Author: Kelsey Sheehy

Don’t Bank on Your Business to Fund Your Retirement

Posted on by Kelsey Sheehy

Retirement can loom like a dark cloud for small-business owners. Many invest blood, sweat and tears — and every penny — into building their business but never set cash aside for the future.

A huge number of entrepreneurs have reported putting aside no retirement savings at all. For some, selling the business is their only retirement plan.

That’s a risky bet, says Keith Hall, president and chief executive officer of the National Association for the Self-Employed.

“You’re putting all of your eggs in one basket. Not just your current lifestyle, but your future,” Hall says. “If something goes wrong, you sacrifice both.”

And the list of things that could go wrong is long: Your business could fail. Your health could fail. You may not find a buyer. You may have to sell for less than you need. You may not be able to retire fully.

Rather than gamble on everything going right, diversify your nest egg so it will last you well into your later years.

Make retirement planning a priority

Saving for retirement is often the last item on your budget and the first to get cut in favor of other priorities, Hall says. Instead, make it as important as paying your mortgage or running your business.

This won’t come naturally to most entrepreneurs, who are often hyper-focused on immediate needs and tend to plan in three- to five-year increments.

“It’s hard as an entrepreneur and small-business owner to think 20-plus years out,” says Mary Bell Carlson, owner of Carlson Consulting LLC. “I’m often figuring out what I need to do today for immediate cash and long-term profitability.”

But Carlson, a financial counselor and certified financial planner, makes a point to invest where she can. She and her husband contribute to his employer-provided retirement plan. They each also put money into individual retirement accounts, among other investments.

“My biggest lesson has been to start, no matter how small the amount; it’s just important to start,” she says.

Determine what you can afford, whether that’s 1%, 5% or 10% of your gross earnings, and commit to it, Hall says. Over a long enough window, even small, regular contributions will compound into something meaningful.

There are a number of retirement plans for small-business owners, each with requirements, stipulations and tax implications.

  • Traditional, Roth IRA: Individual retirement accounts are easy to open and available to virtually anyone. You can contribute up to $6,000 in 2022 (up to $7,000 if you’re 50 or older). The main difference between traditional and Roth IRAs is whether you want tax savings now or later. Traditional IRAs use pre-tax income, but you pay taxes when the money comes out. With Roths, it’s the other way around.
  • Solo 401(K): Available to business owners with no full-time employees (exception made for a spouse). The contribution limit is up to $61,000 for 2022, though that’s broken into two parts, each with limits. Similar to an employer-sponsored 401(k), contributions are pre-tax and withdrawals are taxed as income.
  • SEP IRA: A Simplified Employee Pension IRA, or SEP IRA, operates much like a traditional IRA, except you can contribute a lot more. Annual contributions are capped at $61,000 in 2022 versus $6,000 for a standard IRA. Another key difference: If you put money into your own SEP IRA, you must contribute an equal percentage to employees. This option is best for solopreneurs or those with few employees.
  • SIMPLE IRA: This option has a lower contribution limit, up to $14,000 in 2022 (for those under age 50), but it offers employee accounts and is easier for small companies to administer than a traditional 401(k). You must offer a 3% match or a blanket 2% contribution to all employees. You can deduct contributions made to your account and those made on your employees’ behalf.

Get input from a professional

Sure, you can try to decode which retirement plan is best for your business. Or you can work with a certified financial planner or registered investment advisor to determine the best path. Doing the latter can give you confidence in your strategy, help you avoid any costly penalties and ensure you don’t leave any money on the table.

If selling is still part of your retirement plan, the help of a professional is essential, says Norm Sherman, a certified mentor with SCORE, a national volunteer organization that offers free business mentorship. First, you need to know whether your business is sellable and what you can realistically expect to net in a sale.

An investment banker or business broker can evaluate your revenue, profit margins, business structure and market to give you an honest assessment and help you better position your business for a future sale.

“It costs you nothing to get answers to these questions,” Sherman says. “Don’t operate blindly; find experts who can help you.”

The content is for educational and informational purposes and does not constitute investment advice.

Kelsey Sheehy writes for NerdWallet.

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5 Steps to Weed Out Instagram Ad Scams

Posted on by Kelsey Sheehy

Holiday shoppers, prepare to be bombarded with social media ads — and scams.

Highly targeted advertising on social media sites like Instagram and Facebook makes it easier than ever for brands to get in front of their target market. But these ads also make it easier for shady brands to dupe eager scrollers and shoppers with glossy images, only to deliver low-quality goods or nothing at all.

Scams originating on social media have skyrocketed in recent years. According to data from the Federal Trade Commission, complaints of fraud that started on social media jumped from nearly 28,900 in 2019 to more than 71,500 in 2020. And that figure is on pace to double again in 2021, with nearly 76,000 reports of social media fraud filed in the first half of this year, resulting in $292 million lost by consumers.

“While these advertising platforms try to weed out obvious bad actors via their automated algorithms, it is literally impossible for them to fully protect end consumers from sketchy companies,” says Oleg Donets, co-founder and chief marketing officer for Real Estate Bees, a marketing platform for the real estate industry. “Most of the time, the responsibility of vetting advertisers falls on the shoulders of end customers.”

But how do you know which brands to trust? These five steps will help you separate the gems from the fakes.

1. Search for independent reviews, complaints

Reviews on a company’s website can be cherry-picked, or worse, completely fabricated. So look for customer feedback on independent sites, like Trustpilot and Google My Business, and search for complaints on the Better Business Bureau’s scam tracker.

You can also tap friends, family and your broader social network for insight. They’ve likely been served the same ads as you, and odds are good that someone pulled the trigger and can tell you if the product is as advertised.

“I have friends who have had success ordering clothing via [Instagram] ads, so I go to them for recommendations on which brands they trust,” says Andrea Woroch, a consumer savings expert based in Bakersfield, California.

Not finding any reviews? Consider that a red flag.

2. Research the domain history

One clue to a business’s legitimacy is how long its website has been around. To find out when a website was created, simply plug the URL into the Internet Corporation for Assigned Names and Numbers’ lookup tool.

Sketchy companies pop up and disappear faster than the moles in the arcade game, creating a new domain name every time they resurface, so be wary of any sites created in the past year. Companies with an established web presence are more likely to be legitimate, but you’ll still want to check reviews and return policies.

3. Test out customer support

Take the brand’s customer service on a test drive before buying. Reach out to the company through its official channels, such as a support email or phone number, as well as by direct message on the social media platform.

Donets suggests doing this multiple times to get a true sense of the company’s responsiveness.

“In my experience, this strategy works 90% of the time,” Donets says. “In most cases, a shady company will answer one or maximum two questions, and then they would stop replying.”

4. Triple-check the return policy

Make sure you’re crystal clear on the return policy before tapping the “buy” button. If you’re unhappy with the item, how many days do you have to return it? Does the site allow for a full refund or will you be issued a credit? Does the company even allow returns?

“I fell into this trap and bought a ring with my daughters’ names on it,” Woroch says. “It did not look like the picture in the ad, and unfortunately I overlooked the no-return policy. So basically I threw away $40.”

5. Pay with a credit card

You can do all the research in the world and still fall victim to a glossy Instagram ad. And if you paid from a checking account or with cryptocurrency, you have little recourse to get your money back.

But credit cards have an extra layer of protection. If an item isn’t as advertised and the brand’s customer service doesn’t come through and resolve the issue, you can initiate a chargeback through your credit card company and have the charge reversed.

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

Kelsey Sheehy writes for NerdWallet. Email: ksheehy@nerdwallet.com. Twitter: @KelseyLSheehy.

The article 5 Steps to Weed Out Instagram Ad Scams originally appeared on NerdWallet.

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How Shopping Small Makes a Big Impact in Your Community

Posted on by Kelsey Sheehy

I get it. It’s easy to shop on Amazon. Running low on toilet paper? Need lightbulbs? Want a bath caddy on a whim? With two clicks and even less thought, the item you need/want/desire is at your doorstep, often in 48 hours or less.

Shopping locally requires more thought. Supporting small businesses is an intentional act — one that the mom and pop shops in your neighborhood desperately need you to make.

Tens of thousands of small businesses closed over the past year, many of them permanently. Each closure leaves a void that goes deeper than an empty storefront. The community loses dollars, jobs and resources that now-shuttered business would have circulated back into the local economy.

Small businesses reinvest

According to the U.S. Small Business Administration, when you spend $100 at a small business, $48 stays in the community. Spend the same $100 at a big-box store or national retailer and only $14 stays.

Why? Because local businesses rely on other local businesses.

Kela Nabors is the founder and CEO of Organically Bath & Beauty, an organic vegan skincare line and shop in San Antonio. She uses a local firm for marketing and financial services whenever she can. The cards she puts in each gift set come from another local business: Belle & Union.

“We keep it local as much as possible,” says Nabors, who also partners with and supports a local food bank and frequents other small businesses for her personal shopping.

If her business went under, which it nearly did last year, the loss would ripple through the community. But Nabor’s customers came through, buying products and promoting her store.

“Some people were buying something every day to send to people they knew,” Nabors says. “It really helped create new relationships with people outside of our core (customer) base.”

Turning the lights on

Local support is the only thing keeping the lights on for many businesses. In some cases, it’s turning the lights back on.

Some small businesses that had to close earlier in the pandemic have been able to reopen, in large part because of customer support, according to a January 2021 report from Facebook and the Small Business Roundtable, a coalition of organizations that advocate for businesses and entrepreneurs.

According to the report, 25% of small businesses were closed in December 2020, an improvement from 31% in April 2020. Among those that closed and later reopened, 31% say customer support is the reason they were able to do so. Businesses also cited social distancing measures (40%) and loosened restrictions (30%) as factors that allowed them to reopen.

Nabors had to close her storefront early in the pandemic when sales plummeted from around $15,000 per month to just $500 in March.

“I thought, ‘We can’t make rent like this.’ So we moved everything back into our home,” Nabors says.

Customers kept reaching out, asking Nabors to add products to her website and encouraging her to do more outreach on social media. Her online sales grew from around 10 per month to 50 to 100 per day. She reopened her storefront in May and is now looking to expand.

“We were able to actually thrive and grow during the pandemic,” she says.

Local shops hire locally

Businesses need to staff up as they reopen and gradually bring operations back to pre-pandemic levels. That hiring is going to happen locally, says Tom Sullivan, vice president of small-business policy at the U.S. Chamber of Commerce.

“Small businesses have a unique advantage when it comes to hiring: a network of community that is different than Indeed or LinkedIn,” Sullivan says. “We’re going to see more of an emphasis on local hiring than we have ever seen before.”

Nabors is already looking to hire. Her business went from three employees pre-pandemic (two of whom have since relocated) to one employee and a handful of family members in the early months of the pandemic. Now, she has five employees, is shopping for warehouse space and plans to hire 22 new employees.

A rising tide

There’s a saying: a rising tide lifts all boats. It means everyone benefits from a good economy. This happens on a micro level, too.

When a town or neighborhood has a healthy small-business district, property values rise and housing demand increases, says Matt Wagner, chief program officer at the National Main Street Center Inc., a nonprofit organization that works to revitalize historic commercial districts.

Other small-business owners notice, too.

“You get a bandwagon effect, with more entrepreneurs wanting to enter the market,” Wagner says. “A lot of it has to do with having small businesses there, whether it’s a brewery, coffee shop or grocery store. It becomes a neighborhood.”

Small-business districts become a point of pride, a place to show off to friends and family when they visit.

“It’s become an amenity in some ways. It’s like having a robust school system or parks and trails system,” Wagner says. “People may have taken it for granted before, but we see now that it could be gone and that does a lot to your personal quality of life.”

Kelsey Sheehy writes for NerdWallet. Email: ksheehy@nerdwallet.com.

The article How Shopping Small Makes a Big Impact in Your Community originally appeared on NerdWallet.

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3 Ways COVID-19 Reshuffled Our Finances

Posted on by Kelsey Sheehy

The U.S. economy ground to a halt in March 2020 as state after state issued lockdown orders and shut down businesses to blunt the spread of the coronavirus.

A year later, mask-wearing is commonplace, the phrase “social distancing” is now in the dictionary, elbow bumps have replaced fist bumps and hugs are still on pause.

The tumult of the COVID-19 pandemic impacted our financial lives in ways big and small, too. The big: Many businesses are still temporarily closed, while countless others have closed permanently or are on the brink of doing so, and millions of people are still out of work.

Less acute is the way the coronavirus has influenced how we interact with money, both physically and philosophically. People are being more intentional about how they spend their money, learning what they can do without (sometimes the hard way) and forgoing cash in favor of more contactless payments.

Here are three financial trends we can chalk up to the coronavirus pandemic.

1. Cashless payments

Cash is dirty. Like, covered in bacteria and food and feces dirty. That didn’t bother us much prior to the pandemic. But now, in an effort to minimize contact with germs (namely, the coronavirus) businesses and consumers are ditching cash in favor of credit cards and digital wallets. Payment services quickly pivoted to follow suit. Case in point: Venmo.

Before the pandemic, Venmo was an app you used to split the bill at happy hour or pay your roommate for the electricity bill. Now, you can scan a QR code at CVS to pay for your hand sanitizer using Venmo.

Digital transactions may be more hygienic and convenient, but cashless payment systems typically require a credit card or checking account and, therefore, aren’t easily accessible to the 7.1 million American households who don’t have a bank account.

That’s why major cities like Philadelphia, San Francisco and New York City, along with a handful of states, require retailers to accept cash. And, until the alternative is more accessible, cash will remain king.

2. Shopping small, supporting local

Don’t let the trail of Amazon delivery trucks fool you. The pandemic also prompted people to shop small. In a May 2020 survey commissioned by NerdWallet and conducted by The Harris Poll, 37% of Americans said they made more of an effort to support local businesses as a result of the pandemic.

Shoppers’ desire to support local businesses outweighed their desire to find the cheapest price. In a November 2020 survey by Union Bank, 72% of Americans said supporting small businesses was more important than getting the best deal and 43% said they were willing to spend $20 more on an item to support a small or local business.

While business owners can seek grants and Paycheck Protection Program loans, they will need continued solidarity from shoppers if they are going to rebound from the COVID-19 pandemic.

3. Saving money

Few things amplify the importance of an emergency fund more than an extended, large-scale emergency. The personal savings rate over the past year reflects that trend.

In December 2019, the personal savings rate was 7.2%. In December 2020, it was 13.7%. In the 12 months between, savings rates skyrocketed up to 33.7%, which was an all-time high.

The pandemic didn’t simply illustrate the need to save. By shutting down travel, concerts, restaurants and other fun things we used to spend money on, COVID-19 effectively cut the fun out of budgets.

Almost half (48%) of Americans reported spending less than they did pre-pandemic, according to the May 2020 survey by NerdWallet and The Harris Poll. And 38% said they planned to save more in their emergency fund post-pandemic, too.

But saving money during the pandemic is a luxury mostly afforded to those on solid financial footing before March 2020. Among those with a household income of $100,000 or higher, 47% reported saving more than they did prior to the COVID-19 pandemic, compared with 35% of those earning less than $50,000 per year, according to NerdWallet’s May 2020 survey.

The coronavirus has disproportionately impacted low-income communities and people of color, both physically and financially. And many people struggling to stay afloat before the pandemic find themselves in more dire circumstances now.

Resources like 211.org can help those in need find assistance for bills, housing and other necessities. And nonprofits like Feeding America can help you find food banks in your area.

And if you’re among those with more disposable income since the pandemic started, consider donating to community organizations serving those who need help.

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

Kelsey Sheehy writes for NerdWallet. Email: ksheehy@nerdwallet.com.

The article 3 Ways COVID-19 Reshuffled Our Finances originally appeared on NerdWallet.

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How to stand out in this tough job market

Posted on by Kelsey Sheehy

Dear Class of 2020: You are graduating into one of the worst economies in history. But this isn’t news to you. Many of you have already felt the impact, with summer internships and full-time job offers pulled out from under you as the depth and duration of the coronavirus pandemic truly sets in.

As a product of the last recession, I’m here to tell you that all is not lost. You will eventually land a job. It might not be in your field, but if you’re scrappy and creative, you will get there.

My path looked like this: A call center job (to pay the bills), plus a freelance writing gig (to build my resume), then graduate school (to expand my network) followed by a temporary job with a textbook company (again, to pay the bills). Then, finally, a reporting internship that turned into my first full-time journalism job.

Your path may not look like mine or your parents’ or your classmates’, and it will likely look different from what you planned. These tips from career coaches can help you stand out from the other newly minted associate’s, bachelor’s and master’s degree holders — not to mention the over 40 million newly unemployed workers.

Beef up your LinkedIn profile

“You don’t have as much face-to-face opportunity, so it’s important to optimize online visibility,” says Debra Rodenbaugh-Schaub, a career services consultant at the Alumni Association of Kansas State University.

The place to do that: LinkedIn.

The professional networking platform is heavily trafficked by recruiters and hiring managers, making it crucial to put your best foot forward.

Amp up your profile with links to websites you’ve created, articles you’ve written or presentations you’ve given. You can even upload recordings to highlight public-speaking skills.

Look at profiles of people who are leaders in the industry you’re targeting to get inspiration for what to highlight and how to present yourself in your own profile.

Network virtually

Social distancing hasn’t killed networking; it’s just made it virtual.

The usual players — trade organizations, alumni groups and professional organizations — are all still meeting via webinars and video conferencing.

Moving online can make networking less intimidating for newbies. You can ease into building connections, absorbing information and building the confidence to eventually become a more active participant.

You can, and should, also make meaningful one-on-one connections. Not doing so will put you at a distinct disadvantage, since jobs are often filled via an employee referral.

Lisa Kastor, director of career planning at the College of Wooster in Ohio, recommends building a “mentor map” with at least three mentors who can help guide you and make introductions.

“I coach students to identify a person who has at least 10 years of experience, one that knows them well academically and one who knows them well professionally,” Kastor says. “Start with who [you] know, articulate what [you] want and always ask for the recommendation of two more people to reach out to.”

Tailor your resume

Understand what a company is looking for in a candidate. Then, customize your resume and cover letter to that specific job posting. This is an important step under normal circumstances but it is critical now, as the economic upheaval of the pandemic has increased competition for available jobs.

“Don’t be self-defeating and copy and paste the same thing into 100 job applications. That is not the right approach.” Rodenbaugh-Schaub says.

Avoid simply listing skills or tasks. Instead, give them context. Highlight how your experience and actions delivered measurable outcomes.

Tailoring your resume also means including keywords or phrases from the job posting, since companies use software to sift through the initial barrage of applicants.

Consider alternative career paths

“COVID-19 is unlike anything we have seen, so you have to be flexible,” says Glenn Hellenga, director of career and employability resources at Tri-County Technical College in South Carolina.

That might mean working in a short-term contract role in your field or accepting a job that is completely outside your career path. After all, you’ve got bills to pay.

Taking a detour doesn’t mean abandoning your goals entirely. Instead, find opportunities to develop the tools you’ll need for your dream job. Pick up freelancing gigs, find volunteer opportunities and proactively seek out projects wherever you land.

“You can show that you’ve been actively pursuing, enhancing and honing your skills,” Rodenbaugh-Schaub says. “Employers love that.”

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

Kelsey Sheehy is a writer at NerdWallet. Email: ksheehy@nerdwallet.com.

The article How to stand out in this tough job market originally appeared on NerdWallet.

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3 Ways Millennials Are Getting Money Right

Posted on by Kelsey Sheehy

Read almost any article about millennials and you’ll come away with the distinct impression that this generation is royally screwing up.

That they’re suffocated by student debt. That they spend frivolously. And that they’re behind on everything from owning a home to starting a family.

Don’t buy into all the gloom and doom. Millennials are killing it in some areas, thanks in part to the turbulent financial times in which they came of age.

“Millennials were given a front-row seat to the financial crisis,” says Hallie Kraus, a financial advisor with the Humphreys Group, a financial planning firm in San Francisco.

“Many of us witnessed our parents struggle to pay the bills after getting laid off or suddenly finding their home underwater,” Kraus says. “Through these experiences, we were taught a unique set of lessons about money that are actually serving us well.”

Here are just a few ways millennials — a group that today reaches from their mid-20s to nearly 40 — are getting it right when it comes to their finances.

They know their worth

Millennials are making money moves. A 2018 report from Bank of America found that millennials were far more likely to ask for a raise than those in other generations. And when millennials made the ask, they got paid.

A whopping 46% of millennials had asked for a raise in the past two years, and 80% of those who asked for a raise got one, according to the report.

Those in other generations were far less likely to say they had asked for a raise:

  • Generation Z: 19%
  • Generation X: 36%
  • Baby boomers: 39%

Advocating for better pay is an important habit to build early in your career. Not only will you increase your immediate income, but you also could boost your lifetime earning potential exponentially.

They’re saving for retirement, early

While saving for retirement is a win on its own, millennials are going a few steps further by starting early and setting aside a larger portion of their paychecks.

Among millennials who are saving (73%), 3 of 4 are putting money away for retirement, according to a 2020 report from Bank of America. Those who are saving for retirement started at age 24, on average — earlier than boomers and Gen Xers, who started at ages 33 and 30, respectively, on average — giving them a much-needed head start on their future.

“Despite common stereotypes about this generation, significantly more millennials are saving for the future,” says Andrew Plepler, global head of environmental, social and governance at Bank of America. “These habits are encouraging and build on positive trends we’ve seen in recent years.”

Millennial parents are particularly diligent about saving for retirement, contributing a median of 10% of their annual income, according to a 2017 survey conducted online by The Harris Poll on behalf of NerdWallet.

The survey found that millennial parents who were saving for retirement contributed a median of 10% of their annual income to that goal, compared with 8% for Gen X parents and just 5% for boomer parents (all respondents to this question were employed). That seemingly small difference in savings rates can have a significant impact over time.

All that good news is soured by the fact that less than half (46.5%) of millennial households have access to a 401(k) or other work-based retirement plan, according to the most recent data from the Federal Reserve.

They’re focused on credit

Tracking expenses and keeping their eyes on financial goals is helping millennials gain ground in the credit game.

Nearly 40% of millennials improved their credit score in the past year, according to Bank of America’s 2020 survey. Other generations were less likely to claim a credit boost, Plepler says, noting the figures were 29% for Gen Z, 36% for Gen X and 31% for baby boomers.

“Millennials are practicing positive money habits day-to-day, and they’re moving closer to their goals because of it,” Plepler says. “[They] are also being practical and reserved when it comes to their financial choices. They’re willing to make lifestyle sacrifices and trade-offs in the present to achieve future goals.”

These gains are important, as the average millennial’s FICO score still falls in the “good” range at 668, according to credit reporting agency Experian; that’s on par with Gen Z and X, but far behind the older boomer generation (which boasts an average score of 731).

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

Kelsey Sheehy is a writer at NerdWallet. Email: ksheehy@nerdwallet.com.

The article 3 Ways Millennials Are Getting Money Right originally appeared on NerdWallet.

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You Lost Your Job? Here’s How to Find Your Financial Footing

Posted on by Kelsey Sheehy

It doesn’t matter if you were fired or laid off, whether you saw it coming or were completely blindsided: Losing your job is disorienting. You’ll feel like you’re in a fog. And yet, in that fog you still need to answer some important questions:

How will you pay rent? Put gas in your car? What about your student loans?

The average length of unemployment is almost 22 weeks, according to the Bureau of Labor Statistics, so it’s important to quickly adapt your finances to your temporary new normal.

Working through these tasks in the first seven days can help you find your financial footing as you figure out the next step in your career.

Day 1: Apply for unemployment

“Filing for unemployment insurance is a critical piece to getting back on your feet,” says Kyle Goulard, a certified financial planner in Portland, Oregon.

Contact your state’s unemployment office the day you lose your job. In most cases, you can file your unemployment claim online. The process can take a few weeks, so don’t delay.

Day 2: Assess your savings

Take stock of what you’ve squirreled away over the years. How far will it get you? Factor in any severance or payouts for unused vacation days, which will help you stretch your reserves.

In an ideal world, you’ll have enough savings to get you through a few months. In reality, you may only have a few weeks’ worth. Prioritizing bills and cutting back spending can help stretch that (more on that below).

Your 401(k) might look like a lifeline, but resist the urge to cash it out. Between taxes, penalties and lost retirement earnings, that’s an incredibly expensive move. Consider it a last resort, and you’re not there yet.

Day 3: Strip down your spending

“As soon as you lose your job, you should switch to an emergency bare-bones budget,” says Bruce McClary with the National Foundation for Credit Counseling.

That means cutting nonessentials, including gym memberships, ride shares, cable, streaming services and other subscriptions.

These changes feel extreme, but they’re only temporary. You can readjust your spending once you find another job.

Day 4: Call your creditors

Contact any lenders, utility companies and credit card issuers that you owe money. Many will have options to help out, including reducing or suspending payments, McClary says. The key here is to be proactive.

“It’s definitely taken into consideration when a borrower reaches out first,” McClary adds. “It can change the entire conversation.”

Day 5: Don’t neglect your student loans

Most student loans have built-in protections to help with this exact situation.

You may be able to temporarily suspend your loan payments through deferment or forbearance, or change your repayment plan to lower the amount due each month. Call your loan servicer to figure out the best option based on your loans.

If you’ve already missed a payment, you may have some wiggle room. Federal student loans aren’t considered in “default” until they’re 270 days past due. Avoid getting to that point, says Dana Kelly with the National Association of Student Financial Aid Administrators.

“Little dings are gonna happen, but you don’t want anything major. Especially when truly there is no need for it to happen,” Kelly says. “You can simply make a phone call and get yourself on better footing while you’re finding that next job.”

Day 6: Prioritize financial obligations

You may need to make some hard decisions if you don’t have enough money to go around. But how do you decide what gets paid and what doesn’t?

“Your top priority should be on making rent, keeping the lights on, putting food on the table,” says Scott Newhouse, a certified financial planner in Thousand Oaks, California.

Debt comes next. McClary says to prioritize collateralized loans, like your mortgage or auto loan. Defaulting on those could lead to losing your home or car.

With credit cards, continue to make at least the minimum payment for as long as possible. Missing payments will damage your credit score, which can take years to rebound. And you may need your credit cards to cover expenses down the road.

Remember: Continue talking with your creditors, especially if you need to miss a payment. You’ll have more control over the situation if you keep them in the loop.

Day 7: Sort out your health care

Health insurance through your employer typically won’t terminate the day your employment does. Often, you’ll have coverage at least until the end of the month, but you’ll need something to bridge the gap until your next gig.

Job loss is considered a “qualifying event,” meaning you can get health insurance outside of the annual open enrollment period. Explore the following options:

  • Your parents’ plan, if you’re under age 26.
  • Your spouse’s employer-sponsored plan.
  • The health insurance marketplace (Healthcare.gov).
  • Continuing coverage through your former employer via COBRA insurance.

One option that should not be on the table: forgoing insurance.

“This is a ‘must-have’ without question,” Goulard says. “The only thing worse than being unemployed is incurring health care costs without health insurance coverage.”

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

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The article You Lost Your Job? Here’s How to Find Your Financial Footing originally appeared on NerdWallet.

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Don’t Ignore the Signs of Financial Abuse

Posted on by Kelsey Sheehy

Nearly 70% of millennial women have experienced financial abuse by a romantic partner.

Let that sink in for a second.

That means, for every 10 women you know in that age group, odds are that seven of them have had a partner use money to control or manipulate them, according to a 2017 survey of 2,000 people ages 18-35 by CentSai, a financial wellness website.

Sadly, it’s not surprising given that 1 in 4 women will experience intimate partner violence in their lifetime — often for the first time before they are 25 years old, according to the Centers for Disease Control and Prevention. And financial abuse is present in nearly all domestic abuse cases.

But financial abuse can and does occur absent of any physical violence. And it isn’t strictly a millennial problem, nor is it something that happens exclusively to women. Almost 50% of men in the survey by CentSai said they experienced some form of financial abuse.

Recognizing financial abuse

Financial abuse can run the gamut from subtle to egregious.

It might look like a partner who can’t keep a job or pay their share of the bills. Or one who makes you feel guilty for spending your own money. But it could also be a partner who offers to handle the household finances, then gradually restricts your access to those accounts.

Some other common forms of financial abuse:

  • They open credit cards in your name without your knowledge.
  • They default on accounts in your name, ruining your credit.
  • They make you take out loans or borrow from your family, but don’t pay it back.
  • They hide money from you.
  • They refuse to let you work or try to sabotage your career.

If you feel like you’re being taken advantage of financially, bring it up with your partner. How they react will tell you a lot.

Do they get angry? Do they shift the blame to you? Do they make you feel guilty for questioning them? Or do they apologize and take meaningful steps to remedy the situation?

“A good sign is if you feel like you can have that conversation and your partner is receptive to it,” says Katie Hood, CEO of the One Love Foundation, a nonprofit that teaches young people how to identify and avoid abusive relationships.

But if you’re avoiding these types of conversations out of fear for how your partner could react, that might be a warning sign.

“When someone is in an abusive relationship … they basically start managing their life around another person’s anger and volatility,” Hood says.

Look for patterns

Financial abuse, like most forms of abuse, typically isn’t a one-off behavior, but part of a trend that escalates over time, so it’s important to look for the patterns, Hood says.

“I think about it like falling down a rabbit hole,” Hood says. “It starts out great — you’re adored. The next step is isolation … they basically pull you away from your support network and tether you to them. Then, they start the emotional abuse — manipulating you, being controlling, sabotage, calling you names, calling you crazy.”

How to get help

First, assess your risk level. If you fear for your safety call the National Domestic Violence Hotline at 800-799-7233 or TTY 800-787-3224 or contact a local hotline immediately. They can connect you with resources and help you get out of the relationship safely.

If you’re not concerned for your safety, start building an exit plan.

“The first step is to be aware. The second is to start doing some protection,” says Shannon Thomas, author of “Exposing Financial Abuse.” At this stage, it’s important to not tell your abuser you’re going to leave. “I’ve talked to folks that confronted the abuser, and the next day all the money was out of the account.”

Instead, get educated. Find out where your joint accounts are and how to get access to them. Bank staff can be helpful, Thomas says. It’s difficult, but important, to be honest about what you suspect is going on. Remember, it’s something they’ve likely heard before.

If you suspect a loved one is experiencing financial abuse, express your concern without berating their partner. Point out patterns that you see and ask for their assessment.

“They may get defensive. They may push back,” Thomas says. “But if someone gently asks and says ‘I’m seeing this and I’m concerned,’ it opens the door.”

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

The article Don’t Ignore the Signs of Financial Abuse originally appeared on NerdWallet.

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If ‘Budget’ Sounds Like a Bummer, Try Renaming It

Posted on by Kelsey Sheehy

Webster’s New World dictionary defines budget as: “a plan or schedule adjusting expenses during a certain period to the estimated or fixed income for that period.”

If that doesn’t sound fun, I don’t know what does. (I’m kidding. It sounds terrible.)

By definition alone, budgeting sounds like a chore. So it’s no surprise that many people hear the word “budget” and think: Constraints. Restrictions. Hassle. And it’s even less of a surprise, then, that most people simply don’t do it.

Only 33% of American adults follow a budget, according to an October 2017 survey of Americans from NerdWallet. The time and effort involved are often cited as the reasons, but trying and failing is also a barrier. In a separate study from Northwestern Mutual, 79% of respondents said being financially responsible meant not deviating from a budget.

“When people think ‘budget,’ they think of ‘less,’” says Matt Bell, personal finance expert at Matt About Money. “I’m going to spend less. I’m going to have less fun. I’m going to have less freedom.”

But it doesn’t have to be that way. Taking control of your money can be the opposite of restrictive; it can actually be freeing, Bell says.

“Really, it’s about getting more. More knowledge about what’s happening in your financial life, so you can be more intentional with your money. So you end up having more for the things that matter to you.”

Reframe the conversation

The word “budget” isn’t very helpful. It doesn’t tell you anything about what you need to do. And, for many, it triggers negative associations. So let’s call it something else.

Bell likes cash flow plan. Other people prefer spending plan or expense tracker. You can even get creative with it and coin your own phrase — maybe money map or financial freedom scheme speaks to you. Whatever helps you envision the goal: to know what’s coming in and going out, and adjust where needed.

“When you think about it in that way, that’s pretty easy to handle,” says Vicki Bogan, associate professor of finance at SC Johnson College of Business at Cornell University.

Change the timing

Budgets are often reactive. You have a financial issue — too much debt, not enough savings, a series of unexpected financial hits — and you turn to a budget as a fix.

That is the right move, Bogan says, but it contributes to the negative connotations. Because reacting rarely feels empowering, but taking control does. So try your best to be proactive.

Try to start tracking your income and expenses before there’s a problem. So, when one arises, you’re ready for it. That is, by definition, empowering.

Focus on your goals

“Nobody wakes up excited about a budget,” Bell says. But you can certainly get excited about buying a house, attending your friend’s destination wedding or living it up in retirement.

Whatever the goal, use your spending plan as a means to achieve it. That way, you can break big expenses up over time to make them more manageable. And evaluate any purchases (outside of necessities like food, shelter and bills) against that goal.

Keeping the money you put toward your goals in a separate account will help you easily see your progress (and make you less tempted to dip into that fund for something else).

Don’t start with restrictions

Yes, a spending plan involves limits. But those come in later.

The first step is to simply figure out where your money is going, Bogan says.

“Don’t monitor it. Just, you know, live your life,” she says. “And then on your app or spreadsheet really take stock of what you’re spending money on.”

Then start making decisions about what to prioritize and what to cut out or cut back on.

Be flexible

Once you hit a groove, check in throughout the month to see if your plan is lining up with your reality. It might line up one month and not the next. That’s OK. Plans are flexible.

If you’re consistently off, revisit your plan. Maybe that $100 monthly grocery budget was unrealistic. Or maybe you can be proactive, using coupon apps to find discounts on regular purchases. Either way, make adjustments as necessary.

“If this is something new, chances are it may not go perfectly well,” Bell says. “New habits take a while to establish. But just by starting the process, you’re in the game and you will find benefits very quickly.”

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

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The article If ‘Budget’ Sounds Like a Bummer, Try Renaming It originally appeared on NerdWallet.

Yes, You Should Ask Your Parents About Their Financial Plans

Posted on by Kelsey Sheehy

Parents are often more than happy to offer financial advice to their kids. They like to feel needed and want to make sure you’re on solid financial ground. But it’s important to turn the tables and ask about their financial plans, too.

Are they saving for retirement? Have they updated their will? What’s their plan for long-term care, should they need it?

It doesn’t matter if you’re living on ramen or running your own business, asking your parents about their financial future can feel odd. But life moves fast. And your parents’ financial plans can and will affect your own, eventually. So it’s important to talk early and often about how they’re planning for retirement and the often high cost of aging.

“It’s never too soon to have this conversation,” says Greg Young, owner of Ahead Full Wealth Management LLC in Rhode Island. “If something happens to your parents, not only there goes your safety net and a key part of your support network, but their affairs will likely pile onto you.”

Tact is everything when talking about money. Show them you want to learn and you want to help. Use your own life events, like a new job, a new house or an expanding family, as an opening to talk about their plans.

Retirement

It’s important to know if your parents are saving, but this conversation isn’t just about money. It’s also about their dreams for retirement.

The talk

Your first real job (or any new job) is a good chance to ease into the conversation. Ask your parents for advice as you navigate 401(k) contributions. A simple “What did you do?” gives you insight without being invasive.

House hunting? That’s another opportunity to check in with your folks about their retirement plans. You know, in case you need to add “in-law suite” to your wish list.

Long-term care insurance

The cost of extended care is staggering — assisted living carries a median price tag of $48,000 per year, while the annual median cost for a nursing home is nearly $90,000 for a semi-private room, according to an annual survey by Genworth, an insurance company. In-home care can be just as costly, depending on the services needed.

Long-term care insurance helps offset the cost of nursing care and help with routine activities like eating, bathing and dressing, whether at home or in an assisted living or nursing home.

The talk

Long-term care insurance gets more expensive with age, so most people who buy it do so in their 50s or 60s. It’s good to start the conversation early to have the topic on your family’s radar.

“‘Do you have long-term health care insurance?’ That’s a specific question that is pretty palatable,” says Thayer Willis, a wealth counselor. “If they say yes, the follow-up question is: ‘How does it work exactly?’”

If the direct approach doesn’t jibe, try backing into the conversation. Use someone else’s experience as an example and ask whether your parents have considered assisted living in the future and how they would pay for it.

Estate planning

Sorting through an estate without clear directives can tear families apart. That’s the last thing your parents want. Talking openly about things like wills and trusts, life insurance and advance medical directives can help you understand what they have in place, and give you insight into their intentions, Young says.

“Knowing what to expect from them, or that they’ve done some planning, will certainly make an emotional eventuality a little easier,” he says.

The talk

Starting your own family, and setting up your own estate plan, is a great opportunity to ask your parents what they have in place. You can also use someone else’s experience to start the conversation.

“Ask questions like: ‘A friend from work had a parent pass and they could not find any paperwork. … Do you and Mom have all your paperwork together in one place? If you were to pass, who has access to it?’” says Mark Struthers, owner of Sona Financial, a wealth management firm.

Your folks might not be comfortable talking about their finances. That’s OK. Don’t push them. Instead, make it clear that you’re ready and willing to talk another time, Willis says.

“You might need to take the approach of planting a seed, and that’s all you do in the first discussion,” she says. “Which is another reason for beginning early.”

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

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The article Yes, You Should Ask Your Parents About Their Financial Plans originally appeared on NerdWallet.