Questions About Switching Careers, Calculating Debts, Separating Credit Histories and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Switching careers
2. Sporadic loan interest payment calculator
3. Why credit unions?
4. Separating spouse’s credit history
5. Rebalancing a Roth IRA
6. Best place for student loans?
7. Saving safely for next house
8. Lump sum for old pension
9. Blogs and trademarks
10. At a career crossroads
11. Good credit, no income
12. The size of student loans

As readers know quite well, I’m a fan of games of all kinds. I love board games and card games and storytelling games and role playing games. I just love the experience of sitting around the table with other people playing a game of some kind.

One of my favorite times for gaming is the proverbial “rainy day,” where you might have plans to do something outside that are being quashed by rain. So, instead, you’re inside with some people and looking for something to do together. I loved rainy days for this reason when I was a kid and I still do.

The games I like best during a rainy day are relatively simple ones, ones that I can teach to almost anyone in a few minutes and use minimal components. That’s why card games work so well – you can play a lot of games with a deck of cards and most of them can be taught quickly.

Lately, I’ve been on a tear of playing Dutch blitz. It’s a cardgame you can play with four decks of playing cards as long as the decks have different backs. It’s basically multiplayer solitaire, except you’re trying to do it as quickly as possible because the stacks above – the ones where you pile up cards of the same suit in order – are shared among all players. It plays really quickly and turns into one of those games you can play over and over. I highly recommend it. (There is a company that sells a packaged game of Dutch blitz cards that work great for the game, too.)

If you’re bored this summer on a rainy day, try playing Dutch blitz. All you need are the aces through tens from four different decks of cards with different backs.

Q1: Switching careers

My husband and I combined make ~10,200/month after taxes. We have health insurance through the military and I have health insurance through teaching.

We have $34,000 in student loans (some at 6.6% interest and others at 2.8%) and we owe $17k (0.09% interest rate) on a car. We don’t have any other debt. We currently toss all of our extra income towards extra payments on the student loans. Our mortgage is $1900 each month. We have $30,000 in liquid savings between emergency account, travel, home improvements and slush.

We are saving $1800/month in 3 different accounts to beef up travel, home improvements and slush. I have a retirement account through the school. Husband will retire with military benefits in 8 years. We also contribute to retirement accounts but are not maxing them out because we are focusing on paying down debt.

I want to start a business that would take me away from teaching. It’s a good idea and I think it will do really well but we will be losing my income from teaching ($3400/month)

We live in a little marine town with a lot of wealthy retirees and summer tourists. My idea is to start a pet boutique with upscale products in the downtown area. This will require a significant startup cost to acquire inventory, a retail space, retail space design, website design, etc.

I’ve never worked in retail. I’m incredibly bored/sick of teaching and I’m ready for something new. I’m not vested yet so I would lose all of my retirement contributions from the school if I quit (I’ll be vested in February of 2018)

Do you have any suggestions for starting this business? Should I quit my job and go for it? Should I wait until 2018 and then switch careers?
– Tamara

My honest suggestion for you would be to work through a proper business plan for this idea. You should really work through all of the potential pitfalls of your business idea, make sure that you know exactly what you need to do, have all of the zoning and licensing you need in place, the financing you’ll need, and so on before jumping fully on board with this. Honestly, it’ll probably take until 2018 to have a plan in place that will really make all of this click.

If I were you, I’d start by visiting the library and finding some books on writing a good business plan, then go through that whole process. Spend your spare time writing a great business plan for your business. Have trusted people read it and give you some feedback on it.

Having a plan in place that has all of the key areas considered and covered is going to go a long way toward helping you secure a business loan for this endeavor to cover the startup costs.

If you really bear down on this plan and make it so good that building the business itself is just a matter of following the plan step-by-step, it will probably take you a year or so to get that plan ready. Doing so will not only go a long way toward ensuring that your business is successful, it’ll also eat up most of the time that you should wait until actually embarking on this plan.

Q2: Sporadic loan interest payment calculator

I borrowed money from my brother in 5 equal $1500 consecutive monthly loans about 9 years ago. We agreed on a 6% interest rate. I didn’t start repaying for several years and the repayments were on a sporadic basis (not monthly and not the same amount). It would be like having a credit card with 5 equal charges in 5 months and then not making a payment for several years. Is there a calculator to figure out how much interest has accumulated with this type of payment plan?
– Daniel

There isn’t a specific calculator I know of that will handle something like this. However, if you make the assumption that interest is compounded annually at the end of the year, then you can do it really easy.

You’d start off by saying, at the end of 2007 (which is when the loan apparently started), I owed you $7,500. I made $0 in payments at the end of the year, which leaves a final balance of $7,500. That balance earns 6% interest, so the new balance is $7,950 (you just multiply that final pre-interest balance by 1.06).

In 2008, your starting balance is then $7,950. You didn’t make any payments that year, so the final balance before interest is, again, $7,950. Multiply that by 1.06 and you have the final balance after interest, $8,427.

Do that for each year. The previous year’s final balance after interest is added in is the starting balance for the next year. Subtract any payments you made during that year, then multiply that result by 1.06 to see what the final balance is after earning a 6% interest rate.

If you want to treat the interest as occurring that the start of the year, multiply the balance by 1.06 first, then subtract any payments made.

You can do all of this in a simple table in just a few minutes.

However, if you’re trying to calculate it month by month, it gets a bit trickier. You have to have twelve times as many rows in your table and you’re going to be multiplying by 1.005 rather than 1.06 (since 6% interest annually is 0.5% interest monthly).

I guess the first thing I’d do is sit down with your brother and make sure you’re on the same page with compounding. Does compounding annually at the end of the year work for both of you? If so, the calculations will take you just a few minutes on a piece of paper.

Q3: Why credit unions?

I recently read a suggestion of yours, which I’ve seen come up before, stating that a reader should seek out a local credit union. In my best Seinfeld voice, I ask: what’s the deal with credit unions? I sort of understand them, and am intrigued by their higher rates of return on things like savings accounts and CDs, but any time I do some research in order to find one for myself, I usually find that I don’t qualify. For instance, some serve only teachers, while others only accept members from certain cities, etc. How do I find one for a plain old guy like myself?
– Jeremy

A credit union is a member-owned financial cooperative, usually organized as a nonprofit to offer banking services to its members. Usually, membership is restricted in some fashion as you mention, but many credit unions will serve a specific town or a specific county.

Because profit is usually not their goal, credit unions tend to offer better savings rates and tend to offer accounts to people in somewhat more marginal credit situations.

To see what credit unions are near you, check out this list from the NCUA.

Q4: Separating spouse’s credit history

Is there a way to get your individual credit score without your spouse linked to it? Have been living apart from my husband for 7yrs and have been doing a great job on paying on time and renting but looks like my credit score is low due to my husbands late payments and overcharging. Anything I can do?
– Lana

The best way to separate your spouse’s credit history from your own is to not put both of your names on debts. When you put both of your names down when taking out a loan, that loan is going to appear on both credit reports. Then, if your husband doesn’t make a payment on that loan, it’s going to affect your report.

If you’re not sure why your credit score is low, you should go to the FTC’s website and get your free credit report at annualcreditreport.com. That will tell you exactly what factors are making up your credit score so you can track down the problems.

It is very possible that your husband has used your information to sign up for credit cards and other things in the last several years and then not made payments on them. That’s why it’s vital that you check out your credit report and see what’s on there.

Q5: Rebalancing a Roth IRA

I’m not pleased with my returns in my Roth IRA through Vanguard (100% in the STAR fund) that I opened about two years ago. I had very low risk tolerance since it was my first investment account, even though I was only 26 at the time (now 28). I would like to rebalance, but the process is overwhelming and every time I sit down to do it I end up getting cold feet and walking away. I’d like to go with one of Vanguard’s age-defined distributions (it would likely put me at about 90% stocks). Do you trust those portfolios? I know you are a fan of Vanguard and I feel like I’d get instant diversification, but not as much control. On the flip side, I don’t really know what to do with control anyway, and I’m losing potential return by staying in my current portfolio. Should I go for it?
– Kevin

The Vanguard STAR fund is a strange fund. It’s actually a mix of various stock index funds and bond index funds, among other things, with a mix of domestic and international stocks. It’s meant to be a “one stop” investment for all of that stuff. Given how all of those things have performed in the last two years, I’m not surprised you’re unsatisfied with it. The international stock funds have been weighting down the domestic stocks and even the bonds.

I’m not a fan of Vanguard STAR for anyone under the age of about 50 or anyone with investment goals more than about seven years away, both of which describe you. All of those people should have less in bonds and more in domestic stocks at the very least, in my opinion.

If you’re unsure what you’re doing here, I think that a Target Retirement Fund is probably the right choice for you. If I were in your shoes, I’d move the entire balance over to the Vanguard Target Retirement 2060 fund, as well as my contributions. I think that fund would meet what you’re looking for more than Vanguard STAR would.

Q6: Best place for student loans?

I’m just curious if you knew whether it would be cheaper to get a student loan from a place like Sallie Mae, or a bank, like Wells Fargo?
– Kelly

Honestly, with a student loan, I’d follow the rates above all else. Get a quote from both of these institutions – and others – and get the loan that offers you the best interest rate.

Ideally, you’re probably going to want a fixed rate loan. Given how low interest rates are right now and have been for a while, they pretty much have nowhere to go but up, so a variable rate loan could potentially bite you.

So, in your shoes, I’d just compare a bunch of fixed rate loan offerings from lots of different places. Go with the one that offers the lowest rates on the term that works for you.

Q7: Saving safely for next house

So, if we decide to pay off our current mortagage and save for a larger down payment for the future home. where should our money be as far as risky investments vs. safe? Right now my emergency funds are in stocks (Roth IRA and regular stock investments, ESPP) and checking and savings accounts. 60% is in the market. My down payment is in CD’s and savings account. So for me that makes sense for a few reasons. To me I am in a stable situation where I would not need all the emergency money if something were to happen. I would only need a portion of it within the first 4-6 months of emergency. not sure how long saving for the downpayment will take but it s certainly in < 5 years and that is safe. i suppose it is just semantocs really. if something were to happen (I lose my job and the market crashes) the down payment would be there as a stop-gap to hope to recoup the losses on the emergency fund. And of course when we do buy the new house we would have to liquid the emergency fund a bit to sleep soundly. In fact I want to do a bit of that as I (If) make gains in the emergency fund.
– Jim

If you’re looking at a timeframe of less than five years for any savings goal, then a savings account is probably the best place to save. In a savings account, you’re not at risk of losing any of your savings, the account is insured up to $250,000, you can pull the money out whenever you want, and you’re still going to earn at least a little interest along the way.

You can put some of it in CDs as you go as long as you’re sure about the term of the CD. Having to withdraw a CD early undoes all of the additional interest benefit and more, so before you convert some of your down payment savings to a CD, be sure that’s really what you want to do.

I think that having your emergency fund in stocks is a bad idea for similar reasons. The time when you are more likely to need it – during a job loss, for instance – coincides with periods where the stock market is down. Take a look at 2008, for instance, where many people lost their jobs at the end of a 40% downturn in stocks. I would not have my emergency fund in there – if you want to invest in there, feel free, but it shouldn’t be part of your emergency fund.

Q8: Lump sum for old pension

I recieved a letter from a company I worked for 15 years ago regarding a a pension I have. Because the sum is under 5000 dollars they are offering a lump sum cash it in option. I understand there is a 20 percent penalty + tax if i do so. I am also interested in a 401k or IRA plan. I have to make a decision by july but I am not sure which one is best. I have no money for my retirement at the moment. Any help in this matter would be greatly appreciated.
– Fred

If I were in your shoes, the first step I’d immediately take is finding a company that you would like to manage your traditional (pre-tax) IRA (I recommend Vanguard; your mileage may vary) and asking them how exactly to go about rolling this pension money straight into that account.

I don’t know the specifics of what’s happening here, but I do know that a plan manager should be able to walk you through the steps of figuring out exactly what’s being offered by your previous pension plan and whether that can be rolled directly into an IRA without any tax consequences for you.

Even if there are tax consequences, I’d still view this as money that’s set aside for retirement and try to avoid touching it. If you do have to pay taxes on it, though, I’d consider opening up a Roth IRA with the money instead.

Q9: Blogs and trademarks

What are your thoughts on registering a blog name? The question about copyright this week got me thinking.
– John

I assume you’re talking about trademark registration. As soon as you start your blog and you’re not using a name that someone else is using, you have common law trademark rights, meaning that if someone else tried to trademark that name later, you could demonstrate that your blog operated before that trademark claim.

The reason for trademark registration is that it gives your future trademark claims much more strength. If you register a trademark and then no one makes a counterclaim for five years (this usually doesn’t happen unless you’re doing something very fishy), it becomes very, very strong.

It’s probably useful to get a full trademark, but it’s more important to do a trademark search before you ever start your blog to make sure you’re not using a name someone else has trademarked. Make sure you’re not stepping on someone else’s toes before you start.

Q10: At a career crossroads

My 9 to 5 career has been going well for several years. I’ve steadily gained experience, responsibilities, leadership, a respected resume of completed projects, and genuinely enjoy my job most of the time. No significant complaints! The only thing that I want more out of life is to work for myself, somewhere down the line. I have already identified that if I were to do so, it would ironically enough not be in my current field. In my industry, the barriers to entry are high and also carries a high degree of legal liability, things which do not appeal to me if I were to own a business.

My alternative pursuit has been to teach myself and gain expertise in a hobby about which I am very passionate and enjoy heavily, more so than my 9 to 5. My “plan” has been to blog in order to establish that expertise, with the goal of attracting paying clients for a service-based side business. I have already received very positive feedback on my work, although no paying clients yet. The plan is to keep pursuing that passion, working at it, and just seeing if it takes off at all. With a fairly high satisfaction level in my current career, I’m in no rush. If I started making decent money with a side business in 3-5 years I would be happy.

Now, the rub. At work, I have received very strong indications that I will be asked to step up into a role with much higher responsibility. With that, I know would come higher pay (at least sooner rather than later) and probably at least some more time commitment and possibly higher stress levels. I have no doubt that I will embrace this role and I have high confidence in my ability to delegate and get results from my team. I’ve surprised myself already with how well I might perform, although I do know that I haven’t been truly tested yet.

So, my question is how I handle this potential side business? I am far enough along into testing the waters that I know that, if successful, it could be a highly satisfying side business. If it is wildly successful, maybe I find myself making a choice in the future. At worst, I lose all time and energy to dedicate to continuing the pursuit of that ultimate dream of being my own boss and spending much more time with something I truly love doing. I take this as a good problem to have as it’s not a bad worst case scenario, but wonder if you can offer any advice. I still don’t want that worst case scenario to happen.
– Kevin

If I were you, I’d keep on your current path for now. Do not count your chickens before they hatch. Keep developing this side business just as you are and don’t change a thing.

Eventually, you may or may not be promoted at work. If you are, just take the promotion in hand and, for the moment, keep working on your side business, just as you always have.

One of two things may eventually happen, regardless of whether you get the promotion or not. One, your side business will grow to the point where it interferes with your main job. Two, your responsibilities at work will grow to the point where it interferes with your side gig.

When you’ve reached the point where you’re having to regularly choose between your job and your side gig, you’re going to have to make a decision. Either you cap the growth of your side gig and make your main job the priority, or you step away from your main job and make the side gig the center of your professional life.

I can’t tell you which is the right call, except to say that for me and for everyone else I’ve known that’s reached that point, there was a feeling in your gut that told us the right way to go. Mine told me to follow the side gig and every single day I’m glad that I did.

Q11: Good credit, no income

A question – what would you recommend for someone who has good credit, but has no income at the moment? My plan was to upgrade to a better car to begin driving for uber and start taking classes so that next year I can start a different career. Unfortunately, I don’t have any income at the moment, so securing a loan may be difficult despite my good credit – and finding a cosigner is not likely, either.
– Gregory

Many student loan companies will still offer a student loan to people who have good credit even without income because they kind of assume that people in school will have minimal income and the federal government gives student loan providers a lot of nice guarantees to boot.

If you’re able to get into the degree program you want, I wouldn’t worry too much about getting a student loan provided that you really do have good credit. Cosigners are mostly needed for people who have no credit (the situation I was in when I was in school) or bad credit. Income is much less of an issue.

In other words, I think your plan is fine, even without a cosigner, if your credit really is good.

Q12: The size of student loans

I read your article about student loans and found it really helpful. I recently was accepted to Oxford full time MBA program and am debating on whether to use my personal savings to cover school and living expenses or take our a student loan. My husband and I have been able to save some money since we’ve been married (8 yrs). We were thinking about buying a home and starting a family, but I wanted to do an MBA before that. There are obvious pros and cons about going one way or the other, so just wondering if you could provide any advice. Will greatly appreciate it! Thank you!!!
– Janice

Even given your stable situation, I’d probably lean toward a low-interest student loan, and here’s why.

Let’s say something goes horribly awry in your life at some point during the MBA process or shortly thereafter. If you’ve spent all of your savings, you’re going to be in a tough spot unless you find employment immediately – and if you can’t, you’re really, really going to be in a tough spot.

On the other hand, if you have a low interest student loan, you can simply continue the forbearance on that loan or just make a few payments with the savings that you already have. There’s no need to panic in this situation.

In other words, I think that paying out of pocket increases personal risk for the benefit of saving on interest, whereas getting the loan decreases personal risk at the cost of more interest. Unless you have a ton of money set aside – which it doesn’t sound like you have – I would choose the path with less personal risk, even if it costs more over the long run, because if that bad situation happens, you could wind up in a real pickle without any savings.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Questions About Switching Careers, Calculating Debts, Separating Credit Histories and More! appeared first on The Simple Dollar.

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7 Money Moves That Will Make Life a Lot Easier Next Time You Travel

I’ve been traveling frequently around the U.S. for about five years.

In that time, I’ve learned a lot of lessons through trial and error, so now preparing for a trip feels like second nature.

I’m always surprised by the travel mishaps new road-trippers encounter — until I realize they just don’t know. We assume things we’ve learned are obvious, but they’re not!

So, to help you avoid the same mistakes, here are some super simple travel tips and money moves to make before your next trip across the country — or the world.

1. Tell Your Bank Before You Travel

Among all the tasks you have to complete before hitting the road, calling your bank might not cross your mind.

But it could be one of the most important.

Your bank and credit card companies likely monitor the activity on your debit and credit cards for suspicious activity. Transactions in a new state or country can be red flags, and the bank might block the card without your knowledge.

I learned this the hard way on my first road trip. Two or three gas stations denied my credit card before I finally called the bank to sort it out.

I eventually had my bank note I was a frequent domestic traveler to avoid the issue in the future. If you don’t move around often, I’d recommend just calling before each trip to authorize upcoming activity. Some banks even let you do it online.

If you do that, and still have problems with your card, just keep this issue in mind. You can call your bank to clear things up as soon as your card is denied, instead of wandering from pump to pump all afternoon wondering what’s going on.

2. Find Free ATMs

Instead of tying up your money in traveler’s checks or taking out a bunch of cash before you leave, look for ATMs when you’re on the road or abroad.

But beware of fees.

Before you get on the road, check your bank’s ATM network to ensure you can find in-network ATMs where you’ll be.

If you frequently travel out of network, consider switching banks. Open a checking account, like Aspiration’s Summit Account, that offers free ATMs anywhere in the world.

3. Plan Your Budget Carefully

Plan ahead so you know how much money you’ll need for your trip and how much you can spend each day.

This is especially important for foreign travel, because you’ll need to ensure you have enough of the correct currency.

But it’s just as important for a quick weekend vacation or a cross-country road trip.

When you look at your overall vacation budget, it can feel like the sky’s the limit… until you get a few days in and realize too late your wallet is almost empty.

At her blog Nomad Wallet, Deia shares the story of learning this rule the hard way on a trip through Taipei, Taiwan.

“I miscalculated my budget and by the afternoon I had no local currency left,” she told The Penny Hoarder.

“To make matters worse, it was Sunday and many currency exchange bureaus were closed. I tried my ATM card, but the machine spit it back out, along with a piece of paper full of Chinese characters that presumably explained why.”

4. (Almost) Empty Your Checking Account

If you tend to keep a high balance in your checking account, consider moving your money before you travel with your debit card.

While your credit cards probably come with protections against theft, your debit cards are much more vulnerable. If someone steals and uses the card or information, you may be responsible for the transaction(s) and associated fees.

Move any money you don’t need for the trip to a backup account, so a thief won’t have access to it — even if they have your card.

5. Pack Light

Probably the simplest travel advice but not often heeded — packing light is more than just a convenience.

“A heavy bag is such a drag if you’re moving around much,” said Kristin Addis of Be My Travel Muse.

“Plus you have to pay to check the bag, pay to take cabs because it’s too heavy to walk with and deal with lugging it around.

“Look at what you plan on bringing and reduce it by half — seriously!” Addis recommended.

6. Get to Know Your Credit Cards

If you’re traveling out of the country, “Get a credit card with no foreign transaction fees and an ATM card with no foreign withdrawal fees,” Deia recommends. Here are a few of our favorite travel-friendly cards.

If you’re not sure which fees to expect, do your research. It could save you a lot of money!

While you’re at it, get familiar with your cards’ rewards points.

Traveling often racks up extra costs, and those costs can be quite valuable to you on the right credit card.

Which cards earn double points for gas, hotels, flights or restaurants? Are you approaching the threshold for free flights or other rewards on another card?

Double-checking this information before you leave will help you maximize your rewards points while you travel — and, likely, spend more money than you typically do at home.

7. Have a Backup for Everything

Seasoned travelers recommend you copy, scan or take a picture of your credit cards, relevant contact information, I.D. and passport before leaving the country.

You can email it to yourself and to a trusted stateside contact as backup.

This way, you’ll have access to this information in case your credit cards, purse or wallet are stolen.

For a more secure way of storing the same information, check out Dashlane’s digital wallet. It’ll be trickier to access if you need it in a pinch, but will keep your information safer than email.

After having her phone and wallet stolen on a trip recently, Addis recommends backing up your phone before you go, too.

With all this information stored somewhere, if something happens, Addis says, you can “wipe the phone with a cloud server, file a police report, cancel all the cards and get cash with a backup method.”

To ensure you can get cash even if your wallet is stolen or lost, she recommends, “Always have another method for getting cash, like a bank card stashed in another part of your luggage, just in case.”

Deia adds that backup cards are useful because, “sometimes machines reject foreign cards for no apparent reason.”

Your Turn: Which money moves do you always make before you travel?

Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).

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No Money, Mo’ Problems: What to Do If Your Aging Parents are Broke

Waking up at middle age — or later — and realizing your finances are still a wreck is a scary scenario.

Almost as scary?

Having the same realization for your parents, who seem oblivious or apathetic, despite their advancing age.

Maybe they still have nothing saved for retirement, though they’re more than halfway through their careers.

Add in some revolving credit card debt, a mortgage that just won’t disappear and maybe a not-yet-paid-off vehicle or two, and you’re looking at a complete mess.

But you’re a Penny Hoarder, so you don’t have any of those issues.

Your finances have been in order for years, and thanks to your spendthrift ways and the magic of compound interest, you’re well on your way to financial independence and a long, happy retirement.

Maybe you’re the first Penny Hoarder in the family; we are something of a rare breed.

But if mom and dad aren’t so lucky, you might need to know how to manage money for them, so their problems don’t become your problems.

Your Parents’ Finances Affect Your Finances

No one wants to think about the fact their parents are going to die. I get that.

But aside from preparing to emotionally deal with it, you need to be prepared for the logistical fallout, too.

It’s going to be hard enough to keep track of all the documents, passwords and IDs you’ll need to get mom and dad’s things in order — even if your parents’ finances are golden.

If they’re leaving a financial sinkhole behind, you’re going to be in even worse shape.

Your parents’ money decisions may have ramifications for you they don’t even know about. And if they’ve mentioned they’re planning to leave you an inheritance, the total might change drastically depending on their financial health.

Can You Inherit Your Parents’ Debt?

After grandma’s temper and dad’s bunions, the last thing you want to inherit is parental debt you had no part in creating.

Luckily, laws are in place to prevent that from happening… most of the time.

“The rules are complex and differ depending on the type of debt and where your parent lived,” CNNMoney‘s Jeanne Sahadi reports.

In general, creditors are required to go after your parents’ estate to collect outstanding debts post-mortem.

For us non-pre-law folks, someone’s estate basically amounts to their net worth: It’s the total of all their liquid funds and savings, investments and physical assets — minus the total of their debts, of course.

However, there are exceptions to this rule, including about 30 states which still have filial responsibility laws on the books.

And even if you’re not legally responsible, if any of your parents’ debts have gone unpaid for a long time, you might receive phone calls from collection agencies trying to convince you to empty your pockets.

In the wake of a family member’s death, your head is already going to be spinning.

The bottom line? You’re going to need to check with a lawyer.

Ideally, you’ll want to help your parents get their situation in order now, while they’re still alive.

Get Ahead of Your Parents’ Financial Problems: Help Them Out

While this is a huge and intricate topic and you’ll likely have to do more research depending on your individual situation, here’s a beginner’s guide for how to approach three common, but less-than-ideal, parental finance situations.

1. Your Parents Have Nothing Saved for Retirement

The scariest part of this scenario is it’s pretty darn likely.

A recent study showed almost half of American families have absolutely nothing saved for retirement — and those of us who do aren’t doing much better, with a median $5,000 saved.

Having no retirement savings is a huge financial no-no at any age… but it’s even worse if you’re over 30. Or 50.

That’s because as time passes, compound interest — which makes saving for retirement shockingly easy for 20-somethings — is less and less on your side.

To put it bluntly, you’ve got less time to make it work.

But you’ve gotta start somewhere.

If your parents are part of this unfortunate statistic, help them make a budget and calculate a savings plan.

You might want to look into ways to automate savings so mom and dad don’t feel the pinch quite as much — but it’s gonna be a bumpy ride, no matter how you slice it.

They’ll have to be pretty aggressive to accumulate any appreciable nest egg… but $50,000 or even $10,000 of savings is a heck of a lot better than $0.

A good place to start? Look for obvious, extraneous expenses to cut — like storage units full of stuff no one’s using.

2. Your Parents Have Credit Card Debt

You might already know, but you should hear it again: Credit card debt is the very worst kind you can have.

It’s more likely to have an interest rate in the teens or 20s than any other kind of debt, like a mortgage or student loans.

And since credit card companies often lure customers in with promotional low interest rates, it’s very easy to fall into the trap of revolving credit card debt. Why do you think the companies are so rich in the first place?

When you carry revolving credit card debt, you might pay almost double the price of everything you charge.

Don’t believe me?

Spend a few minutes playing with this debt repayment calculator — and tell me credit card debt doesn’t terrify you.

There is some good news here, though: Credit debt is one kind you absolutely can’t inherit, unless you’re a cosigner. Keep that in mind should a credit card company or collections agency try to convince you to pay up after someone’s death — they’re not above it.

But those outstanding debts could take a pretty hefty chunk out of your parents’ estate and mitigate any other efforts your folks are taking to get their money on the mend.

So tell mom and dad their balance has got to go. Now. Here are 11 ways to make it disappear post haste.

3. Your Parents’ Mortgage Isn’t Paid Off

Newsflash: The American housing situation ain’t what it used to be.

When your parents were growing up, they more than likely invested in a house in the name of the American dream, with the expectation they’d made a smart investment and would be able to pay it off on time.

These days, things are probably looking a bit backwards to baby boomers.

Young people are less likely to settle down and buy a house, while many older folks are still grappling with mortgages, likely due at least in part to the housing bubble of 2008 and its subsequent foreclosures.

When the fixed income of retirement proves to be more belt-tightening than they’d hoped, many seniors take out reverse mortgages to cover living expenses.

And since reverse mortgages don’t require a monthly payment, the interest is simply tacked on over time — creating a loan that can even surpass the value of the house itself.

In the case of a regular old mortgage, heirs may have several options, including taking over the loan at the same interest rate with the payment plan, refinancing or walking away from the property.

If there are enough funds in the estate to pay off the remainder of the mortgage, they might even inherit the property free and clear.

But a reverse mortgage is a different animal.

Payment is due at the occurrence of a “trigger event” such as sale of the home or — you guessed it — the debtor’s death.

If you’re the beneficiary, that means it’s in your hands.

And since the loan hasn’t benefitted from being paid down on a regular basis, it could be pretty hefty.

It’s important to note reverse mortgage creditors can’t come after your assets after your parents’ death in order to settle the loan. But you could still be losing a valuable asset — maybe even the place you thought you’d be calling home.

What should you do about it?

If your parents are still dealing with mortgage-related issues — or even worse, facing down foreclosure — you might want to gently suggest they consider downsizing.

Ideally, you could help your parents find a home they can afford free and clear… even if it means going back to renting, or moving in with you. (Hey, they changed your diapers.)

A good friend of ours has been able to buy his home in cash — three times! — to avoid the mortgage problem altogether.

And if a move is on the table, check out these cities that will pay you to move there. Free land or assistantship might help make the cost of housing itself more footable.

Need More Help?

You’re in the right place.

Your parents can find great tips and tricks to demystify personal finance and fatten their wallets here at TPH — we publish them every day.

But healthy spending habits are learned skills, and it’s going to take practice.

For your parents’ sake (and your own), use your hard-earned penny-hoarding prowess to help them get situated.

After all, they’re your parents. You owe them big-time.

Your Turn: What familial financial troubles are you dealing with? How do you help your family turn around their money problems?

Jamie Cattanach (@jamiecattanach) is a staff writer at The Penny Hoarder. Her creative writing has been featured in DMQ Review, Sweet: A Literary Confection and elsewhere.

The post No Money, Mo’ Problems: What to Do If Your Aging Parents are Broke appeared first on The Penny Hoarder.

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How to Make $1,200 a Month with Amazon’s FBA Program

Tracy Smith is the founder of EntrepreneurGirl. In this interview, she describes how she discovered her purpose, rejected the 9-5 work model, and committed to having play time, travel freedom and financial security. Here’s how her work-at-home journey started. You’ve experienced some significant hurdles in your life; tell us about that and how it lead […]

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Four Reasons to Invest (That Have Nothing to Do With Retirement)

Everyone knows you’re supposed to be investing for retirement. But let’s be honest: That’s kind of a drag.

Yes, it’s important to save and invest so that you can one day support yourself without working. We’ll all be there eventually, whether by choice or by necessity, and you’ll need money in savings to replace the income that’s no longer there.

But that’s a boring reason to invest. Pretty morbid, too.

And the truth is that there’s a LOT more that investing allows you to do with your life than simply retire. Because at its core, investing is really about freedom.

The more you invest and the sooner you start, the more freedom you’ll have to make lifestyle decisions based on what you want instead of what you need.

Here are four examples of people who have done just that. People who have used their investments in support of things that matter to them, things that have nothing to do with retirement.

These aren’t pie-in-the-sky, fly-around-the-world-in-your-private-jet-type stories either. These are real people doing real things that almost anyone could do with enough time and dedication.

Choosing Not to Work

Jim Collins was laid off shortly after 9/11. But instead of finding another job and hopping right back into the grind, he chose to be unemployed.

For three years.

He could do that because he had F-U money. Or as he eloquently puts it: “Not enough to retire on perhaps, but enough to say F-you if needed.”

So he stayed home and spent time with his daughter, watching “The Lion King” and building Lincoln Log cabins. Eventually he jumped back into the workforce, but only when he wanted to and only when the right opportunity presented itself.

He didn’t drive a Mercedes, live in a mansion, or dress in fancy clothes. But he had the freedom to find employment on his own terms and enjoy himself in the meantime.

• Related: ‘Freedom’ Money

Advancing a Cause

A few months into our relationship, one of my clients emailed me to say the following:

“I haven’t mentioned it to you before, but since I was 14 I’ve had this wish to run an orphanage or a place where kids with needs can feel safe and cared for. I had this idea that my future yoga studio could somehow be the source of funding for this orphanage in the future. Just wanted to start sharing this with you.”

How cool is that?!

Now, this woman is married with two young children. Her husband is working part-time while pursuing a PhD, she’s working to build her yoga business, and her children have all the typical school and daycare expenses.

In other words, they have a lot of financial responsibilities on their plate already, and opening an orphanage is not going to happen in the near future. But it was absolutely something we could plan for.

They had money they could save, so we opened an account and started investing a small amount toward this goal. It will probably be a while before this is a realistic possibility, but in the meantime that money will grow and it will be there when she wants it.

Supporting Your Children

Despite his well-documented adventures in non-conformity, Mr. Money Mustache spent years insisting that his son deal with a public school system that was clearly a struggle for him.

Why? As he puts it:

“You have to stay in school,” we insisted, “that is what all responsible people do to ensure a bright future, learn to deal with diverse sets of people, and of course to socialize with other children.”

Finally, he had enough. His son was suffering and needed a change. So he and his wife decided to start homeschooling.

Part of the reason they could make that decision was that they had time on their hands. And the reason they had time on their hands was that they had spent years diligently saving and investing to the point that they no longer needed a paycheck.

Now, you obviously don’t have to be completely financially independent or start homeschooling in order to support your children.

The point is simply that your investments can give you the freedom to spend both time and money in support of your children. You can save for their college education. You can fund their travel overseas. Or you can simply be there for them when they need you.

Could there possibly be a better way to use your money?

Starting a Business

A few years ago I lost my job. I had been working at a startup and, like many startups do, it failed.

So I had a choice: Find another job, or start the business I’d been dreaming of doing.

The idea of starting a business was scary enough on its own, but my wife and I also had a one-year-old son at the time, another boy due in about a month, and to that point we had been completely dependent on my income.

It was not the ideal time to take a big financial risk.

But here’s the thing: We had enough money in savings and investments, outside of retirement accounts, to last us a year without any income at all. We could have even stretched it to 18 months with some realistic cuts, and that included the startup costs of the business.

I was still pretty hesitant because I hated the idea of putting my family in such an uncertain financial situation. But finally, after having the same conversation about a million times, my wife said these fateful words:

“We have all this money. If it’s not for this, then what’s it for?”

That Is What It’s For

Honestly, I couldn’t say it better myself. Being able to make choices like the ones above is the entire reason you work so hard to save and invest.

It’s not about retirement. It’s not about putting your head down and grinding it out until you’re finally allowed to start enjoying yourself 30 or 40 years down the line.

It’s about having choices. Investing gives you the freedom to pursue a life you love, both now and in the future.

And if that doesn’t get you excited, I don’t know what will.

Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.

Related Articles:

• The Four Stages of Financial Independence
• Four Ways to Use a Roth IRA That Have Nothing to Do With Retirement
• The Most Important Investment Decision You’ll Ever Make

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These Guys Have Made $1,000/Day Selling T-Shirts That Can Carry Puppies

Jake Kehlenbeck and Alex Alfaro know the tiny chest pockets on ordinary T-shirts are useless.

So, they hatched a business idea to fix the problem and recruited Kehlenbeck’s mom to sew up a few prototypes.

Then they wore them out on the town.

Image from BucketTees.com

“Everywhere we went, someone had something to say about it,” Kehlenbeck says of Bucket Tees’ namesake T-shirts, which can hold your phone, wallet, keys and maybe even the family dog.

The public reaction pushed the pair of recent college grads to turn their idea into a full-fledged design operation. John Grellner soon joined to round out the trio.

Now, BucketTees.com sells nearly a dozen designs, with more on the way — and often brings in more than $1,000 a day.

What does it take to make it as a designer and purveyor of funny T-shirts with gigantic pockets?

Image from BucketTees.com

I called one of the founders to find out.

Why Local Manufacturing Matters

Kehlenbeck, who has a psychology degree, said he often jokes with Alfaro about being fashion designers.

“Being in this field we meet people who are into fashion, and they get really excited,” Kehlenbeck says. “But we’re just having fun.”

Although Alfaro has a business degree, starting Bucket Tees still involved a steep learning curve.

It was clear the shirts were a hit, but Kehlenbeck’s mother wasn’t the right fit to run the company’s manufacturing department in the long term.

He turned to the community to find a solution, picking up business cards for seamstresses at JoAnn Fabrics and searching a directory of local fashion professionals.

Bucket Tees found a screen printer and a seamstress, who ended up referring the team to someone else who could better meet their needs.

The decision to locally produce the shirts came mostly from convenience. Big manufacturers, most of them overseas, require large orders from designers.

Making the shirts in the founders’ Tampa Bay area means Bucket Tees can easily customize its stock needs.

“We’re not sure about the future, but for now keeping it local is very convenient,” Kehlenbeck said.

“We can go see the ladies who sew our shirts face to face. I was actually at their office this morning, and visited the screen printer’s office. It’s super convenient to have a personal relationship.”

Growing Pains from Going Viral

Image from BucketTees.com

Even though Bucket Tees started with just a few designs, building the business has been unpredictable at times.

Tees with pockets showcasing mustache and bacon patterns have done well, but customers by far prefer a beachy vibe.

“The Floridian,” which features bright pink flamingos, “is by far our biggest seller,” Kehlenbeck says.

But while that particular shirt’s design is laid-back, it’s caused some stress for the team. A photo of Grellner wearing the Floridian packed with ice and a couple of beers landed on Reddit and humor site The Chive.

“Orders were flying in and we didn’t know where they were coming from,” Kehlenbeck says, initially wondering if the influx of orders was a prank.

“Later that day we learned [the shirt was] on the Chive, and Alex had to call out of work the next morning to help ship all the shirts.”

Image from BucketTees.com

They’ve handled a few big order rushes since then, but they’ve also streamlined their shipping process.

Bucket Tees routinely sees sales as high as 50 shirts per day (for $25.95 each), but don’t assume the trio is living a startup life of leisure. Alfaro recently left his full-time job to focus on the company with Kehlenbeck, and Grellner still has a full-time job.

“When I started this, I thought I would be making money,” Kehlenbeck admits.

“That’s not the case yet. The company makes money, but every time we sell out of shirts, we have to reinvest to make more shirts.”

Image from BucketTees.com

And while the three have done their fair share of research, there are still surprises along the way.

“Planning ahead is the biggest challenge,” Kehlenbeck says. “We thought we would sell twice as many mediums, but extra-large is our second most popular size (after larges).”

Large Floridian styles sold out the day of the Chive feature, and again before Christmas. Selling out means answering lots of emails from anxious customers, “And calling manufacturers, like, let’s get this on the move!” Kehlenbeck laughs.

Lessons from a Lean Startup

Kehlenbeck says the trio will try to run the business lean as long as they can.

Girlfriends and cousins have been excellent salespeople at in-person events in Florida, and we suspect mom would be willing to lend a hand — so long as she doesn’t have to sew any more shirts.

“That’ll be a good day when we need to hire somebody,” Kehlenbeck says, anticipating a shipping assistant will be their first role to fill.

Starting small has helped them stay sane.

“Before we started thinking about starting a business it seemed overwhelming,” Kehlenbeck says. “But we started really simple, with three designs. With that simple idea, we made a few sales and built up on that to get to where we are.”

His advice for wannabe entrepreneurs: “Start simple. Keep going.”

Listening to customers has helped too, both in determining design options and sizing needs.

They’re starting to order shirts in larger quantities, which has helped the profit margin increase little by little. But Bucket Tees is focused simply on tees and soon-to-come tanks for steady growth.

The crew just shipped its first order to France, while most of the others are spread far and wide throughout the U.S.

“Minnesota,” Kehlenbeck responded quickly when I asked where Bucket Tees are most popular. “There must be group of friends somewhere in Minnesota, because we keep getting orders from the same area.”

Image from BucketTees.com

Your Turn: Ever thought about starting an apparel business? What’s holding you back?

Lisa Rowan is a writer, editor and podcaster living in Washington, D.C. She loves clothing with pockets.

The post These Guys Have Made $1,000/Day Selling T-Shirts That Can Carry Puppies appeared first on The Penny Hoarder.

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Deeds Done

Chestnuthill TownshipFranklin D. Mackes Dr. to Mountain View Holdings Inc., Parcel, Route 115, from Effort to Blakeslee, containing 1.00 acres, Tax ID 2/14/1/7-12, $250,000Edward and Donna Curry to Joseph and Liudmila N. McManus, Lot 43, Section 2, Laurelton Heights, $350,000Pocono TownshipEdmund F. and Karen A. McKeown to Brian and Kathleen Walsh, Lot 34, Section 2, Maeve Manor, $220,000Wayne Bank to Steven J. and Mary- [...]

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Neola wine-maker growing the old fashioned way

Mountain View Vineyard Winery and Distillery continues to expand its business in size and sales by doing it the old fashioned way, all the way to owner Linda Rice hand picking Japanese beetles off the vines.Nestled on Neola Road straddling Hamilton and Jackson townships, the winery opened in 2009 by Linda and Randy Rice, produces 13 wines, three sparkling wines, two dessert wines/port style and spirits as well as a distillery for brandy and peach, pear, blueberry and red raspberry [...]

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Ultimate entrepreneurs hurdled challenges

Call them the Poconos Mountains' ultimate entrepreneurs. Monroe County vintners Linda and Randy Rice and doll accessories designer Joann Cartiglia built two of the fastest growing and hottest businesses in the region. But not without its challenges, resembling the recent popular true story film, "Joy." The Rices at Mountain View Vineyard Winery and Distilelry in Neola spanning Jackson and Hamilton townships that is the feature story this week plan to break ground next [...]

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Tannersville attorney predicted 'GoT' episode twist in advance

Sadly, Hodor appears to be no more.The simple-minded, likable giant met a tragic end on a recent episode of the TV fantasy adventure series, "Game of Thrones." A plot twist revealed the origin of Hodor's name, the only word he had been able to speak since a childhood incident, as a rushed joining of "hold the door," which is what he died doing in order to save his friends when attacked by monsters.According to a recent article in "The Verge," a publication covering the [...]

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Main Street hotel gets major facelift

The renovated hotel of the former Pocono Inne Town is currently undergoing construction that could have it open as early as this winter, a partner behind the project said.Keyur Patel, a partner of the building’s owners DK Stroudsburg LLC, said full renovations to the former hotel’s interior and exterior could be completed by the end of 2016, weather permitting. The building’s interior has almost been entirely demolished, Patel said, and exterior work will begin [...]

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Merging traffic guided by law and courtesy

If everyone waits their turn it works fine.

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How to Escape the Trap of Expensive Banking

One of the most powerful articles I’ve ever read is When You’re Poor, Money Is Expensive. The article lays out in incredible detail how easy it is for otherwise stable people to fall into financial crisis and then how incredibly difficult it is to get out of that situation.

The reality of it is that when you fall into a financial hole where you can’t afford to pay some of your bills and you wind up visiting a payday lender in order to keep your roof over your head, you can end up in a very vicious cycle where almost all of your money goes toward simply keeping afloat for the next few weeks.

To make matters worse, you can easily get locked out of the “normal” banking system, as no bank will allow you to open a checking account, meaning that you’re relying on check-cashing services and other expensive propositions just to get the money that you’ve earned, and you have to rely on things like money orders – again, expensive – to send money to people with any degree of security.

In short, it becomes expensive just to do the things most of us do normally.

The story of Alex and Melissa from the article sums up how such things can get started:

“In a flash, their lives changed dramatically. Alex was diagnosed with multiple sclerosis and had to quit his job. Now he walks with a cane. A few weeks later, their young son Jonah was diagnosed with severe autism. Their medical costs suddenly soared as their incomes dwindled. To manage their finances as responsibly as they knew how, Alex and Melissa chose to live on cash. But they weren’t making enough money to meet their bills. Without a credit history, they couldn’t qualify for a bank loan. Desperate for something to tide them over, Melissa visited a payday lender.

“‘In the moment that we needed it, I was glad that it was there,’ she said. But soon, they were both trapped in a cycle of dependency that wracked up more than $1,700 in fees. With one diminished salary and rising medical costs, they couldn’t make it alone. They needed the help of their neighbors to pay off the original loan.

“The amount of that original loan?Just $450.”

The article goes on:

“Alex and Melissa aren’t unique. Middle-class families falling on hard times and grappling outside the traditional banking system are alarmingly common. Approximately 70 million Americans don’t have a bank account or access to traditional financial services. That’s more people than live in California, New York, and Maryland combined. It’s more than the number who voted for Barack Obama (or Mitt Romney) in the 2012 election.

“Instead of direct deposit, many rely on physical pay stubs. Instead of checking accounts, they have to drive to check-cashing services, like Pay-O-Matic. Instead of automatic payments, they drive again across the suburbs to pay utility bills in person. In lieu of a credit history that qualifies them for bank loans, they have a history of cash that is disqualifying. Instead of low-interest loans, they rely on payday lenders whose services can ultimately cost three- or four-times the original loan. And so, replacing the services of a bank on your own becomes a second part-time job, an odyssey of stripmalls, check-cashing storefronts, money orders, prepaid cards, and miles and miles on the road.”

Obviously, this is a disastrous problem for anyone who falls on hard times. It’s a situation that holds the poor in place and makes it much harder for them to climb up the ladder to the next rung.

In fact, that’s how I view it: a ladder. The climb to financial success is like climbing up a ladder, except the bottom of the ladder is actually in the sea. The first several rungs are slick with sea water and kelp, making it very difficult to get a grip and to get a secure enough footing to make it up to the next step. When you get above that level, it’s smooth sailing, but those first few rungs are very difficult. Everything is working against you.

This isn’t just a story in a magazine for me, either. I have friends who have found themselves in this kind of precarious situation; some have managed to claw their way out, while another was only able to do it with significant financial help from a good friend. I have heard and seen the horrors of payday lending and of being locked out of having a checking account.

While there are certainly some broader potential solutions to this problem, whether they come about through legislation of the banking system or just through an entrepreneurial person or a thoughtful non-profit, that’s not what I’m going to look at today. Instead, I’m looking at solutions that people can try right now to help lift themselves out of this mess.

Here are nine strategies that people can take that will help them escape this cycle. I’m the last person that’s going to claim that this is easy. However, I will say that, if you put your mind to it, it is possible to climb up the first few rungs on the ladder.

Strategy #1: Start establishing a positive history on all of your bills

If you want to take the first step up that ladder out of this mess, you need to be standing on a strong foundation, and that foundation is made up of a consistent positive history of paying your bills on time.

There are a bunch of reasons why paying your bills on time is so foundational.

First, paying your bills on time keeps you from paying late fees on your bills. Many, many bills hit you with a $20 or $35 or $50 late fee for a late payment. If you’re in a situation where money is already tight, this can be devastating.

Second, late payments can have a negative impact on your credit. Often, it’s poor credit that keeps you from getting a checking account, so doing what you can to improve your credit is going to help ensure that you can eventually break out of the cycle of check-cashing services, money orders, and payday loans.

Finally, paying debts on time will make them smaller going forward (provided you don’t add more to the balance). Even if you’re just making a minimum payment on a debt, you’re going to reduce the size of the payment in the future (for some debts) and you’re taking another step toward paying off the debt entirely.

You should do everything in your power to stay up to date on all of your bills, even if that means making some hard choices in the short term. You’re better off living in a smaller place that you can more easily afford than a bigger place that really stretches you to the limit, for example.

Strategy #2: Follow up on info provided on your account denial disclosures

If you’ve signed up for a checking account and been denied, the bank should have provided you with an account denial disclosure that explains the reason why you were denied the account.

Most of the time, that reason has to do with personal credit. Banks get reports on your credit history from the credit bureaus and those reports detail when you’ve defaulted on debts and also when you’re excessively late on bill payments. If you have a bad credit report, they’ll deny you an account. Bad marks on your credit report last for seven years, though their impact fades over time as those bad marks grow older.

Sometimes, it has to do with a past history of writing bad checks. Banks subscribe to a shared service called ChexSystems that keeps track of people who write bad checks and if your name appears in that system, a bank will likely not give you an ordinary checking account. This information does go away after five years and banks become less concerned about negative entries as those entries become older.

Whatever the reason, take that account denial disclosure seriously. Make it your goal to address exactly what is stated on that disclosure and do your best to correct it.

Strategy #3: Open a savings account at a credit union with initial deposit

Your best strategy for getting an account in the traditional (read: inexpensive) banking system is to get a savings account at a credit union. In general, credit unions are much more friendly in terms of extending services and accounts to people with spotty banking and credit histories, and savings accounts are usually easier to get than checking accounts (because of the risk of bad checks).

You can start by heading to a local credit union and establishing a savings account for yourself. You’ll likely need some amount in hand with which to make an initial deposit – $100 is probably an ideal amount if you can come up with that much.

Establishing this account serves one big purpose and several smaller ones (I’ll get to the smaller ones in a bit). The big purpose is that it begins to establish a good customer history with that financial institution which you may be able to build upon in the future in order to get a checking account and perhaps even some loans in the future.

The savings account is the first step, though, and it does come with some benefits.

Strategy #4: Keep a balance and add to it occasionally

The first benefit of a savings account is that it can earn a little interest over time. Rather than your money going away, your money in there actually grows. It doesn’t grow fast, mind you, but it does move in the right direction over time.

Another benefit is that a savings account can serve as an emergency fund for you. That means that if you ever find yourself in a difficult unexpected situation, like a car failure or something akin to that, you have cash that you can tap. You don’t have to throw money at a check cashing service or hope that your credit card won’t be declined. You can handle it.

The key to those things is to keep a healthy positive balance in that savings account, which means that not only do you only use it in an actual emergency, but that you also contribute to it on a regular basis. The balance of that account should slowly be going up over time, not down, and if you do need to use it, you fill it back up as quickly as you can.

Strategy #5: Deposit checks into savings, then make a lump withdrawal from it to pay bills as needed

Another really nice benefit of a savings account at a credit union is that it will usually help you break away from check cashing services. Most credit unions will happily allow you to deposit checks from other sources into your savings account, so when a paycheck comes in, you can deposit that money into your savings account. Then, when you need to pay bills, you can pull money out of that savings account to do so.

There is a pretty tight limit on the number of withdrawals you can make from a savings account each month, so if you’re using this savings account as a check cashing tool, you’ll want to withdraw most of the check in one lump sum (leaving a little behind to build up that savings account over time, as described above) and use it for your bills and other expenses.

Doing this not only frees you from the cost of check-cashing services, it also helps you with continuing to build an emergency fund and also establishing a great relationship with that credit union.

Strategy #6: Ask about “second chance” banking programs

Another nice feature of many credit unions – and some banks – is what is known as a “second chance” banking program. In this program, the bank will issue you a checking account, but they will put some restrictions on the use of that account.

One common restriction is that they require you to put down a deposit to open the checking account. So, for example, you might put down a $100 deposit to open that account. That money serves as the “last $100″ in your checking account in effect, but does not actually appear as part of your balance. Instead, it merely protects the bank in the event that you try to pass a bad check.

Another avenue that some financial institutions follow is to require that you have a savings account with a certain balance in it in order to open that “second chance” checking account. If you’ve been following the other strategies in this article, this part should be easy, as you should already have a balance in your savings account.

Having a checking account is incredibly useful as it removes you from the need to use payment services like money orders in order to pay bills. It also typically unlocks online banking, which enables you to pay bills directly from your checking account without having to buy stamps either. When you can pay a small bill without having to deal with the time and the expense to go get a money order and send out the bill, that can make a huge difference in terms of your financial recovery and your time.

Strategy #7: When you do get a checking account, maintain a buffer

Once you’ve managed to climb a few rungs on the financial ladder, the last thing you’re going to want to do is slip again due to a simple mistake. One common mistake that people make is writing a check and then forgetting about it when they use their ATM card. They draw their account down to a low enough point that the check, when it arrives back at their bank, triggers an overdraft, which is yet another expense piled on people at the margins of banking.

You can avoid all that with one simple strategy: keep a buffer in your checking account. A buffer is a certain amount of cash that sits in there that is intended to never be touched at all. Let’s say you have a $100 buffer in there. Since you’re treating that buffer as untouchable, you essentially treat a balance of $100 as the same as a balance of $0 in your head. When you’re trying to figure out how much money you have left in your account, you just subtract $100 from your account balance.

That buffer can save you in the event of a small mistake. If you accidentally write a check that might otherwise exceed your account balance by, say, $50 and then cause an overdraft … and an overdraft fee … and the potential threat of closing your checking account, instead your buffer just takes care of it. Obviously, if you ever hit your buffer, you need to refill it as fast as you possibly can to avoid overdrafts.

A checking account “buffer” saved me several times early on in my professional years. Even now, I still have a healthy checking account buffer. It’s a great guard against little mistakes that can wind up being very costly.

Strategy #8: Get your credit report and read it carefully

One challenge that’s faced by people who find themselves pushed out of the banking system is that their credit is in bad shape. They have a history of bad credit choices following them around, haunting every financial move they make, whether it’s renting an apartment or applying for a job or trying to get a checking account.

One powerful step that anyone in this situation can take is to simply get a copy of their credit report and study it carefully to find out what’s actually on there. Doing so can give you a very good picture of your credit situation and can provide a foundation for starting to fix those problems.

The federal government runs a website, annualcreditreport.com, that allows every citizen to access their credit report annually. Visit that site and follow the procedures, then give that credit report a thorough reading. Do you know everything that’s on there? Does everything make sense? Or are there things that don’t make any sense at all?

Strategy #9: Clean up all problems with your report

You’ve got your credit report. Most of it makes sense. A few items seem wrong or out of date, and those things are reflecting on you poorly.

Your next step, then, is to clean up those problems. Just walk through each of those items and contact the financial institutions involved. Find out what’s actually going on with each of those accounts.

Some of the entries might be accounts that aren’t even yours. In other cases, your credit report might be providing incorrect information about your actual account. In either case, work with those businesses to have the accounts assigned to the right person or that they’re providing the correct information to the credit bureaus.

For those accounts that actually are yours, do what you can to get the ones that are marked as delinquent up to date. Contact those companies and see what you can do to create a new payment plan or other arrangement to get things in order and get that negative mark off of your history.

If you take those steps, your credit score will naturally rise. Doing this will help you with things like insurance rates, getting an apartment, applying for entry-level jobs, and, yes, getting a checking account.

Final Thoughts

I’m not going to kid you: this won’t be easy. You’re going to be tackling these things on a low income and probably under a great deal of time stress to boot.

Right now, you have a choice. Do you want a better future for yourself and the people you love the most? Do you want this situation to go on forever? Or do you want better opportunities, with less money and time being drained away into things like check cashing and making payments?

It’s hard. It will probably require you to make a few lifestyle changes, like moving to a smaller place or selling off some stuff from your closet to get started.

In the end, though, it’s going to be worth it. Getting back in the mainstream banking system will save you an incredible amount of time and money.

Good luck.

The post How to Escape the Trap of Expensive Banking appeared first on The Simple Dollar.

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6 Money Tips You Would Never Expect to Come From Millionaires

Do you dream of living life like a millionaire?

What do you imagine? Fancy dinners, elaborate mansions, fast cars and designer clothes?

Don’t forget your grocery budget, fixer-uppers, bumming rides and second-hand stores.

Oh, you didn’t think millionaires worried about that stuff? Well, how do you think they became millionaires?

For an invisible majority, accumulating wealth isn’t about a massive inheritance, family name or success in the entertainment industry. Most (multi)millionaires work and budget just like the rest of us — only smarter.

If you want to actually live like a millionaire, here are six ways to save money our favorite frugal millionaires employ:

1. Make It a Game

Regardless of how much money you have to spend, it always feels good to find a killer price on something you want.

Millionaire couple Angela Marchi and Bob Weidner shop at outlet stores for deals, because they hate to pay full price.

When they go, Weidner likes to play a game: How many items can he buy without spending more than $100?

Frugal spending and saving are always more fun when you can make a game of it — we can almost guarantee it. Create challenges for yourself and your family to help you get the most for your money.

2. Buy Modest Vehicles

What’s the first sign of someone who just cashed a huge pension check or landed some kind of windfall?

A flashy car.

Any armchair financial advisor (‘hem, your dad or grandpa, usually) will tell you a car is a terrible thing to sink your money into.

“A car loses value as soon as you drive it off the lot,” said every adult in my family since I was old enough to sort of know what money is.

Given the extra money, though, the first stop for many people is the Mercedes dealer.

Don’t make the same mistake.

Take a note from Dallas Cowboys running back Alfred Morris, who commutes to the field either by bicycle or in a used 1991 Mazda.

Cincinnati Bengals running back Giovani Bernard takes it even further: During his rookie year, he rented a place close enough to the stadium to walk to work, and he borrowed his girlfriend’s mother’s van when he needed a vehicle.

3. Spend on Extravagances… Selectively

Many self-made millionaires choose to spend money on experiences, rather than things.

That means travel and hobbies, instead of fancy cars and big homes.

We see lots of stories of people retiring early to travel or pursue other passions.

Sure, those experiences come with a cost not everyone can afford. But these frugal retirees are choosing to spend their extra cash wisely — on stories and memories they can share with friends and family, instead of fleeting possessions.

We always recommend spending and saving your money wisely — frugality doesn’t have to mean never spending it at all. It just means being choosy about when and how you splurge.

4. Ignore the Joneses

Consider what makes you happy, and ignore the rush to keep up with Joneses or Kardashians or whoever is leading the endless race these days.

And, for goodness sake, do not Instagram before you shop!

Don’t compare your life to your friends’ Instagram and Facebook photos. We all know these are hand-picked to portray unrealistic perfection, but somehow we still hold them up as an unattainable goal.

5. Save the Bulk of Your Income

Former Tonight Show host Jay Leno is notorious for his lifelong (relative) frugality.

Over his 17 years with the network, Leno reportedly saved every dime of his NBC salary.

He lived off earnings from personal appearances, endorsement deals and stand-up, which he continued to perform dutifully most weekends — even while he taped the show five days a week.

While it may seem like a celebrity has the unique luxury of setting aside a full salary, the habit likely started early, before the millions were rolling in.

“You know, when I was a kid,” Leno told fellow comedian Jerry Seinfeld on Seinfeld’s show Comedians in Cars Getting Coffee, “I always had two jobs, and I would bank one, and I’d spend the other. Then when I got ‘The Tonight Show’ I just continued to do that.”

Could you live off the income from a side hustle or part-time job — even for a few years?

Sticking to a tighter budget and automatically saving your salary from a full-time job could expedite your road to financial freedom.

6. Make Smarter Choices, Not More Money

Self-made millionaires tend to accumulate wealth because they save, invest and manage money wisely — not because they make huge salaries.

Consider this: A 21-year-old liberal arts graduate making an average starting salary of $36,000 would need to save only $25 per week in an IRA to retire comfortably at 65.

That’s neither a phenomenal salary nor a major sacrifice in most weekly budgets. But knowing what to do with that small amount of money can mean big things.

By investing as much as he could of every paycheck, Brandon Sutherland was able to retire at 32. He expects to live for at least 30 years on the interest from his investments.

Brandon is a pretty typical college graduate without special advantages. He was just willing to invest up to 70% of his paycheck toward living the life he wants — sooner than later.

Your Turn: What smart money-saving tips can you add for living like a millionaire?

Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).

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