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A blog dedicated to providing readers information for all of life's financial decisions

How to Raise Your Child to be a Saver

We aren’t born knowing how to handle money and finances. While it seems some people are natural savers and others bum through money the moment they get it, it’s not necessarily nature that causes those behaviors. More often, it’s that we’ve been taught - likely unintentionally - to be a spender or a saver. Fortunately, it’s possible to teach our children to learn to enjoy saving money. Here are some tips for how to raise a saver:

Model Saving Behaviors- As with most things, children pay just as much (if not more) attention to what we do, rather than what we say. If you tell your child they need to save their money but they see you spending recklessly, that advice isn’t going to carry much weight. If, however, they see you regularly making careful, smart spending and saving decisions, they will be more likely to model that behavior. When appropriate, include kids in family conversations about saving money, so they see it as a natural part of daily life.

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Betsy DeVos Rolls back Obama-Era Student Loan Guidance

Education Secretary Betsy DeVos on Tuesday 4/11/2017 rolled back two Obama-Era memos intended to help protect student loan borrowers.

Student loan contracts aren’t serviced in-house by the Federal Student Aid Office. Instead, they are managed by third-party companies, which are awarded contracts by the government. Before the Obama memos, those contracts went to the companies that were best at collecting the debts.

Rather than rewarding the companies that cashed in on debts, the now-rescinded Obama guidance incentivized a good track record and sought to award contracts to companies with a history of helping borrowers.

While the Obama memos sought to give borrowers more options, transparency and better services as a means to prevent them from defaulting on loans, DeVos said that withdrawing the memos is intended to limit “the cost to taxpayers” and “increase customer service and accountability.”

Devos’ withdrawal memo cited “a lack of consistent objectives” as the reason for rescinding the previous administration’s guidance.

The Department of Education did not immediately respond to NBC News’ request for comment.

So what does DeVos’ mean for those who have loans?

Attorney Adam Minsky, who has dedicated his practice to helping those with student loans, said the withdrawal only creates more frustration for borrowers.

“[The Obama memo] alerted servicers that how they deal with borrowers - the outcomes would be a factor in if they’re awarded a contract,” Minsky told NBC News. “[The memo said,] ‘We’re going to consider that.’ And the idea there was to incentivize the servicers to work harder to help borrowers.”

Now, borrowers are going to have to work much harder to figure out the best way to repay their loan and research programs that might benefit them, he said.

Student loan expert Heather Jarvis said the changes Obama made where long overdue, and walking them back sends a message to borrowers that the government values the businesses over those loans.

“Borrowers don’t get to decide who their servicers are and [the servicers] can make your life miserable if they’re not,” Jarvis told NBC News. “For years, the government was content to award contracts based on the collection success of servicers. But Obama became aware of the problems students and families face and decided we want you to do better.”

Jarvis said because the contracts are lucrative, companies will be responsive to the signals the government is sending.

Another issue Jarvis and Minsky took with the DeVos memo is the justification for the withdrawal.

Minsky said DeVos’ logic doesn’t make sense, as taxpayers aren’t affected by the provisions in the Obama memos, but are affected by borrowers defaulting on loans.

“I don’t understand her reasoning,” Minsky said. “I don’t understand how it’s costly to taxpayers - it costs taxpayer money when borrowers default on loans and don’t pay their loans. She certainly hasn’t, I think, made an effective argument to justify saving money.”

Jarvis called the withdrawal “ridiculous,” adding that student loan borrowers are American taxpayers.

Jarvis and Minsky offered the following advice to those who currently have student loans and could be impacted by DeVos’ withdrawal of the Obama guidance:

  • Do homework to find out what plans you are eligible for, don’t rely on your servicer to provide you with the correct information
  • Don’t take advice from your debt collector
  • Keep meticulous records on your loan
  • Ask to speak with a member of your servicer’s management, rather than the customer service representative who answers your call
  • If you have a dispute, try to send it to your servicer in writing
  • Contact the student loan ombudsmen group at the Department of Education - it’s their job to resolve conflict between borrowers and servicers
  • Contact your local representative and make them aware of existing problems with your servicer
    In a statement, the Consumer Financial Protection Bureau, a government agency charged with protecting consumers from unfair, deceptive, or abusive practices in the financial sector, said borrowers deserve the best possible service from those issuing their loans.

“Borrowers deserve to be treated fairly and should be able to repay their debt without having to deal with illegal loan servicing practices. The CFPB will continue to find ways, working with all of our partners, to support and protect the 44 million Americans with student debt,” a CFPB spokesperson said in an email to NBC News.

Jarvis agreed, saying to treat the borrowers fairly isn’t asking for much.

“[Obama’s memo] was the latest they could do, and it was hardly anything,” Jarvis said. “It wasn’t a requirement, and I think pulling that back - it’s a signal to big businesses that [the government is] on your side. You’re more important to us than student loan borrowers.”

Can You Contribute to a 401K and an IRA in the Same Year?

Taking advantage of more than one retirement account in the same year allows you to cut taxes and save more money for the future. But in some cases, having an extra retirement account changes the rules and the tax benefits you receive.

I was recently asked by a client “I already maxed out my 401(k) for 2017 and after receiving a small inheritance, i now have more money to invest for retirement. Can I also max out on IRA- and if so, would the contribution also be tax-deductible?”

This is a common question that comes with a slightly complicated answer that I’ll unpack in this post. The good news is that you can always max out a retirement plan at work (like a 401(k), 403(b) or 457 plan) and still max out an IRA for the same tax year.

For 2017, workplace plans allow you to contribute up to $18,000 (under 50) or up to $24,000 (over 50). If you met those limits and still have cash to spar, socking even more into an IRA is a wise move.

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Top 5 Reasons People Seek Credit Counseling

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WBG has helped thousands of people overcome financial challenges through Credit Counseling and other programs. We are committed to educating our clients and the general public on ways to spend less, save more and work towards becoming financially fit. Over the years, we have had clients seek Credit Counseling for a wide variety of reasons, but certain life events keep coming up again and again. Here are the top five reasons people seek Credit Counseling and some things you can do if you find yourself in any of these common situations. 

Loss of Income or Reduced Income- Few things are as stressful as losing a job or being told you have to take a pay cut to keep your job. You’ve built your lifestyle based on receiving a consistent income and suddenly it disappears or gets smaller. If you don’t have savings to fall back on, you’re immediately in financial crisis mode. Taking the following steps can help ensure you’re if you experience lost or reduced income:

  • Work toward having 6 months of living expenses in an emergency savings account
  • Keep your resume up-to-date and maintain contacts with potential employers
  • Develop a marketable skill that will allow you to temporarily freelance if needed

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Experian, TransUnion, and Equifax Announced Major Changes That Could Give You a Better Credit Score

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Some Americans may see a boost in their credit scores this summer thanks to new policies adopted by credit report agencies Experian, TransUnion, and Equifax. 

The big three credit bureaus will eliminate some negative information from appearing on credit reports, according to the Consumer Data Industry Association, a trade association that represents them.

But before you anticipate more credit approvals on the horizon, it’s important to keep in mind that these changes will likely affect only a small portion of the population. Here’s how these credit report updates may impact you this year. 

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How to Help Loved Ones with Money Problems

When family or close friends are in trouble, it’s natural to have a desire to help. However, when dealing with finances, you should take a few precautions before jumping in. For instance, do you know lending money isn’t always the right option? The tips below will help you evaluate different scenarios and develop the appropriate course of action:

Don’t Cross Boundaries – Has your loved one reached out to you for assistance, or are you assuming he or she needs assistance? If family members or friends haven’t asked for help, they may not want or need it. They may prefer to climb out of a difficult situation themselves. If you feel assistance is necessary, consider bringing up the topic indirectly. For example, you can comment on a news story about debt or housing troubles, or you can mention a few financial tips you recently received from a friend.

Determine Whether Assisting is the Right Move – It’s not necessary to bail friends and family out of all financial problems. In some cases, it can even be a hindrance. First look at the cause of money troubles. Did your teen run up a credit card splurging at the mall, or has an unexpected injury led to a pile of medical bills? Determine whether there’s a vital lesson that needs to be learned. If the money problems are the result of poor choices, the individual may need to take the time and effort to pay off the bill themselves in order to prevent it from happening again. If financial difficulties were caused by outside sources, such as job layoffs, a financial boost may be beneficial.

Evaluate Your Options – Lending money is one option, but it’s not the only option. You may be able to help your loved ones help themselves. For instance, you can babysit children or clean the house while your loved one works an extra shift or side job. You can also help family and friends develop a workable budget or find professional assistance. Credit counseling is a free service from non-profit organizations like Take Charge America that educates consumers about their options for overcoming debt and saving for the future.

Gift, But Don’t Enable – Gifting money is appropriate if you are willing, in a financial position to do so, and the gift doesn’t enable poor behaviors or make the borrower dependent on you for more cash in the future. Everyone deserves the right to become independent. Gifts that make someone dependent on another can seriously strain personal relationships and ultimately cause more harm than good.

Lend Money with Caution – If you believe lending money is the best option, proceed with caution. First take an honest assessment of your finances to determine whether you’re in a position to lend. Then, put it in writing.

How to Help Loved Ones with Money Problems

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When family or close friends are in trouble, it’s natural to have a desire to help. However, when dealing with finances, you should take a few precautions before jumping in. For instance, do you know lending money isn’t always the right option? The tips below will help you evaluate different scenarios and develop the appropriate course of action:

Don’t Cross Boundaries – Has your loved one reached out to you for assistance, or are you assuming he or she needs assistance? If family members or friends haven’t asked for help, they may not want or need it. They may prefer to climb out of a difficult situation themselves. If you feel assistance is necessary, consider bringing up the topic indirectly. For example, you can comment on a news story about debt or housing troubles, or you can mention a few financial tips you recently received from a friend.

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Closing Costs: What You Need to Know

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If you’re buying your first home — or it’s been awhile since your last real estate transaction — you might need a refresher on what closings costs are and how they work. Saving for a down payment is often discussed when purchasing a home, while closing costs can get overlooked; but they are an equally important part of any real estate transaction. Keep reading to learn what closing costs are and how they work.

What are closing costs?

The closing point of the transaction is when the property title is transferred from the seller to the buyer. Closing costs are the fees associated with the end of a real estate transaction. Closing costs will vary based on the state in which you live and the property you purchase; they generally make up 3% to 6% of the home’s total purchase price. Closing costs may include, but are by no means limited to: a loan origination fee, escrow deposit, attorney’s fees, title insurance, and inspection & appraisal fees, to name just a few.

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Are You Ready to Buy a Home?

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Owning a home remains one of the components of living the American Dream. But as the recent housing crisis illustrates, jumping into homeownership without being adequately prepared for everything it entails can be the start of a financial downfall. Owning a home is about much more than having a down payment and being able to pay the mortgage every month. Here are several things to consider to help you determine if you are ready to buy a home.

Your Current Financial State — You need to take a deep dive into your finances before deciding to buy a home. First and foremost, you must have enough money saved for a down payment and be earning enough to cover the monthly mortgage payment. You also need to check your credit score and review your credit report to ensure it is accurate. If you’re already carrying a high debt load, you will want to pay off a good portion of it before applying for a mortgage. If you’re not sure where you stand financially, Home Ready counseling is a great place to start.

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Beyond the Mortgage - Additional Costs of Homeownership

In addition to a monthly mortgage payment, owning your own home involves a number of additional costs and expenses you need to plan for in your budget. Some of them will be recurring expenses, others you won’t see coming – but you’ll need to be prepared for them nonetheless.

Recurring Expenses

Utilities – If you’re moving into a larger space than you’re used to, remember it means your utility bills will be larger as well, particularly the heating and cooling costs. If your utility company offers it, consider going on a plan that “equalizes” your bills over the course of the year so you’re always paying close to the same amount. It will make budgeting for utility expenses much easier.

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