Urban Institute Study Raises the Question
Why People are not Reaching Out for Help

GailCunninghamBy Gail Cunningham

The recent study released by the Urban Institute reveals that 35% of Americans have accounts in collections. So what keeps consumers from reaching out for help?

NFCC member agencies assisted more than 1.5 million people last year with their financial concerns, but that is a only a fraction of the 77 million Americans who have debt in collections. It is a shame that so many are struggling financially when help is easily accessible and affordable.

Consumers may be hesitant to reach out for help due to misconceptions about financial counseling. Below are some of the false beliefs that consumers admitted in the 2014 NFCC Financial Literacy Survey:

  • Financial counseling costs too much. The truth is that counseling through an NFCC member agency is either free or low cost. One of the requirements for agency membership in the NFCC is that no service will be denied based on an inability to pay. Cost should never be a barrier to finding the financial help needed.
  • It would be embarrassing to discuss my situation. It is highly likely that the trained and certified financial professional you visit with has encountered a financial problem similar to yours, and is skilled at resolving comparable issues.
  • Financial counseling agencies only offer advice, not real solutions. Although financial education is critical to financial success, when a person has debt beyond what he or she can responsibly manage, NFCC members do offer concrete options, such as a Debt Management Program (DMP). A DMP allows consumers to continue to service their debt, repaying it in full, but often with a more affordable monthly payment, a lower interest rate, and late fees and over-limit fees stopped or lowered.
  • Seeking credit counseling might damage my credit report and score. Credit counseling is not reported to the credit bureau, thus could not have a negative impact on a person’s credit report or score. However, if a person elects to repay their debt through a DMP, the creditor may make a notation on the credit report of participation in the program. Nonetheless, graduates of the DMP often emerge with improved credit scores due to having paid off the debt through consistent monthly payments.
  • Debt settlement or bankruptcy seems like better solutions. Both debt settlement and bankruptcy are serious financial decisions which can negatively impact a person’s credit report and score for years. Before opting for either, a person should first rule out all other alternatives.

There are severe financial consequences resulting from unmanageable debt, realities that should not be ignored.  Consider the following:

  • A blemished pay history reflecting late or missed payments tarnishes a person’s credit report which could result in a lower credit score;
  • A low credit score often equals a higher interest rate when borrowing money, making the cost of credit more expensive, and
  • A negative credit record could diminish access to additional credit needed for emergencies or unplanned expenses.

Further, the stress of unmanageable debt has destroyed marriages, shattered families, and contributed to lost jobs. No one ever scripts financial ruin as a part of their life plan, but when financial distress occurs, it is a very real part of a person’s daily activities, as debt is a burden people carry with them 24 hours per day.

The NFCC, the nation’s largest and longest serving network of nonprofit financial counseling agencies, stands ready to help all American families who are struggling with financial issues, whether they be around debt, housing, foreclosure prevention, or simply creating a workable monthly budget.

Don’t delay seeking help. Finding answers and solutions to your financial concerns starts by reaching out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or find an agency online at www.NFCC.org.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Popular Money Advice You Shouldn’t Take

MaryHuntHeadshot-New as of 2-5-13By Mary Hunt

Money advice—it’s available everywhere. But that doesn’t mean you should take it. The wise person knows how to separate the good from the bad. Here are a few timely examples:

Bad advice: Do not save money for yourself until you have paid off your credit cards. Direct every cent you can scrape together to pay down your credit card debt as quickly as possible. It’s not smart to earn 1/2 percent interest on money you save while you are paying 20 percent or more on your credit card debt.

Good advice: That bad advice sounds great, but let’s get real. If you do not have an emergency fund, what will you do next month when your car breaks down or next summer when you lose your job? You will run back to your credit cards for a bailout. Unless you are aggressively building an emergency fund, you never will get out of debt because unexpected expenses always come up. Instead, you should pull back to making only minimum payments so you can start saving money now. You need to stash all the cash you can, to be used only in a dire emergency. Once you have that fund in place, you will be ready to tackle your credit card debt with a vengeance!

Bad advice: Purchase whole life insurance for children. The cash value will pay for college. It guarantees insurability should that child develop a health issue later that would make him or her uninsurable, and it will pay for the child’s funeral if that becomes necessary.

Good advice: The only purpose for life insurance is to replace income for dependents who would become financially destitute if the breadwinner were to die. If you want to save for college, life insurance is not the way to do that. Instead, set up a 529 savings plan or another type of savings or investment vehicle. If you are concerned about a funeral (statistically, the chances of a child’s dying are very small), create a funeral account. As for the insurability issue, chances that your child will become uninsurable for health issues are very slim. Unless you have money to burn, buying life insurance on non-wage-earning individuals who have no dependents is a terrible waste of money.

Bad advice: Do not pay off your mortgage, because you would lose a valuable tax deduction. Mortgage interest on your principal residence is a deductible expense on your federal tax return. Even if you can pay off your mortgage, don’t do it. If you don’t have a mortgage, get one so you can claim this tax advantage.

Good advice: Deductibility is not a wonderful thing. It’s a “consolation prize” to ease the pain of having to pay interest. If you pay $12,000 a year in mortgage interest and you are in the 22 percent tax bracket, you get to deduct $12,000 from your gross reportable income. That means a tax savings of $2,640 ($12,000 x 22 percent equals $2,640). You pay $12,000 to get back $2,640. Does that sound great to you? If so, I’ll give you a better offer. Send me $12,000, and I’ll double it and give you back $5,280. Deal?

Mary Hunt is the founder of DebtProofLiving.com and author of 23 books, including her latest, “The Smart Woman’s Guide to Planning or Retirement.”

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 It’s Time to Get Our Heads
Out of the Sand

Kristine GammSmith photoBy Kris Gamm-Smith

It’s time to get our heads out of the sand approach-avoidance with your money is a sure way to experience financial stress at its best! As a credit counselor, more than half of the people I see for counseling have been practicing this strategy for a long time, and to no avail. It Doesn’t Work! It results in failure every time. To ignore our financial circumstances does not make it go away. So in spite of this fact, why do we still try to “flee” from our money problems by pretending everything is fine, or simply not paying attention to bills and creditor calls?

One primary reason that I hear consistently from clients is that they “couldn’t afford to pay the bills so why deal with it.”  But those phone calls keep coming, along with nasty letters and stacks of unopened bills. This behavior results in irritability, sleepless nights, strained relationships, and a feeling of powerlessness over YOUR money.

Of course there are unexpected life events that dramatically change our lifestyles overnight. Loss of a job, cut back in hours, divorce, death, or illness of a loved one that was also a primary provider, serious medical problems; and the list goes on. The large majority of people I see have no emergency fund or savings to help them through these difficult times.

Lack of planning and preparation are causal factors in our wanting to avoid managing our finances. One couple said that they believed that “If we ignored it long enough, it would go away.” Isn’t that often the way we choose to handle conflict in our lives? In fact, it takes paying closer attention to the ins and outs of our money when we have lost significant income, or when you are experiencing stress from other major life events that leave you depressed, anxious, and depleted emotionally. We are especially vulnerable at these times. And yet, so often, that is the starting point for our losing control of our finances.

Gayle and Jim (fictitious names for anonymity) are a good example of this. Gayle quit her job to become primary caretaker for her mother, who was terminally ill. Trying to raise two teenagers, and dealing with a 40% loss of income from quitting her job, seemed to send her over the top. She was the primary money manager in their relationship, and she didn’t want to burden her husband with more problems; his job was already consuming him physically and emotionally. So Gayle just kept quiet and ignored the bills she knew they couldn’t afford to pay right now, until they finally fell behind in their mortgage. Then they found themselves in a financial crisis. Both Gayle and Jim were aware of what had transpired and they knew they would have to adapt, but they chose to stay in denial and did not seek help until the consequences were much more devastating to them. They “buried their heads in the sand” rather than face the situation directly and take control of their money.

The moral of this story is that stress is not reduced by this approach-avoidance to money. In fact, we dramatically increase our stress by not facing it head on. We need to learn how to identify when we are in financial trouble, and ask for help when needed. That is why credit counseling exists….to help someone achieve financial wellness. We are here for you.

Kristine Gamm-Smith is a Certified Credit Counselor with Chestnut Credit Counseling Services. She has a Master’s degree in Rehabilitation Counseling, and over 30 years of experience in the mental health and substance abuse field in addition to her experience as a credit counselor. Chestnut Credit Counseling Services is a member of the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Five Steps to Finding $1,000
for Holiday Spending

GailCunninghamBy Gail Cunningham

The 2014 holiday season is a short five months away, yet many are financially unprepared to begin shopping. In recent years, Americans spent an average of $800 on holiday-related expenses. That’s more than a week’s wages for many workers, and in spite of the fact that the December holidays are an annual event, people routinely neglect planning for them and resort to charging their purchases.

Consider the ramifications of this lack of planning:  If a shopper charges $1,000 and makes only the minimum monthly payment of 2 percent of the balance at an Annual Percentage Rate of 18 percent, it will take 12 years to pay off the debt.  Think of it this way – the ghost of Christmas past will haunt until 2026. Further, this generous consumer will have paid a total of $2,353 for the $1,000 worth of goods and services purchased.

The NFCC proposes a better plan. Since debt is a gift no one wants, the NFCC suggests five steps that consumers can put in place now in order to have money available for holiday spending and create a debt free holiday.

  • Before trimming the tree, trim everyday spending. Review current spending looking for leaks. Plug those leaks and use the found money for holiday spending. Amount saved by December 25 at $1 per day:  $150.
  • Adjust the W-4 to accurately reflect the amount of taxes owed. The average income tax refund in recent years has been close to $3,000, but Uncle Sam only returns that money in April, long after the holiday bills should have been paid. Amount saved by December 25 at $250 per month: $1,250.
  • Commit to shaving $10 off of 10 spending categories. Some obligations such as rent, mortgage, and car payments are fixed. However, there are other categories that offer a great deal of flexibility. Cut back $10 each month on categories such as food, clothing, gas, utilities, and entertainment without feeling deprived. Amount saved by December 25 at $100 per month:  $500.
  • Sell unused items.  Since others are also shopping, this is the perfect time of year to sell items that haven’t been used in one year. Amount saved by December 25:  $100.
  • Open a separate holiday savings account. Don’t mingle the holiday money with existing savings or checking accounts, as it could easily get spent on other items. Amount saved by December 25:  $1,000.

If you’re still paying for holiday spending  from 2013, consider rethinking your gift giving for this year. It makes no financial sense to pile new debt on top of old. Kindness and experiences are meaningful substitutes for purchased gifts, and are remembered long after the wrapping paper and bows have been discarded.

Find answers and solutions to your financial concerns by reaching out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or find an agency online at www.NFCC.org.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 5 Basic and Simple Ways
to Reduce Your Credit Card Balances

Years ago, I found myself in the unenviable position of being about $30,000 in debt, mostly due to credit cards. Why I dug myself into such a deep hole isn’t important. What matters is what I did about it.

Surprisingly, getting out of debt doesn’t have to be difficult. However it does require you taking a good look at the situation you’ve created so you can craft an intelligent way to get out of it. Once you get that out of the way, it’s mostly a matter of establishing and following simple steps to reduce your credit card balances and eliminate them for good.

1. Total Your Debt
First, you need to know exactly how far in debt you are. This can be uncomfortable, but adding up how much you owe to each creditor is essential. From there you can better determine which cards to pay off first (according to interest rates, for example) and develop a pay down plan according to your budget.

2. Get on a Budget
One of the problems I had is that I didn’t know the ratio of my spending to income, so I was spending more money than I made. The way to solve this is to make a personal budget. There are a variety of websites available that can help, such as Mint and BudgetPulse. Accurately input all of your monthly expenses, as well as your income to get started. If you are spending more than you are making, trim your nonessential expenses and research the Internet to find ways to cut your monthly bills.

3. Create a Realistic Pay-Down Plan
Trying to eliminate all your debt in three months probably is not feasible, and if you set an unrealistic goal, you may get frustrated and give up. Instead, create a pay-down plan that is realistic. For example, say you have $4,000 in credit card debt, and after all expenses are paid have $100 to devote to it each month. By applying that $100 to your debt each month, you can be debt-free in three years and four months. If possible, reduce your monthly bills to free up even more money to “snowflake” your debts.

4. Create Goals and Adjust Them as Necessary
As you craft your pay-down plan, include short- and long-term goals. Obviously, per the above example, your long-term goal is to be debt-free in three and a half years – but if you don’t include short-term goals, you can lose motivation. Therefore, set benchmarks along the way to make sure you are on-track. If after six months you find yourself slightly behind schedule due to other unforeseen expenses, don’t give up – readjust your goals and keep plodding along. On the other hand, if you get a raise at work or an unexpected bonus, apply this money to your debts, and adjust your timeline to account for the extra income.

5. Reward Yourself
When you meet your benchmarks, don’t be afraid to do something nice for yourself, even if it involves spending a small amount of money. Treat yourself to a ballgame, take in a free concert, or enjoy a night out at a modestly priced restaurant. One thing I learned along the way to a debt-free life is that motivation is of the utmost key. Congratulate yourself whenever it makes sense.

Once you become debt-free, be sure to stick to your new found and fiscally responsible way of life. Instead of paying off credit card balances every month, redirect that money to an emergency fund or retirement account. If you’ve never lived life without credit card balances, you’ll be amazed how liberating it is, and how much easier financial management becomes.

What additional ways can you suggest to reduce credit card balances?

Jay Barnes managed to dig himself out of thousands of dollars in consumer debt. He now works on wisely managing his finances and shares his insights with others.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 What to Get the Grad Who Has…Nothing

donna freedman photo (smaller)By Donna Freedman

Know a college senior who’s moving into his own place post-diploma? Want to give a gift even though you’re on a budget? Forget the $20 bill or the iTunes card. Instead, buy some dishtowels, a laundry basket, or a johnny mop. Your preparing-to-launch student may have saved up the first and last month’s security on an apartment. But does he have a can opener?

People who’ve never lived on their own might not think about the necessities of daily living – that is, until they need to do laundry, clean the bathroom, or take a frozen pizza out of the oven. (Potholders? Who thinks about those?) Best-case scenario: You go in with some other friends or family members, each one providing one or two (or more) items. This can be done as a series of frugal hacks. Here’s how.

Hit the discount shops

Stores like Target, Rite Aid, and Walgreens frequently put basics like salt, baking soda (as good as Ajax), spices, dish soap, sponges, and rubber gloves on sale as cheaply as two for $1. Watch for specials: When I moved into my apartment in 2005, I got a toilet brush free after rebate from Walgreens.

Dollar stores have their critics, and sometimes the disdain is justified. (Tainted toothpaste, anyone?) But really: How much do you want to pay for a mop bucket? Dollar emporia can yield brooms, scrub brushes, dish towels, shelf liners, and tons of kitchen tools.

Of course, I’ve also found such items at yard sales. The first place to start is the “free” box, if there is one. Among the gratis goodies I’ve obtained: a small saucepan, Tupperware, a spoon rest, an apron, spatulas, utensils, and my beloved cast-iron frying pan.

Rummage sales and thrift stores are good places to shop, too. I bought silverware (a couple dozen pieces for 50 cents) and cloth napkins (six for a quarter) at a church sale, and paid 35 cents for a toothbrush holder at a charity thrift shop.

Hot coffee and laundry money

I think a slow cooker is a terrific thing to have. Include a list of websites specializing in crock-pot cuisine.

Target and Walgreens, among others, put small appliances on sale fairly regularly. Unless your young grad is a java snob – and can he really afford to be, with student loans looming? – then a $6.99 coffeemaker will work just fine.

A toaster oven beats a toaster because you can use it to roast or broil a couple of chops or a chicken breast. Since counter space is usually tight in starter apartments, pass on the electric can opener in favor of a good-quality manual variety.

Other possibilities:

  • Aluminum foil, plastic wrap, plastic bags. (Reusable containers save money over the long haul, though.)
  • Paper towels, toilet paper.
  • A flashlight and some batteries, preferably rechargeable.
  • Ibuprofen or acetaminophen, some bandages, antiseptic ointment. Watch for rebates.
  • If you’re really flush, a roll of quarters for laundry. If not: A piggy bank (or jar) with a few bucks’ worth of seed money.
  • Basic foodstuffs like canned tomatoes, spaghetti, rice, baking mix, pasta sauce, canned or dried fruit, crackers, beans, tuna, soups, peanut butter.

Presentation is all

If you’re going in with a group of people, place the items into a big laundry basket. You could put cleaning supplies in a bucket, group kitchen items inside a large pot, or fill a reusable shopping bag with pantry staples.

Oh, and before you go shopping? Check your own cupboards. You might be able to put together an apartment starter kit from things you already have.

Don’t worry about not spending “enough.” Nobody will know what it cost unless you blurt it out – and why would you?

Getting the best deal can mean that you’re able to give more than you thought. If you’re on a super-tight budget, it could mean being able to give anything at all.

Here’s a tip, though: Don’t give ramen. Really. That’s just cruel.

This article originally appeared at DonnaFreedman.com

Donna Freedman won regional and national prizes during an 18-year newspaper career, and earned a college degree in midlife without taking out student loans. She now writes the Frugal Nation website for MSN Money, blogs at DonnaFreedman.com,and freelances for national magazines.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Poll Reveals Americans Lack Confidence
When Dealing With Personal Finance

GailCunninghamBy Gail Cunningham

Successfully managing our daily lives includes making smart financial decisions, often requiring a fair degree of financial competence. Nevertheless, the NFCC June online poll revealed that the majority of respondents were not fully confident when managing their finances, with more than one in four (26%) wishing they didn’t have to deal with their finances at all. Only eight percent, the lowest number of respondents, felt as though they had a good grip on their personal finances.

Personal finance can be complicated, thus there is no shame in admitting difficulty understanding how to best manage money. However, since there is easily accessible and affordable help available nationwide, it is regrettable that more people don’t take advantage of it.

Consumers may be hesitant to reach out for help due to misconceptions about financial counseling. Below are some of the false beliefs toward financial counseling that consumers admitted in the NFCC Financial Literacy Survey:

  • Financial counseling costs too much. The truth is that through an NFCC member agency counseling is either free or low cost. One of the requirements for membership in the NFCC is that no service will be denied based on an inability to pay. Cost should never be a barrier to finding the financial help needed.
  • It would be embarrassing to discuss my situation. NFCC member agencies counsel more than 1.5 million people each year. It is highly likely that the trained and certified financial professional you visit with has encountered a financial problem similar to yours, and may do so every day.
  • Credit counseling agencies only offer advice, not real solutions. Although financial education is critical to financial success, when a person has debt beyond what he or she can responsibly manage, a Debt Management Program (DMP) may be appropriate. The DMP allows consumers to continue to service their debt, repaying it in full, but often with a more affordable monthly payment, a lower interest rate, and late fees and over-limit fees stopped or lowered.
  • Seeking credit counseling might damage my credit report and score. Credit counseling is not reported to the credit bureau, thus could not have a negative impact on a person’s credit report or score. However, if a person elects to repay their debt through a DMP, the creditor may make a notation on the credit report of participation in the program. Nonetheless, graduates of the DMP often emerge with improved credit scores due to having paid off the debt through consistent monthly payments. 
  • Debt settlement or bankruptcy seems like better solutions. Both debt settlement and bankruptcy are serious financial decisions which can negatively impact a person’s credit report and score for years. Before opting for either, a person should first rule out all other alternatives. 

If you desire to improve your understanding of personal finance, you are not alone. The NFCC Survey revealed that 73 percent of consumers would benefit from answers to everyday financial questions from a professional. Improve your financial know-how by reaching out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or find an agency online at www.NFCC.org.

The NFCC’s June online poll question and answers are below:

Which of the following best describes your financial confidence?

  1. I’m the CEO with a good grip on my finances = 8%
  2. I’m in mid-level management steadily working my way up = 30%
  3. I’m an entry-level employee trying to learn the ropes = 35%
  4. I can’t seem to catch on and wish I didn’t have this job = 26%

Note: The NFCC’s June Financial Literacy Opinion Index was conducted via the homepage of the NFCC website (www.DebtAdvice.org) from June 1–30, 2014, and was answered by 644 individuals. 

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 What To Do If You Inherit Someone’s 401(k)

alderman_color_1By Jason Alderman

Talk about good news wrapped in bad: In the midst of grieving the loss of a loved one, you learn that you were named beneficiary of their 401(k) plan or IRA. Chances are you’ve got too much on your mind to make any sudden decisions about what to do with the money. That’s a good thing – better to research your options first.

However, don’t procrastinate too long. It turns out the IRS has ironclad rules, deadlines, and penalties concerning inherited retirement accounts. And, the rules vary depending on what type of account it is. This column will discuss inherited 401(k) and similar employer-provided plans such as 403(b) and 457 plans; we’ll tackle inherited IRAs in a future column.

Here’s how it works:

Under federal law, surviving spouses automatically inherit their spouse’s 401(k) plan unless someone else was named beneficiary and the surviving spouse signed a written waiver. If someone is single at death, their plan’s assets go to their designated beneficiary. (Note: If you’re divorced and want to ensure your ex won’t receive your benefit, seek legal guidance.)

The IRS has basic tax and distribution rules and timetables for inherited 401(k) plans. However, the plans themselves are allowed to set more restrictive guidelines if they choose, so read the plan documents carefully to ensure you fully understand your options. Basically:

You must pay income tax on the distributions (except for Roth accounts, which have already been taxed), although you may be able to spread out withdrawals and tax payments over a number of years, depending on how you structure it.

Many 401(k) plans require beneficiaries to withdraw the money in a lump sum or in separate payments extending no longer than five years after the person’s death; however, some will allow you to keep the money in the plan indefinitely, so check their rules.

Note that distributions you take will be added to your taxable income for the year, which can greatly increase your tax bite. Thus, many people prefer to spread the payments out over as long a time period as possible. Plus, the longer funds remain in the account, the longer they accrue earnings, tax-free.

If the original account holder had already reached the mandatory withdrawal age of 70 ½, you may be allowed to continue withdrawing funds according to his or her withdrawal schedule. Your minimum annual withdrawal amount is based on your own life expectancy, according to IRS tables (see Appendix C in IRS Publication 590). Alternatively, you could speed up the payment schedule or take a lump sum.

Inherited IRA. You may also be able to transfer your balance into an inherited IRA (or “stretch IRA”), which must be named and maintained separately from your other IRAs. (For example, it might be called, “Inherited IRA for benefit of Mary Smith as beneficiary of John Smith.”) With an inherited IRA, you must withdraw a certain amount each year, based on your life expectancy. Distributions must begin the year following the donor’s death, regardless of whether or not you’re retired. Make sure the 401(k) plan trustee transfers the funds directly to the inherited IRA’s trustee so you never touch the money; otherwise the transfer may be voided and you’ll have to pay taxes on the entire sum that year. Also, if multiple beneficiaries were named, consider asking the plan custodian to split the account so each beneficiary can take distributions as he or she wishes.

Spousal rollover. Surviving spouses have another option other beneficiaries do not: In addition to opening an inherited IRA, they’re also allowed to do a “spousal rollover,” which means rolling over the balance into an existing or new IRA in their own name. The key advantage of doing a spousal rollover is that you don’t have to begin taking mandatory withdrawals until you reach 70 ½, unlike inherited IRAs where you must begin withdrawals the year after the donor’s death. Thus the balance can continue to grow tax-free for a longer period if you’re well under retirement age.

However, note that if you’re under 59 ½ and decide to withdraw from a spousal rollover IRA (that is, one that’s in your name only), you’ll not only have to pay income tax on the amount, but might also be face a 10 percent early withdrawal penalty. Inherited IRAs aren’t subject to the penalty.

One last point: Always withdraw at least the required minimum distribution (RMD) amount each year, if one is specified. If not, the IRS will sock you with a penalty equal to 50 percent of the difference between what you should have taken out (the RMD) and what you actually withdrew.

Bottom line: Talk to a financial or legal expert before taking any action on your inheritance.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Follow Jason Alderman on Twitter: http://twitter.com/PracticalMoney

Jason Alderman is Senior Director, Global Financial Education, with Visa, Inc.            

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Five Gas Saving Tips
to Avoid Pain at the Pump

MarkFoster_CCOABy Mark Foster

This month the cost of gasoline is expected to be about 20 cents a gallon higher than last year, AAA predicts. The higher that fuel costs are the more it takes a bite out of a family’s vacation plans or their overall budget.

The reality of the high cost of gasoline is that it can wreck a family’s budget. We’ve seen many families who are financially stressed because of having to put gas in their truck, van or SUV, or must commute a fair distance to work or school. People on fixed or limited incomes, such as students or retirees, are especially hard hit. Here are a few tips from CCOA for those looking to keep their gasoline costs under control:

  • Don’t “floor it.” Fast starts and Indy 500 style driving drastically cut down fuel efficiency, and can burn 30 percent more gasoline.
  • Make sure your air and gas filters aren’t dirty. Dirty filters waste up to 10 percent more fuel. It’s like a marathon runner trying to breathe through a straw.
  • Check to make sure the air pressure in your tires is adequate. Underinflated tires not only result in lower gas mileage, but wear out your tires sooner as well.
  • Extra weight makes your car work harder. If your trunk is doubling as a storage closet, remove some items. For every 100 pounds of extra weight in the car, you lose 1 m.p.g.
  • Explore your options. If possible, use public transportation. Ride a bike short distances. Or find carpool friends to split the costs.

Stretching your gas dollar can be helpful, but if it’s not enough you may need to take a step back and look at your overall household budget and see what else you can adjust.

Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. To schedule an appointment with a Certified Consumer Credit Counselor contact CCOA at 800.889.4916, or visit CCOA online at www.CCOAcares.com.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Vacations on the Cheap

Jana CastanonBy Jana Castanon

With summer finally here many people are planning on getting out of town. In fact, July and August are the two most popular vacation months. So now is the time to start planning that perfect get-away. But, how do you do that when money is tight? The first thing you need to consider is how much you can afford to spend without having to rely on credit cards. It is never a good idea to put vacation expenses on a card unless you plan on paying them off when you get home. Next, itemize your costs. How much do you plan on spending on getting to your destination? Food? Entertainment? Souvenirs? New clothes or necessities? Do your research so you won’t be surprised when you get there. Lastly, you need to find ways to cut costs. Apprisen offers these tips to help you vacation on the cheap.

  • Consider a “staycation”. Become a tourist in your own city or venture an hour or two out of town to explore new experiences. Think about if you had visitors coming to stay with you, where would you take them? Many of us have historical or cultural venues in our area, but never take the time to visit. Search your city’s visitors and tourism website for information. Don’t forget to take pictures!
  • Control your dining costs. This is one area that most people under-estimate the cost. Eating out for breakfast, lunch, and dinner can often be more than the cost of your lodging per day. Plan on purchasing breakfast items and snacks to have available in your hotel room.  If venturing out for the day, stop by a local market and pick up pre-made sandwiches and fruit to put in a backpack. Also, consider visiting websites like Groupon and Living Social to find dining deals in the area.
  • Look for cheap fun. Check out the visitor’s website of the city you are going to. Often times, there are links to package deals or discounts at restaurants or local attractions. You can also go directly to the website of the attraction you are planning on visiting. They might have specials listed for buying tickets online or coupons to use once you’re there.
  • Reduce your transportation costs. Getting to your destination can be expensive. To cut costs, again do your research. If you are traveling by car, gasbuddy.com has a trip cost calculator which will give you a good estimate of the price you will pay for fuel. If traveling by plane, experts suggest flying midweek. Airfare is often lower on a Wednesdays rather than any other day of the week. It’s best to book your reservations at least 7 weeks out.

Going on vacation doesn’t have to be expensive.  With a little homework beforehand, you can plan the perfect vacation on the cheap!  

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

Jana Castanon is Media Relations/Outreach Manager for Apprisen. Apprisen is a member of the National Foundation for Credit Counseling. To schedule an appointment with a certified financial professional call 800.355.2227, or visit Apprisen’s website at www.apprisen.com.

 

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