell people when it comes to networking. I receive so many emails every day from people who clearly aren’t genuine, and it’s very easy to see.

I’ve made great friends who are bloggers and influencers, and it’s truly a great community to be in.

 

8. You don’t need previous experience to be successful.

To become a blogger, you don’t need any previous experience. You don’t need to be a computer wizard, understand social media, or anything else.

These are all things that you can learn as you go.

Nearly every single blogger was brand new at some point, and they had no idea what they were doing.

I’m proof of that because I didn’t even know that blogs existed when I started Making Sense of Cents, and I definitely didn’t know that bloggers could make money. I learned how to create a blog from the bottom up and have worked my way to where I am today. It’s not always easy, but it’s been rewarding!

With blogging, you’ll have a lot to learn, but that doesn’t mean it’s impossible. It’s challenging, but in a good way.

 

9. You can make a living blogging.

This is probably one of the best things that I’ve learned since I first started my blog.

You can actually make a living blogging!

No, not every single person will become a successful blogger (it’s NOT a get-rich-quick scheme), but I know many successful bloggers who started in a similar way as I did – blogging as a hobby and it just grew from there.

For me, I have earned a high income with my blog, and I have enough saved to retire whenever I would like. I am still working on my blog, though, as I enjoy what I do.

 

What’s next?

I’ve never really been much of a planner, so I don’t want to commit to anything HUGE haha.

But, for Making Sense of Cents, I do have some plans. I am working towards improving traffic and readership, and coming up with more and more high-quality content.

I am so grateful to all of you readers, and I want to continue to help you all out by writing high-quality content.

That is really my only goal for now!

If there’s anything you’d like me to write about on Making Sense of Cents, please send me an email at michelle@makingsenseofcents.com or leave a comment below.

Thank you for being a reader!

 

There’s a ton of valuable free resources.

I know I’ll be asked this, so I am going to include this here.

One of the great things about starting a blog is that there are a ton of FREE blogging resources out there that can help you get started.

In fact, I didn’t spend any money in the beginning in order to learn how to blog – instead, I signed up for a ton of free webinars, free email courses, and more.

  1. First, if you don’t have a blog, then I recommend starting off with my free blogging course How To Start A Blog FREE Course.
  2. Affiliate Marketing Cheat Sheet – With this time-saving cheat sheet, you’ll learn how to make affiliate income from your blog. These tips will help you to rapidly improve your results and increase your blogging income in no time.
  3. The SEO Starter Pack (FREE Video Training)– Improve your SEO knowledge in just 60 minutes with this FREE 6-day video training.
  4. The Free Blogging Planner – The Blogging Planner is a free workbook that I created just for you! In this free workbook, you’ll receive printables for starting your blog, creating a blog post, a daily/weekly blog planner, goals, and more.

Do you have any questions for me? Are you interested in starting your own business?

The post 9 Things I Love and Have Learned After 9 Years Of Blogging appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

How Microlearning Can Level Up Your Knowledge

If you’re looking to advance your career or pivot to a new industry, then you’re probably checking out ways you can beef up your resume. Maybe you’re considering an MBA, a bootcamp, or browsing upcoming conferences. Or perhaps you’re considering the DIY route and looking for podcast and book recommendations. 

While any of these options will help you learn and could boost your resume, the best way to level up your career prospects is to dedicate yourself to becoming a lifelong learner, which is where microlearning comes into play. 

Conferences and classes are bursting with information, but you may feel limited by the course schedule and teaching style. This works for some people, but it can be expensive and hard to fit into a budget or daily schedule. Microlearning can help you take charge of your education by providing bite-sized lessons. Over time, you can build up your learnings for a more thorough and robust understanding of the subject. 

The best part is you can apply your specific lessons to your life, career, and goals to build each of these out over time and see what really works and what doesn’t. Your consistent growth can improve job satisfaction and career opportunities, putting you in the spotlight for the next raise or promotion. Learn more below or jump to our infographic to get started.

What Is Microlearning?

Microlearning has become a popular workplace trend as a learning process that breaks topics into highly specific, concise lessons. This allows the learner to build understanding and confidence at their own pace.

Microlearning is great for tackling new information and closing knowledge gaps. If you already have a foundation of knowledge for a topic, then it can be frustrating to wade through the basics for the few new ideas you were looking for. Khan Academy and TED Talks are a great example of how you may fill in knowledge gaps. 

The Benefits of Microlearning

The most important part of any lesson plan is that it’s tailored to a learner’s needs, and that the learner is actually able to retain information. Microlearning’s flexibility for learners is one of its biggest benefits.

illustration highlighting the benefits of microlearning

Here are some other reasons to consider microlearning:

  • Maximize time by preparing lessons for on-the-go and fitting them in during breaks or commutes.
  • Go in-depth to build a solid learning foundation and improve retention with practice. 
  • Find what works by experimenting with videos, articles, or podcasts to find what format works best for you. 
  • Save money with free resources like TED Talks, YouTube, and expert podcast hosts who provide episodic insights and lessons for you to follow. 
  • Fill knowledge gaps with lessons targeting exactly what you need to know instead of wading through beginner resources. 

The Disadvantages of Microlearning

Microlearning is great for career development, employee training, and specific topics that you could use a refresher on. However, they’re not a total replacement for other learning systems, and you should keep these in mind when you get started:

  • It’s not immediate and microlearning is about regular commitments to learning.
  • It isn’t easier, but it may feel easier. This is actually a benefit unless you assume it will be easy. You still have to actively learn and practice your lessons. 
  • Some topics just don’t work, including complicated topics like global economics. It’s great for learning about things like mortgages, but you likely won’t become an expert on personal finance in just a few lessons. 
  • There’s work upfront to finding and compiling the resources that fit your needs and that you trust. This work pays off in the long-run, though, with easy-to-access lessons. 

5 Ways to Begin Microlearning

You may not realize it, but you’ve probably already prioritized microlearning in your day-to-day life. If you’ve watched a YouTube video to learn how to change your oil or customize a spreadsheet, then you know exactly how beneficial short, specific, and detailed lessons can be. 

89% of employees feel more productive when their work is gamified with rewards

Here are some ways you can get started using microlearning as part of your professional development:

1. Game Groups

Gamifying your learning helps make the topic fun and builds a positive relationship with studying. You can get started by setting goals and rewards, or inviting peers to join you with a competitive leaderboard or a trivia night. 

2. Video Clips

Videos are designed to be relatively short and engaging, and YouTube has made learning largely accessible from anywhere. While YouTube playlists are a great place to learn, make sure you’ve done your research on any channels or personalities you’re watching to ensure your lessons are accurate. 

3. Podcast Playlists

Like videos, podcasts are a great way to consume information on the go and from personalities you enjoy and trust. They’ve become hugely popular because they’re easy to listen to while driving, working, or exercising, but it’s important that you give your playlist your active attention if you hope to learn effectively. 

4. Quiz Collections

Considering a quiz may bring flashbacks of test anxiety and stressful finals weeks, but in this scenario, quizzing isn’t about checking a box that you learned something new. Instead, it’s a means to practice your memory recall and retention so you can count on it when you need it most. 

5. Team Talks

Having a team to study with is not only great for motivation, but it can also improve your lesson retention. Active learning is the process of working or chatting through a subject or problem, and studies show this is the best way to learn and practice your skills. 

Keeping up with your professional development is the best way to impress your employer and expand your job prospects. Whether you want to climb the career ladder or ease your daily workload, How Microlearning Can Level Up Your Knowledge appeared first on MintLife Blog.

Source: mint.intuit.com

What Do New FICO Changes Mean for Me?

Have you ever applied for a credit card, car loan or mortgage? If so, then one of the first things the lender looked at was your FICO score. It has a major impact not only on getting approved in the first place, but also on the interest rate you will receive after approval.

On August 7, FICO announced some pretty major changes in how they will be calculating that ever-important number. Before you can understand how the changes will or won’t impact you, you need to have a firm grasp of the basics.

What is my FICO score?

Your FICO score, or credit score, is a number ranging from 300-850 that shows lenders how reliable you will be in repaying your debts. A bad score is anything below 560, not very good is 560-659, good is 660-724, very good is 725-759, and anything above 760 is classified as great. While it is best to be in the great range, you can sometimes qualify for the best available interest rates with 720 or above.

In order to calculate your credit score, FICO pulls information from your credit reports from the three major reporting agencies: Experian, TransUnion, and Equifax. When banks and other lending institutions consider your application, they look at several factors. The first is usually your FICO score, which will either get you in the door or get it slammed in your face, but after that they consider other aspects of your finances, such as income and the detailed history on the credit report itself.

What are the changes, and how will they affect me?

There will be four notable changes to how FICO evaluates your credit score once the announced new model is released. Some of them will be very good for some people, some of them will be bad for others, and some of them may prove to show negligible changes.

The first, and biggest, is that medical debts will no longer be considered when calculating your score. This is a huge relief. Many otherwise fiscally responsible people go into massive debt when a medical emergency happens. Others don’t even know they owe money on medical bills in the first place, as they thought their insurance was going to cover their costs. When they realize they owe money, the responsible consumers pay it back, but it still leaves a scar on their credit report and, therefore, their FICO score.

With this new change, your FICO score will not be impacted. In fact, if you have no other negatives on your credit report (which would mean you most likely have a halfway decent score), you can expect to see your FICO score increase by up to 25 points.

Changes will also be made in considering debts that you have paid off. Currently, after you’ve paid off a debt, it stays on your credit report for seven years. That will continue to be the case after FICO’s updates go into effect, but FICO will no longer look at those debts, even though they show up on your credit report. If you have consumer debts that you have paid off, and they’re the only thing holding you back, you may see your score improve, as well.

There will also be an update to consider the creditworthiness of people who do not have an extensive report, taking into consideration things beyond just paying your month-to-month bills on time. (A lot of times, the people you are paying those bills to don’t even report that anyways.) Depending on how this is done, it could be a boon for those who are unable to get credit not because they are irresponsible, but simply because they have never chosen to borrow money before.

The final update is not good news for those who hold consumer debt. If you owe money and it isn’t paid in full, you can expect to see your credit score take a hit.

Hold your horses – and your enthusiasm.

While FICO has announced that it will make these changes, the new model has not gone into effect. It will not be ready to release to lenders until late 2014 or early 2015. Even then, banks have to choose to adopt it. Thismodel will be FICO 9. FICO 8 was introduced in 2009, and some lending institutions still have not updated since FICO 7. Just because they are releasing a new model doesn’t mean that your lending institution will apply it to their evaluation process.

Another thing to remember is that while your FICO score gets you in the door, banks will look at your credit report. All of those things FICO ignores will still show up. If your medical debts are deemed too oppressive for you to possibly be able to pay for a mortgage on top of them, you may still be denied. And while FICO will ignore debt that has been paid off and closed, it will still stay on that pesky credit report for seven years for all of your potential lenders to see.

While these changes could be a great way to get your foot in the door with lenders, they’re not a holy grail to your credit problems. The same tried and true wisdom will still apply: Spend responsibly, make sure the information on your credit report is accurate and pay off any debts as quickly as possible.

Femme Frugality is a personal finance blogger and freelance writer. You can find more of her writing on her blog, where she shares both factual articles and esoteric ruminations on money.

The post What Do New FICO Changes Mean for Me? appeared first on MintLife Blog.

Source: mint.intuit.com

2020 Could Be an Unprofitable Year for Rental Properties. Here’s How to Handle the Taxes

beach house Darwin Brandis/Getty Images

Economic fallout from the COVID-19 crisis and civil unrest could cause many rental real estate properties to run up tax losses in 2020 and maybe beyond. This column covers the most important federal income tax questions and answers for rental property owners. Here goes.

What can I write off?

Nothing new here. You can deduct mortgage interest and real estate taxes on rental properties. You can also write off all standard operating expenses that go along with owning rental property: utilities, insurance, repairs and maintenance, care and maintenance of outdoor areas, and so forth.

What about depreciation write-offs?

For many rental property owners, the tax-saving bonus is the fact that you can depreciate the cost of residential buildings over 27.5 years, even while they are (you hope) increasing in value. You can generally depreciate the cost of commercial buildings over 39 years.

Example: You own a small apartment building that cost $1.5 million not including the land. The annual depreciation deduction is $54,545 ($1.5 million/27.5). The deduction can shelter that much annual positive cashflow from income taxes. So, depreciation write-offs are nice tax-savers, especially if you own an expensive property or several properties.

Variation: As stated earlier, commercial buildings must be depreciated over a much-longer 39-year period. Even so, the annual depreciation write-off for a $1.5 million commercial building is $38,462. The deduction can shelter that much annual cash flow from income taxes.

Can I claim 100% first-year bonus depreciation?

Yes, for qualified improvement property (QIP) expenditures on a nonresidential building. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) included a retroactive correction to the statutory language of the Tax Cuts and Jobs Act (TCJA). The correction allows much faster depreciation for commercial real estate qualified improvement property (QIP) that’s placed in service in 2018-2022. QIP is defined as an improvement to an interior portion of a nonresidential building that’s placed in service after the building was placed in service. However, QIP doesn’t include any expenditures attributable to: (1) enlarging the building, (2) any elevator or escalator, or (3) the internal structural framework of the building. Thanks to the CARES Act correction, you can write off the entire cost of QIP in Year 1, because it qualifies for 100% first-year bonus depreciation.

Alternatively, you can choose to depreciate QIP over 15 years using the straight-line method. That alternative might make sense if you expect higher tax rates in future years. Discuss your QIP depreciation options with your tax pro.

What else do I need to know about depreciation write-offs?

You ask such good questions. There’s more. The TCJA increased the maximum Section 179 first-year depreciation deduction for qualifying real property expenditures to $1 million, with annual inflation adjustments. The inflation-adjusted maximum for tax years beginning in 2020 is $1.04 million. The Section 179 deduction privilege potentially allows you to deduct the entire cost of qualifying real property expenditures in Year 1. I say potentially, because Section 179 deductions are subject to several limitations. Ask your tax pro for details.

The TCJA also expanded the definition of qualifying property to include expenditures for nonresidential building roofs, HVAC equipment, fire protection and alarm systems, and security systems.

Finally, the TCJA further expanded the definition of qualifying property to include depreciable tangible personal property used predominantly to furnish lodging. Examples of such property include beds, other furniture, and appliances used in the living quarters of an apartment house.

Can I claim the qualified business income (QBI) deduction base on my net rental income?

Maybe. For 2018-2025, the TCJA established a new personal deduction based on qualified business income (QBI) passed through to your personal Form 1040 from a pass-through business entity (meaning a sole proprietorship, LLC treated as a sole proprietorship for tax purposes, partnership, LLC treated as a partnership for tax purposes, or S corporation). The deduction can be up to 20% of QBI, subject to restrictions that kick in at higher income levels. For a while, it was unclear if you could claim QBI deductions based on net rental income passed through to you from one of the aforementioned pass-through entities. The IRS eventually issued taxpayer-friendly guidance that allows QBI deductions in most such cases, but you must follow complicated rules to collect the tax-saving benefit. As your tax pro for details.

What about the passive loss rules?

Ugh. If your rental property throws off tax losses (most properties do, at least during the early years and during years when the economy is suffering — like now), things can get complicated. The so-called passive activity loss (PAL) rules may come into play. Losses from rental properties will usually be classified as passive losses.

In general, the PAL rules only allow you to currently deduct passive losses to the extent you have current passive income from other sources, like positive income from other rental properties or gains from selling them. Passive losses in excess of passive income are suspended until you either have enough passive income or you sell the property that produced the losses. Bottom line: the PAL rules can postpone any tax-saving benefit from rental property losses, sometimes for years. Fortunately, there are several exceptions to the PAL rules that can allow you to deduct rental property losses sooner rather than later. Your tax pro can explain the exceptions and help you plan to become eligible, if possible.

Is that the end of the bad news?

Not exactly. Say you manage to successfully clear the hurdles imposed by the PAL rules for your rental property losses. So far, so good. But the TCJA established another hurdle that you must also clear to currently deduct those losses. For tax years beginning in 2018-2025, you cannot deduct an excess business loss in the current year. An excess business loss is one that exceeds $250,000 or $500,000 for a married joint-filing couple. Any excess business loss is carried over to the following tax year and can be deducted under the rules for net operating loss (NOL) carry-forwards. This loss disallowance rule applies after applying the PAL rules. So, if the PAL rules disallow your rental losses, this rule is a nonfactor.

COVID-19 Relief: Thankfully, the CARES Act suspends the excess business loss disallowance rule for losses that arise in tax years beginning in 2018-2020. That’s good news.

What’s the deal with net operation losses (NOLs)?

Say you manage to successfully clear both of the preceding hurdles for your rental property losses. Now we are talking, because you can generally use those losses currently to offset taxable income from other sources. If losses for the year exceed income from other sources, you may have a net operating loss (NOL) for the year.

COVID-19 Relief: The CARES Act allows a five-year carryback privilege for an NOL that arises in a tax year beginning in 2018-2020. So, you can carry an NOL from one of those years back to an earlier year, deduct it, and recover some or all of the federal income tax paid for the carryback year. Because federal income tax rates were generally higher in years before the TCJA took effect, NOLs carried back to those years can be especially beneficial. The TCJA kicked in starting with tax years beginning in 2018.

What if I have positive taxable income?

Eventually your rental property should start throwing off positive taxable income instead of losses, because escalating rents will surpass your deductible expenses. Of course, you must pay income taxes on those profits. But if you piled up suspended passive losses in earlier years, you can now use them to offset your passive profits.

Another nice thing: positive taxable income from rental real estate is not hit with the dreaded self-employment (SE) tax, which applies to most other unincorporated profit-making ventures. The SE tax rate can be up to 15.3%. Something to avoid when possible.

One bad thing: positive passive income from rental real estate owned by a higher-income individual can get socked with the 3.8% net investment income tax (NIIT), and gains from selling properties can also get hit with the NIIT. Ask your tax pro for details.

The bottom line

There you have it: most of what you need to know about the federal income tax issues that can come into play for rental property owners. The economic fallout from the COVID-19 crisis and recent civil unrest increase the odds that rental properties will suffer losses in 2020, but tax relief provisions may soften the blow.

The post 2020 Could Be an Unprofitable Year for Rental Properties. Here’s How to Handle the Taxes appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

So You Want to Buy a Fixer-Upper: Here’s What You Need to Know

Stephen and David St. Russell, self-taught renovation and fixer-upper experts, are sharing their advice for homebuyers who are looking to explore buying a home that needs some extra TLC.

The post So You Want to Buy a Fixer-Upper: Here’s What You Need to Know appeared first on Homes.com.

Source: homes.com

Average credit card interest rates: Week of January 13, 2021

The average credit card interest rate is 16.05%.

The average minimum credit card APR held firm Wednesday after lenders declined to revise rates on new offers for another week. As a result, borrowers in the market for a new card continued to enjoy starting APRs that are more than a full point lower on average than they were a year ago.

Cardholders with excellent credit are enjoying some of the sharpest rate savings this year. For example, lenders have clipped APRs on some of the most popular rewards cards by at least a point and a half in the past year. For example, the Discover it® Cash Back card currently starts APRs at 11.99%, which is well below the minimum APR most low rates advertise. A year ago, by contrast, it advertised a minimum APR of 13.49%.

Some of the most striking rate decreases have occurred on travel cards, which had surged to record high rates in 2019. For example:

  • In January 2020, the Chase Sapphire Reserve charged an 18.49% minimum APR. Today, it starts APRs at 16.99%.
  • Similarly, APRs on the Citi Premier® Card currently start at 15.99%. A year ago, the lowest APR cardholders could get was 17.49%.
  • The lowest rate Hilton enthusiasts could get on the Hilton Honors American Express Card last winter was 17.24%. Today, the card’s APR starts at 15.74%

As a result, the average rewards card APR has tumbled from 17.11% in the second week of 2020 to 15.76% today, while the average airline card APR has fallen from 16.9% to 15.53%.

As the end to the coronavirus pandemic edges closer, lower rate travel cards could become more attractive to cardholders who are dreaming of a post-pandemic vacation.

Even low interest and balance transfer cards are much less expensive nowadays, giving cardholders who need to carry a balance a temporary reprieve.

Last January, for example, the U.S. Bank Visa Platinum Card and Citi Simplicity® Card both charged a 15.49% APR. Now, borrowers could secure an APR as low as 13.99% on the U.S. Bank Visa Platinum and as low as 14.74% on the City Simplicity. Meanwhile, Bank of America has reintroduced the BankAmericard® credit card after a temporary pause with a minimum APR of 12.99%. A year ago, the best APR cardholders could get was 14.49%.

Most cards received their biggest rate cuts in March and April when the Federal Reserve cut its benchmark interest rate, the federal funds rate, by 1.25 percentage points. When federal interest rates change, most lenders also match the changes on new card offers that are tied to the U.S. Prime Rate.

However, a few lenders have cut rates on select cards by an even larger amount. For example, Wells Fargo cut the APR on the Wells Fargo Rewards® card by five and a half percentage points last year, making it one of the lowest rate cards Wells Fargo offers. Cardholders who qualify could get a rewards card APR as low as 12.49%.

Today’s lower rates won’t last forever, though, since most are due to federal interest rate changes, rather than independent rate strategies.

As soon as the Federal Reserve begins increasing rates, the APRs on all variable rate cards tied to the prime rate will also go up.

It will be a long time, though, before cardholders in good standing will have to worry about higher rates on cards they’ve already opened. The Fed has said it is unlikely to hike rates for at least another year.

See related: How do credit card APRs work?

All information about the U.S. Bank Visa Platinum Card and Citi Simplicity Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. These cards are no longer available through CreditCards.com.

CreditCards.com’s Weekly Rate Report

Avg. APR Last week 6 months ago
National average 16.05% 16.05% 16.03%
Low interest 12.77% 12.77% 12.83%
Cash back 15.85% 15.85% 16.09%
Balance transfer 13.85% 13.85% 13.93%
Business 13.91% 13.91% 13.91%
Student 16.12% 16.12% 16.12%
Airline 15.53% 15.53% 15.48%
Rewards 15.76% 15.76% 15.82%
Instant approval 18.38% 18.38% 18.65%
Bad credit 25.30% 25.30% 24.43%
Methodology: The national average credit card APR is comprised of 100 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Source: CreditCards.com
Updated: January 13, 2021

Historic interest rates by card type

Some credit cards charge even higher rates, on average. The type of rate you get will depend in part on the category of credit card you own. For example, even the best travel credit cards often charge higher rates than basic, low interest credit cards.

CreditCards.com has been calculating average rates for a wide variety of credit card categories, including student cards, balance transfer cards, cash back cards and more, since 2007.

How to get a low credit card interest rate

Your odds of getting approved for a card’s lowest rate will increase the more you improve your credit score. Some factors that influence your credit card APR will be out of your control, such as the length of time you’ve been handling credit.

However, even if you’re new to credit or are rebuilding your score, there are steps you can take to ensure a lower APR. For example:

  1. Pay your bills on time. The single most important factor influencing your credit score – and your ability to win a lower rate – is your track record of making on-time payments. Lenders are more likely to trust you with a competitive APR – and other positive terms, such as a big credit limit – if you have a lengthy history of paying your bills on time.
  2. Keep your balances low. Lenders also want to see that you are responsible with your credit and don’t overcharge. As a result, credit scores take into account the amount of credit you’re using, compared to how much credit you’ve been given. This is known as your credit utilization ratio. Typically, the lower your ratio, the better. For example, personal finance experts often recommend that you keep your balances well below 30% of your total credit limit.
  3. Build a lengthy and diverse credit history. Lenders also like to see that you’ve been successfully using credit for a long time and have experience with different types of credit, including revolving credit and installment loans. As a result, credit scores, such as the FICO score and VantageScore, factor in the average length of your credit history and the types of loans you’ve handled (which is known as your credit mix). To keep your credit history as long as possible, continue to use your oldest credit card so your lender doesn’t close it.
  4. Call your lender. If you’ve successfully owned a credit card for a long time, you may be able to convince your lender to lower your interest rate – especially if you have excellent credit. Reach out to your lender and ask if they’d be willing to negotiate a lower APR.
  5. Monitor your credit report. Check your credit reports regularly to make sure you’re being accurately scored. The last thing you want is for a mistake or unauthorized account to drag down your credit score. You have the right to check your credit reports from each major credit bureau (Equifax, Experian and TransUnion) once per year for free through AnnualCreditReport.com.

Source: creditcards.com