Are You Picking the Wrong Money Goals?

Setting smart, achievable goals is important if you want to take charge of your financial life. But many of us are surprisingly bad at choosing the goals that actually matter most to us.

Investment research firm Morningstar had 318 people write down their top three financial priorities, then showed them a master list of goals prepared by the researchers. Three out of four investors changed at least one goal after seeing the master list, and one out of four switched their top priority.

“We were like, ‘Wow. People don’t really know what they want,’” says lead researcher Ray Sin, behavioral scientist at Morningstar.

Other behavioral research has shown that even when people think explicitly about what matters to them when making decisions, they overlook many of their most important goals. That interferes with their ability to evaluate their choices and consider alternatives.

Among the problems: We’re better at thinking short term than long term, Sin says. Plus, we may overvalue goals that are currently on our mind.

A renter who just attended a housewarming, for example, might say her top priority is saving to buy a home. She may forget that she really wants to be able to quit her job and travel the world for a year. She probably has other goals as well, such as retiring someday and perhaps starting her own business.

Of course, all those goals may matter to her, but “resources are finite,” Sin says. That’s why prioritizing is so important. Someone determined to retire early, for instance, may not be able to fully fund a child’s college education or leave an inheritance.

If you want to check for your own blind spots, quickly write down your three most important financial goals. Then look at Morningstar’s master goal list and see if you want to change what you wrote:

  • Be better off than my peers.
  • Pay for personal self-improvement (e.g., go back to school, learn a skill).
  • Experience the excitement of investing.
  • Start a new business.
  • Buy a house.
  • Help pay for my kids’ college education.
  • Stop working and do something I love.
  • Go on a dream vacation.
  • Relocate in retirement.
  • Care for my aging parents.
  • Give to charity or other causes I care about.
  • Feel secure about my finances in retirement.
  • Feel secure about my finances now.
  • Leave an inheritance to my loved ones.
  • Retire early.
  • Pay for future medical expenses.
  • Avoid becoming a financial burden to my family as I grow older.
  • Manage my debt.

Something you may notice about this list: Many of the goals involve feelings. Goals that resonate on an emotional level can help people maintain the discipline they need to stick with a financial plan, says Ryan O. Murphy, head of decision sciences at Morningstar Investment Management.

“When it starts to become more emotional, it becomes more personal,” Murphy says. “This abstract thing of ‘save more money for later’ may not be a goal that really gets people to move now, today.”

Even the goals that don’t seem emotional, like managing debt, can be transformed into something more powerful if you consider the feelings around them. Paying down debt can make you feel more comfortable and secure and less stressed, for example.

Morningstar researcher Samantha Lamas, a recent college graduate who just started paying her student loans, has firsthand experience with goal blind spots. Lamas initially thought paying off her debt was her top priority, but during the study realized that saving for retirement was important as well. Accelerating her student loan payments might have meant missing years of company matches, tax breaks and tax-deferred compounding she can get from contributing to her retirement accounts.

“I no longer think of my financial goals as a zero-sum game where I’m forced to either save for retirement or pay down debt,” says Lamas. “I can achieve both, simultaneously, if I’m thoughtful about it.”

This article was written by NerdWallet and was originally published by The Associated Press.

The article Are You Picking the Wrong Money Goals? originally appeared on NerdWallet.

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How to Resist Online Ads and Keep Your Money

Online ads are like salespeople. Sometimes they’re helpful — and sometimes they trail you while you shop, make suggestions, “check in” on you, and all but shove you to the checkout.

Those online ads “chase you around the internet,” says Neeru Paharia, associate professor of marketing at Georgetown University’s McDonough School of Business. They get in your face to convince you to spend.

And while online advertising isn’t all bad — it can expose you to products from companies that can’t afford TV ads, Paharia says — the persistence and targeting can lead to unplanned purchases.

How online ads (stalk and) tempt you


Say you’re shopping for jeans, and the salesperson takes your measurements and learns about your style to suggest a fitting pair. Marketers learn about you, too, in order to advertise exactly what you want. Retailers’ targeted advertising tools work within websites to collect your data and track your internet activity. If you browse home-improvement blogs, for example, marketers may show you ads for power drills.

Or maybe you’ve been eyeing a specific pair of sneakers. Marketers may plant ads for the same kicks on social media, in articles and sponsored emails. Even if your brain knows that these repeated ads are targeted and designed to make you spend money, your heart may feel that they’re serendipitous. “The more that we come in contact with something, the more it feels like it should be part of our lives,” says Kit Yarrow, consumer psychologist and author of “Decoding the New Consumer Mind.”

Through apps

Apps track you in even more ways than browsers, says Rebecca Herold, CEO of The Privacy Professor consultancy. Most people “mindlessly” agree to app terms, she says, which often grant access to text messages, contacts and other information. “You’re leaving this huge cloud of data that’s just emanating out of your phone or device and going directly to those who want to sell you something,” Herold says.

App providers may sell this “personal data exhaust” to third parties for marketing and research, she says. With this information, marketers can serve you especially relevant (and tempting) ads. Consider a running app that tracks your routes. “Maybe [marketers] know from the data that you like pets, and they see that you’re running by a pet store,” Herold says. “They can make it more likely that you will purchase something there by showing you an ad for a sale or even offering a coupon.”

In social media

You may see targeted ads on Instagram, Facebook and Pinterest — sites where you can easily buy the products advertised. For example, ads for sneakers may show up in an Instagram post or story, where a tap or swipe sends you to the retailer’s website to buy them.

Fear of missing out can compound the urge to buy products highlighted in your feed. After all, friends’ curated profiles can make it seem like everyone but you is running on the beach in fancy sneakers, remodeling their kitchen with a power drill, and spoiling their dog with new toys from the pet store.

As Yarrow puts it: “As long as we’re using social media as a way to gauge what we’re capable of having, we’re never going to feel like we have enough.”

How to avoid impulse buys

Keep data to yourself. The less personal data available to marketers, the harder it is for them to inundate you with targeted ads. Remove every app you don’t use, Herold says, and for apps you keep, “change the privacy and security settings so they block as much of the tracking as possible.”

Online, clearing your cookies — a kind of tech that tracks your activity — and using incognito mode can help you browse the internet a little more privately, Herold says, adding: “Using an anonymous browser, like Tor, will provide even more privacy for your activities.” And if you want to check out those sneakers, you’ll give away less data by going directly to the retailer website, rather than clicking an ad.

Pause before you purchase. Buying something through an online ad is tempting, because it’s quick and abstract. “You see a product, you love it, you wish it was yours, and suddenly it is,” Yarrow says. “It feels like magic.”

Break that spell by waiting at least 20 minutes before making what could be a more rational decision, Yarrow says. In that time, demystify the purchase by considering other uses for that money. “You’ve got to make it real,” she says. Maybe the cost of those shoes is half a student-loan payment.

If you can, wait a couple of days, Yarrow says. “My guess is that at least half the time, you will forget about it forever.”

The article How to Resist Online Ads and Keep Your Money originally appeared on NerdWallet.

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How Banking Apps Can Motivate You to Save

Every time Olivia Robinson shops at Nordstrom, $10 moves from her checking account to savings. She set up this automatic transfer, or “rule,” in the savings app Qapital.

The rule “has definitely scaled back my spending at Nordstrom,” says Robinson, 26, a flight attendant and travel blogger based in Seattle. This way of saving money “makes me feel like I can go on a trip and not feel guilty about it.”

Some apps, like Qapital, can help bridge the gap between our desire to save more money and following through. Here’s how tech tools can nudge us to save — with clues from behavioral economics, a field that explores how our thoughts and feelings affect how we handle money.

Automatic transfers: giving in to the ‘default effect’

Studies show that we tend to accept a default option instead of changing it. For example, companies that automatically enroll their employees in 401(k) plans tend to see higher participation rates.

Similarly, some banking apps harness this behavior to help us save gradually.

  • Opting into automatic savings programs: Apps such as Qapital and Acorns — and some banks, too — can round up each transaction to the nearest dollar and transfer the cents over to a savings or investing account. You won’t get rich quick, but the savings add up over time.
  • Setting up automatic transfers: Banks’ apps or websites usually let you transfer money from checking to savings accounts, so you can set up recurring transfers, possibly timed around when your paycheck arrives.

» Looking for a high-yield savings account? See our top choices

Ideally, we’d save by looking at our monthly expenses and carefully calculating how much we can set aside. But automating a fixed-amount transfer offers the luxury of dropping a task from your to-do list.

“Making something default or automatic is a great way to overcome issues of self-control,” says Jeff Kreisler, co-author of the behavioral economics book “Dollars and Sense” and editor in chief of

Savings goals and budgets: using mental accounting

In a 100% rational world, we would treat all our money consistently. But that’s not how it always shakes out.

For example, you might have coffee at home to avoid spending $4 at a cafe, but also buy a $10 beer at a baseball game even though it’s cheaper to buy a six-pack at the store and tailgate. The coffee, you might justify, is a daily expense, while the beer is part of your “fun money.”

This tendency to think about money differently depending on where it is, such as which bank account it’s in, is called “mental accounting,” Kreisler says. Such categorizing isn’t a bad thing if you can use it to your advantage:

  • Tracking spending by category. Budgeting apps such as Mint and You Need a Budget can sync with your bank accounts and break down your spending in specific areas, such as dining and grocery shopping. This helps keep tabs on where you overspend and curb any bad habits.
  • Using separate accounts. Some online banks let you open multiple savings accounts and give each a nickname that can map to your savings goals, such as a future vacation or an emergency fund, and use an app to view balances and set up transfers. You’re less likely to dip into that money if it’s not part of your checking balance.

» See which banks offer multiple savings accounts

Spending locks: accepting the ‘pain of paying’

“There is a pain we all feel when we give up something,” Kreisler and Dan Ariely wrote in “Dollars and Sense.” Buying things means we’re giving up money.

Credit cards, e-wallets and the latest payment technology make paying more effortless and less painful than using cash, but their convenience has a downside.

“Pain serves a purpose,” Kreisler says. “It makes us pay attention to what we’re doing and adjust” when necessary.

But using cash isn’t the only way to raise spending awareness. Apps can help here, too.

  • Locking debit and credit cards: Some banks let you switch your plastic on and off within their mobile apps, which can help control impulse buying. This might be handy if you associate spending categories, such as ride-sharing or eating out, with certain cards.

» Learn more about credit card locks

  • Blocking certain spending categories: Though only available overseas so far, one major credit card issuer and some online-only banks in the U.K. have rolled out an app option to block certain types of transactions, such as those from bars and gambling websites.

Of course, you control the locks and blocks. But adding an extra barrier to paying might be enough to prevent unnecessary spending.

As banking technology advances, we’ll likely see other ways that apps can help motivate us, such as more timely and personalized advice.

“We aren’t yet at the step where many banks are offering those proactive suggestions or reminders with respect to a budget,” says Daniel Latimore, chief research officer at financial analyst firm Celent. “But I can see that happening in the near future.”

You can’t literally download motivation. But some banking tools may give you just the right push to boost your savings habits.

The article How Banking Apps Can Motivate You to Save originally appeared on NerdWallet.

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How Student Loan Default Can Gut Your Paycheck

There’s a dirty little secret of the student debt crisis. One that affects millions of borrowers, but isn’t talked about at dinner tables, on social media or in think pieces about student loans.

The taboo topic is wage garnishment and it works like this: Default on your federal student loansand the government can take up to 15% of each paycheck to satisfy your debt. That amounts to $300 per month for someone who normally takes home $2,000 per month. The Education Department can also withhold federal benefits like tax refunds and Social Security payments.

Garnishment is an effective tool to recoup unpaid loans — private collection agencies enlisted by the Education Department took in over $841.6 million via wage garnishment in the 2018 fiscal year — but it inflicts serious financial strain on borrowers who are already struggling.

“It’s a very powerful collection tactic that can really devastate the financial lives of the people subjected to it,” says Joanna Darcus, a staff attorney at the National Consumer Law Center who works with low-income student loan borrowers. “They can’t afford to pay their rent, buy their medicine, buy clothes for their kids and also pay a large percentage of their wages toward their student loan.”

If you received notice of garnishment or are already in the thick of it, don’t panic; you have options that are far less painful than a 15% hit to your paycheck.

Stop garnishment before it starts

The ideal time to take action is when you begin struggling to make payments. At that point, your loan servicer can help you explore other repayment options, including income-based plans that cap your monthly payment.

Once your loans are in default — nearly nine months past due for most federal loans — those options are off the table until your loan is in good standing. You can rehabilitate your loans to move out of default (more on that below). You also have a brief window to consolidate your federal loans (combining them into a single loan with its own interest rate) before the Education Department, via a private collection agency, moves to garnish your wages.

The collection agency handling your federal loans will notify you by mail before it starts garnishing your wages. The notice serves as your 30-day warning. During this time, you can stop the process by negotiating payment arrangements with the agency. The key: It must receive your first payment in that 30-day window.

If you can’t make a payment within that window, request a hearing to appeal the garnishment. To prevent garnishment from starting, you must request the hearing in writing within 30 days of the date on your collection notice. You can still file an appeal after garnishment starts, but the collection agency will continue to take up to 15% of your take-home pay while the case is reviewed, which can take two to three months.

A hearing sounds intimidating but it’s no more than a long form detailing your income, debt and expenses. The goal is to stop or reduce garnishment.

“You hear the word ‘hearing’ and think, ‘Oh my god, I need an attorney!’ But it’s just a basic exchange of information,” says Betsy Mayotte, founder of The Institute of Student Loan Advisors.

Contact the collection agency handling your loan to talk about payment arrangements or get details on a hearing request. Not sure whom to call? Check the National Student Loan Data System to find out who is managing your loan and how to reach them.

Rehabilitate your loan

Loan rehabilitation is a one-time “Get out of default” card. Here’s how it works:

The collection agency sets a monthly payment based on your income, minus any reasonable monthly expenses. The amount could be as low as $5 a month.

You’ll need to provide documentation, like copies of pay stubs and bills, and complete a detailed form to help determine the amount. Any wages garnished due to defaulted student loans will be considered among your expenses.

Make nine payments of the agreed-upon amount within 10 months and your loans move out of default. Any wage garnishment will stop. And you’re once again able to choose a repayment plan that works for you, including several income-based options that could drop your monthly payment to $0.

Once out of default, take care to stay out. Make your payments each month. Recertify your income every year if you’re on an income-based plan. And call your loan servicer if you run into trouble. If you default a second time, you’ll have fewer options.

This article was written by NerdWallet and was originally published by The Associated Press. 


The article How Student Loan Default Can Gut Your Paycheck originally appeared on NerdWallet.

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Minimalism Can Declutter Your Finances, Too

Christian Matney, 22, and his wife, Aubry, 23, haven’t let their youth hinder them from big financial goals.

The Austin, Texas-based couple — content creators at YouTube channel The Matneys — are travelers, entrepreneurs and homeowners, thanks in part to their commitment to financial minimalism. The approach involves decluttering accounts, obligations and balance sheets.

“We got things simple enough [to] where we both knew where our money was going,” Christian Matney says.

Here’s how financial minimalism can help you clarify goals, reduce stress and focus on what matters.

List your motivations

Minimalists live intentionally by carving out goals around which they center their lifestyles. But the key is knowing what those priorities are.

“If you’re not directed and know exactly where you’re going, something’s going to be directing you,” Christian Matney says.

The Matneys married in May 2016 and began mapping their goals and documenting milestones on YouTube. At the time, both were employed at the same startup, working long hours and unable to commit much time to one of their top goals: travel. They set about simplifying.

When they moved into an apartment together, they purged many of their belongings — and many of their financial obligations. “We had tons of unnecessary expenses we didn’t even know were there,” Christian Matney says. He notes they went from 30 monthly bills — including subscription accounts and donations they didn’t realize had piled up — to five.

They then bought a van and, in 2017, moved into it, taking their jobs with the startup on the road. Along the way, they continued building their social media brand. By 2018, Christian says, they were able to quit their jobs and become business owners themselves, focusing on their brand and building websites for other companies.

For the Matneys, it was a matter of visualizing a goal — travel — and organizing their lives to meet it.

“The money follows, the steps follow and everything follows, but you’ve got to know where you’re going first,” Christian Matney says.

Weigh value versus stress

When deciding whether to buy, skip or toss an item, minimalists try to determine whether it adds value to their lives. Apply that to your financial accounts.

Beyond holding your money, accounts should save you time, fees and, perhaps most importantly, stress. For 64% of Americans, money is one of the most common sources of stress, according to the 2018 American Psychological Association’s Stress in America Survey.

If your accounts are stressing you out, switch, close or consolidate. “If you can take four different accounts and move them into one, on your brain, that makes such a tremendous impact because your finances are so much easier to manage,” says Brent Sutherland, a certified financial planner and self-proclaimed “semi-minimalist.”

Take a look at:

  • Bank accounts. Keeping track of checking, savings, money market and/or CD accounts can be daunting and expensive, thanks to service fees. Resolve to manage only a few low-cost options. For the Matneys, one savings account and two checking accounts suffice. Some online savings accounts pay upward of 2% annual percentage yield, much higher than the 0.09% national average.
  • Credit cards. Clear out plastic that no longer fits your spending habits or charges an annual fee. If you have an older card with a high limit, closing it can ding your credit scores, but you can still move it to a sock drawer.
  • Debts. Moving debt to a balance transfer card can mean paying less interest. If student loans are part of your debt mix, you can consolidate or refinance. Automating your payments can help, too, especially if you’re still writing checks or paying via multiple creditors’ websites.
  • Investments. If you’ve changed jobs, see if you can transfer your old 401(k) to your new employer’s plan, or roll it over into an IRA. If your other investments are scattershot, transferring them to a single brokerage firm can help you better track your allocation and performance, Sutherland says. (Before doing so, ask about costs for such transfers.)

Spend with purpose

In 2018, the Matneys became homeowners, splitting the down payment and monthly mortgage 50/50 with Christian’s grandparents. All four are on the deed, and they all live together.

Adding responsibilities and roommates may seem at odds with minimalism. For the Matneys, who still travel, the arrangement makes sense.

“It gives us … a home base at an affordable rate, an investment property and an ability to take care of my family, which is a huge factor for me,” Christian says.

This article was written by NerdWallet and was originally published by The Associated Press.

The article Minimalism Can Declutter Your Finances, Too originally appeared on NerdWallet.

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Don’t Let a Car Dealer’s ‘Yo-Yo’ Financing Scam Reel You In

If you buy a new or used car, and a few days later the dealer tells you there’s been a problem with your financing, alarm bells should go off. You might be the victim of a “yo-yo” financing scam — so called because you’re pulled back into the dealership to renegotiate the deal at a higher interest rate and worse loan terms.

Such scams are a twist on what’s known as a “spot delivery” in which the customer drives off in a car while the dealer continues shopping for their financing. By understanding yo-yo financing and what to watch out for at the dealership, you can avoid being put on the spot — and falling prey to deceptive practices.

Buyers at risk

Yo-yo financing “is a significant problem with dealerships that cater to lower-income borrowers, and oftentimes for people of color,” says Rebecca Borné, senior policy counsel for the Center for Responsible Lending.

Rosemary Shahan, founder and president of Consumers for Auto Reliability and Safety, a nonprofit consumer advocacy organization, calls yo-yo financing scams “epidemic.” Often, she says, dealers target people who are vulnerable or seem uninformed: young or older people, minorities, recent immigrants and even members of the military.

How yo-yo financing scams work

Dealers use spot deliveries to take buyers out of the market for a car before they’ve finalized the financing. Spot delivery laws vary significantly from state to state, but when the practice is used appropriately, dealers can get buyers a car quickly, even when banks are closed, such as at night or on the weekend.

However, in yo-yo scams, the dealer gives the buyer the impression the car is theirs to keep. Days later, the dealer may use predatory or deceptive behavior to pressure the buyer into returning to renegotiate the deal. In some cases, dealers threaten to repossess the car or report it as stolen. Shahan says she’s even heard of buyers being arrested for auto theft after refusing to bring the car back to the dealer.

Victims of yo-yo scams who renegotiate wind up with an interest rate that is, on average, five percentage points higher than the initial loan, according to CRL. Those who are victimized by this practice often “are those who are least able to shoulder the burden of higher interest rates and don’t have a lot of bargaining power to get a fair deal,” says Borné.

But there are steps buyers can take to protect themselves.

Warning signs

“Once you fill out that credit application, they know so much about you” and can then target victims, says Shahan. So it’s important for all shoppers — especially those with poor credit — to be alert to early signs of a possible yo-yo financing scheme.

Borné and other experts say to watch out for these red flags:

  • You’re asked to sign a sales contract with some fields left blank.
  • It’s not clear what interest rate you’ll be paying.
  • You’re asked to sign a form that says the deal is “conditional.”
  • Or, the dealer lets you drive away in the car without any contract at all.

Don’t be a yo-yo buyer

However, yo-yo financing is easy to avoid. One surefire defense is to avoid dealer financing. You can get a preapproved car loan from an independent lender before you go to the car lot. Or, if you’re buying a relatively inexpensive used car, save up and pay in cash.

The Consumer Financial Protection Bureau recommends additional preventive measures:

  • Review the sales contract to ensure you understand the terms of your deal.
  • Make sure you have copies of all documents signed by you and the dealer and that all the contract blanks are filled in.
  • Verify that the loan rate is final before you take the vehicle off the dealer’s lot.

If you’re a victim

If you’ve just purchased a car and the dealer later tells you there’s a problem with the financing, proceed with extreme caution.

First, review all of the documents you received from the dealer. See if you signed a form stating that the sale was conditional. If so, Borné recommends that you simply return the car and “unwind the deal.”

However, by this point, many people are emotionally invested in the car and want to keep it. One strategy is to demand the financing denial letter from the lender. If the dealer can’t provide it, it may be testing you and trying to set you up for a yo-yo scam.

If the dealer persists, or threatens you, Shahan says it’s time to consult an attorney. Visit the National Association of Consumer Advocates site, which lists attorneys who specialize in auto fraud cases. When handled correctly by an attorney, the situation can be resolved without any harm to your credit, Shahan says.

The article Don’t Let a Car Dealer’s ‘Yo-Yo’ Financing Scam Reel You In originally appeared on NerdWallet.

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Here’s What Homeowners Must Remember at Tax Time This Year

Homeownership traditionally comes with some great tax breaks, but lots of things are different this year due to new tax rules. Here are four things that could put a wrinkle in your tax return this filing season if you’re a homeowner.

1. The mortgage interest deduction is different

Mortgage interest is tax-deductible, but this year the deduction has been adjusted. The deduction is limited to interest on up to $750,000 of debt ($375,000 if you’re married filing separately) instead of $1 million of debt ($500,000 if married filing separately).

The key date here is Dec. 15, 2017. If you took out your mortgage before then, the rule change likely doesn’t affect you, according to Ruthann Woll, a certified public accountant and principal in the tax services group at RKL LLP in Wyomissing, Pennsylvania. There’s an exception for people who were under contract to buy a home before Dec. 15, 2017, as long as they were scheduled to close by Jan. 1, 2018.

Also, the law treats refinanced mortgages as if they originated on the old loan’s date, which means the old limit of $1 million still applies. (If you refinance to borrow more than your current mortgage balance, different rules may apply, though.)

2. The property tax deduction is now capped

Property taxes are generally still tax-deductible, but this year the deduction is subject to a total cap of $10,000, which includes property taxes plus state and local income taxes or sales taxes paid during the year ($5,000 if married filing separately).

“That’s, obviously, huge for everybody, especially wage earners who have high state and local taxes to begin with,” Woll says.

3. The HELOC deduction has new rules

New rules around home equity lines of credit, or HELOCs, can affect whether the interest on those loans is tax-deductible. Now you can deduct HELOC interest only if you used the HELOC money “to buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. In other words, if you used the money to improve your house, you can probably deduct the interest.

“But if you’re using that line to pay off personal expenses, like credit cards or things like that, then you can’t deduct it,” Woll warns.

4. Moving expenses aren’t deductible for most anymore

Under the old tax rules, you may have been able to deduct the cost of moving. But under the new tax rules, moving-expense deductions are largely limited to military members.

“If you’re on active duty, or if it’s a move pursuant to a military order, change of station, then those deductions are allowed,” Woll reminds homeowners.

A word about itemizing this year

Although many tax deductions associated with homeownership are still around this filing season, you might decide not to take any of them. Woll says financially it may not be worth it.

That’s because something else happened to the tax rules in 2018: The standard deduction increased dramatically to $12,000 for single filers and $24,000 for joint filers. The effect is that a married couple filing jointly would probably need to have more than $24,000 in itemized deductions — those related to owning a home and any others as well — in order to make itemizing the better route financially.  And so, many people might save more money (and time) this year by scrapping the itemized deductions for mortgage interest, property taxes and all the rest and just taking the standard deduction.

People shouldn’t stop keeping track of their deductible expenses, though. For some, itemizing could still be the better route. “They could be leaving money on the table,” Woll says.

The article Here’s What Homeowners Must Remember at Tax Time This Year originally appeared on NerdWallet.

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If You’re Expecting a Tax Refund, Make a Plan to Grow It

Hiding your income tax refund in your sock drawer may feel handy, and locking it in your safe may feel secure, but putting it in the right savings or investment vehicle will make it grow.

Americans expecting a refund on their 2018 federal income taxes anticipate they’ll get $1,861 back, on average, according to a new report from NerdWallet. More than any other goal, they’re earmarking that extra cash for savings — 46% plan on stashing the money away. But not all savings methods are created equal.

“It’s really good news that such a high percentage of people are looking to save their tax refund,” says NerdWallet tax specialist Andrea Coombes. “The next step is to make sure you’re saving in the best possible place. That will depend on your goals, but the choice of account can mean a difference of hundreds or even thousands of dollars over the years.”

The bottom line: You have several options for this annual windfall. Using as an example that $1,861 average anticipated refund, here are four five-year scenarios that show how you could make the most of any refund you receive.

1. Traditional savings account

Potential return: $8 after five years.

Traditional savings accounts — those you find at big banks with a lot of branches — aren’t known for earning a ton of interest. Right now, the national average is 0.09%. If you squirrel away your refund and manage to leave it alone for five years, it could earn $8.39 in an account like this — not enough to write home about, but it may be appropriate if you want quick access to your funds and value visiting the bank branch in your neighborhood.

With just over $8, you could take a friend out for coffee.

2. High-interest savings account

Potential return: $196 after five years.

Online banks are known for higher-interest savings accounts, and it’s not unusual to find one offering 2%. Opt for a high-interest savings account like this and you’re looking at a return of $195.55 after five years. If seeing a teller isn’t a top priority for you but you still want your money readily available, an online high-interest savings account is generally a step up from a traditional savings account.

With an extra $196, you could cover one year of a premium streaming music plan for your entire family or just over two weeks of groceries, according to spending data from the Bureau of Labor Statistics.

3. Certificate of deposit

Potential return: $301 after five years.

As with savings accounts, how much you can earn with a certificate of deposit depends on the bank you do business with. And like savings accounts, online banks typically offer better CD rates than traditional institutions. Putting your income tax return into a five-year CD with an online bank could reap you $301 in interest, assuming the current 3% interest rate. You risk paying a penalty if you need to withdraw from your CD before its maturity date. If you have an emergency fund elsewhere and know you won’t need these additional funds, a CD is a solid option for growing your money at a moderate rate.

Just over $300 is nearly enough to pay the average monthly utility costs, according to the BLS.

4. Individual retirement account

Potential return: $630 after five years.

If you are without credit card debt and have an emergency fund in place, putting money toward your retirement is perhaps the savviest move you can make. Opening an IRA with $1,861 and letting it grow for five years could earn you $630, assuming a 6% average rate of return. But there’s a good chance you won’t be retiring in five years. Leave it in for 10 and you could earn $1,472; in 20, it could grow by more than $4,108. And with any luck, you’ll be able to add to that account — as you contribute more, you earn more for your golden years.

Today, an extra $630 might afford you a year’s worth of high-speed internet. In retirement, you might prefer to spend it on plane tickets to see the grandkids.

“It can be tough to focus on something that’s maybe 20 years or more down the road,” Coombes says, “but investing your money rather than simply saving it — assuming that makes sense for your financial situation — can make a really big difference in lifestyle for you when you’re ready to stop working.”

The article If You’re Expecting a Tax Refund, Make a Plan to Grow It originally appeared on NerdWallet.

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