10 Things I Wish I Knew about Money in My 20s

millennials

For all you 20-somethings out there, know this: We 30-somethings, we get it. We get what it’s like to be a 20-something struggling to find your way and make ends meet financially. We get that your baby-boomer parents don’t always seem to understand the social and financial pressures 20-somethings face nowadays. We get that times have changed, and that financial advice from folks 30 years your senior – folks who themselves grew up in a dramatically different era – doesn’t always seem relevant. We get what it’s like to be you because we so recently were you. In many ways, we still are you.

That said, while the gap in years between your 20s and your 30s isn’t all that large, the life changes that often occur in that time period tend to be dramatic. And whether it’s marriage, children, or the fact that some of us are now closer to 50 than we are to 20, most 30-somethings, myself included, suddenly find themselves looking back at a long list of financial moves we’re either glad we made or wish we made when we were in our 20s.

So, without further ado, here are 10 pieces of financial advice I wish I had known in my 20s.

1. Live at home for as long as you can.

If the offer to live at home is on the table, then consider yourself lucky and take it. Even if only for a year or two, the savings are significant. I know living with your parents might not seem hip, but take it from a 30-something, there’s nothing hip about paying thousands of dollars in rent unnecessarily. If you do live at home, be mature about it. Help out around the house when and where you can, and don’t be surprised or offended if you’re asked to chip in financially.

2. Pursue a postgraduate degree only if you’re sure you’ll need it and use it.

The world is littered with 30-somethings who piled on additional student loan debt to pursue an expensive postgraduate degree they’ve never put to use. Not knowing what you want to do is fine. Paying for graduate school on account of it is not.

3. Don’t make money-driven career decisions … yet.

Now, I’m not saying money shouldn’t be a consideration when weighing job offers and career paths. But I am saying that for a 20-something, it shouldn’t be the only consideration. There will come a day when, out of necessity, financial considerations guide your career decisions. Your 20s shouldn’t be that time. Instead, use your 20s to explore, learn, and find a career you find fulfilling and, hopefully, enjoyable.

4. Keep credit card debt out of your life.

By the time your 30s roll around, you will regret every penny you spent paying interest on a credit card. Use your credit cards to build your credit history and earn rewards, but be sure to pay them off in full every month.

5. A 401(k) match is your best friend.

Regardless of what decade of life you’re in, free money is free money, and it’s never to be passed up. If you’re lucky enough to work for a company that offers a 401(k) match, then be sure to sign up and start contributing from day one.

6. A Roth IRA is your second best friend.

One of the best ways for 20-somethings to put themselves in a great financial position come their 30s is to start investing in a Roth IRA as soon as possible. If you’re not familiar with a Roth IRA, there are many great resources available to help you learn. But it really is pretty simple. You contribute after-tax money, and your investments grow tax free and cannot be taxed as ordinary income if withdrawn during retirement.

7. Automate everything.

One of the major advantages you have as a 20-something is your comfort and familiarity with modern online tools and technology, a growing segment of which is being built specifically to help you get a head start financially. Perhaps the best thing modern technology does is help you automate everything. Automation is the easy button for managing your finances as a 20-something. So, whether you’re talking about credit card payments, bill paying, 401(k) contributions, investments in your Roth IRA, or anything in between, automate it and know it’s done.

8. Skip the wedding of the century.

Yes, I know, easy for us to say. We 30-somethings all spent a fortune having grand weddings. But that’s exactly the point. We spent a fortune. And trust us, your wedding day will fly by, and you won’t remember every last detail about place settings and flower arrangements. What you will remember is how much you spent on it. There’s no limit to the good use to which 30-somethings could put all that money spent (or should I say, blown) in one day.

9. Spend on experiences, not things.

As we 30-somethings can attest, you’ll never look back and regret the things you didn’t buy (they go out of style fast anyway), but you will regret the experiences you never had. Which is why it’s no surprise so many millennials prefer to spend money on memorable experiences, like traveling the world, over things, like the hottest smartwatch. 

10. Understand that time is on your side now, but it won’t be forever.

The biggest financial advantage you have as a 20-something is also the most fleeting – time. Hard as it may be to believe now, your 30s aren’t that far off. Whether it’s planning, saving, or investing, the sooner you start, the better off you’ll be. 

If there’s one thing you take away from this long list of advice, make it that last point. There are few absolute truths in the world of finance, but in all aspects of money management, if you get started as a 20-something, you’ll be glad you did once you’re a 30-something. Trust us on that one.

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3 Smart Money Moves to Make Before You Get Divorced

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Ending your marriage is both difficult and life-changing. There are many things to think about, from deciding where you’re going to live to learning to deal with the realities of being newly single.

What you may not think about is how best to protect your credit from the adverse effects of a divorce.

In my two-plus decades in the credit environment I’ve heard countless disaster stories about how divorce has ruined both spouses’ credit reports and scores. If you wait until after your divorce is final to take stock of your credit health, it may be too late to undo the damage.

There are a few steps everyone should take to protect their credit before they get divorced. This strategy will help limit your credit’s exposure to your divorce will almost always allow you to re-enter the world of being single with the cleanest credit report possible.

Here’s how…

Close joint credit card accounts

Divorce may allow you to sever ties with your spouse, but you could still be on the hook for shared credit debt. Even if a court assigns payment responsibility to one spouse or the other, your creditors do not have to recognize the assignment because they were not a party to the divorce settlement agreement.  That means any joint credit cards will still be the responsibility of both spouses even after your divorce.

Any use or abuse of the joint credit cards will blow back and harm the credit reports and scores of both spouses. It’s because of this potential harm that all joint credit cards should be closed prior to your divorce. Normally this would be poor advice because of the potential damage you can cause to your credit scores by doing so, but the downside of continued liability on a credit card that isn’t being paid is even more problematic.

Optional: Before you close any account, it’s a good idea to open a few new cards in your name. Once you start closing credit cards you’re going to lose the buying power that comes with plastic and you are going to need cards to use in their place. Opening a few cards in your name prior to closing your joint credit cards will allow you to continue functioning as efficiently as possible during and then after your divorce.

Sell or refinance your joint assets (house, car, etc.)

If you have joint loans secured by either your home or your car then you will still have liability for the debt even after your divorce.  This is problematic for two reasons. First, if your ex-spouse is assigned payment responsibility in your divorce settlement and he or she starts missing payments then your credit reports and scores will suffer. Second, even if the accounts are being paid on time, the large amount of debt will harm your debt-to-income ratios, which are important metrics considered by lenders when determining how much you can qualify for when you apply for loans.

You will not be able to convince your lenders to simply take your name off of joint loans, just like you won’t be able to convince your credit card issuers to remove your name from joint card accounts. That means the only way to separate yourself from the joint loan is to either sell the house or car, refinance it into your name alone, or buy the home or car from your spouse. Of course, some of these options may not be feasible.

You may not be able to afford to buy or refinance the loan into your name alone. You may not have a job or you may not be able to qualify for the loan amount needed to do so. And, you may simply not want the house or the car for whatever reason. In these cases the best move is to simply sell the house or the car, divide the proceeds with your soon-to-be ex-spouse and move on with your life.

Protect your credit from identity theft

Identity theft continues to be one of the fastest growing white collar crimes in the United States. And because your spouse likely has access to your personal information, he or she could easily apply for credit in your name during or after your divorce. This is not unheard of, especially if the divorce becomes contentious.

Thankfully, there three ways you can minimize the risk of this type of fraud, each with varying difficulty and expenses.

For free: You can check your credit reports once every 12 months at annualcreditreport.com at no cost. But this once-a-year checkups are hardly sufficient when you’re trying to protect your credit reports from fraud. To keep a closer eye on your accounts, sign up for a site like CreditKarma.com, which will ping you anytime there’s new activity on your account.

On the expensive side: There are costly credit monitoring services that you can buy that will passively monitor all three of your credit reports for changes that could be indicative of fraud and alert you via email if there are any potential problems. You’ll be paying roughly $15 per month in perpetuity for those tri-bureau monitoring subscriptions.

The best low-cost option: The best, most cost-effective option is to place a security freeze on your three credit reports. That essentially removes them from circulation until you choose to make them available again. It also prevents anyone from opening new credit under your name. The security freeze, or credit freeze, is not free but the cost is a fraction of credit monitoring subscriptions. The cost is different state by state but it is usually less than $30 to place the freeze on all three of your credit reports and in some states it’s less than $10. The freeze prevents any disclosure of your credit reports to new lenders until you’ve given permission to the credit bureaus to provide them.

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12 Ways Student Loan Debt Is Holding People Back

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Student loan debt has increased significantly over the last 20 years, from an average among new graduates in 1996 of $12,850 to more than $35,000 in 2016. This debt is having a lasting impact on the financial, personal and emotional lives of graduates, a recent survey by the Student Loan Report found.

The survey of 1,220 college graduates carrying student loan debt, conducted online between July 2 and July 19, 2016, revealed that the debt is preventing them from pursuing their dreams. Whether it’s buying a home or starting a family to not working in their field of study because they can make more money elsewhere, the impacts of all this debt are very real.

Here are 12 ways student loan debt is holding borrowers back.

1. Saving for Retirement

Nearly three-quarters of respondents (73%) said their student debt was affecting their decision or ability to save for retirement.

2. Taking a Vacation

More than two-thirds of respondents (68%) said their student debt restricted their ability to take a vacation.

3. Buying a Home

A majority of survey respondents (63%) said their student debt was affecting their decision or ability to buy a home.

4. Being Embarrassed

More than half of respondents (57%) said they were embarrassed when talking about student debt with friends, family or significant others.

5. Eating Out

Nearly half of those surveyed (49%) said their student debt has restricted their ability to eat out.

6. Buying a Car

Forty-seven percent of respondents said their student debt was affecting their decision or ability to purchase a car.

7. Paying Daily Expenses

Keeping up with daily expenses was an issue for 41% of respondents.

8. Choosing a Job

Student loan debt even impacts the job choices of 41% of respondents.

9. Starting a Family

More than a third of respondents (34%) said student debt has forced them to put off or delay starting a family.

10. Socializing

Student debt has hindered 32% of respondents’ abilities to go to social events.

11. Getting Married

Nearly a third of respondents (28%) said student debt has forced them to put off or delay marriage.

12. Starting a Business

Almost a quarter of respondents (23%) said their student debt is affecting their decision or ability to start a business.

Of course, student loan debt doesn’t have to be all bad. If you make on-time payments and are able to do the same with your other bills, you can build your credit and watch your credit scores improve significantly as you pay down the debt.

If you want to see how your student loans may be impacting your credit, you can get a free copy of your credit reports from each of the major credit bureaus annually. Also, you can look at your free credit scores, updated monthly on Credit.com, which will also show you how you’re doing in major credit scoring categories, like payment history.

If you’re already behind on payments, there are some options that can help you get back on track, even if student loan forgiveness isn’t on the table. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan or you can go through the government’s default rehabilitation program. Under the rehab program, if you make nine consecutive on-time payments (they can be extremely low), your account goes back into good standing, and the default gets removed from your credit report.

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How to Stay Together While Keeping Your Money Separate

sign a pre-nup

“Sign here. I love you, but you can’t have my money.”

Are those not the most romantic words you’ve ever heard? Prenuptial agreements are one way to ensure that your money stays separate while you are married, but can definitely be a killjoy when it comes to the relationship.

So what if you really want to keep your money separate but have decided that the prenuptial is not worth the headache, expense or aggravation? Are there ways to keep your money separate while you are married? The short answer is yes … most of the time. Certain assets can absolutely be protected. Others … not so much.

Drawing (State) Lines

The first level of the analysis is to find out if you live in one of the nine community property states. They are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, all property is presumed to be “community” property (of the property of both parties) and the burden is then on the one who wants to prove otherwise to the court. That this can often be a difficult task goes without saying. The principle behind this and all marital property law (as well as alimony law) goes back more than 100 years, and is that both spouses have a duty to support each other in all ways; morally, physically, financially.

The vast majority of the states are equitable distribution states. In those states, the courts will take a look at everything either of the parties has and make three piles: his, hers and theirs (with gay marriage now legal, the piles may be his, his and theirs or hers, hers and theirs, but you get the idea). So the his and her piles would contain assets, such as inheritances, gifts that were meant for just that one spouse and any assets that the party earned prior to the marriage that were all kept separate during it.

The caveat to the above though — and this is a big one — is that, generally, anything that either party actually “earns” during the marriage (including wages, business income for a business where one person works, 401K contributions, stock options — anything received for actual work), is going to be marital. Unless you have a prenuptial or postnuptial agreement, there is no keeping this element of your assets separate.

Furthermore, think of those “earnings” like a teaspoon of baking soda you add to your cake mix and stir up – once it’s in there, that’s it. You can’t decide to take the baking soda back out.

With those concepts in mind, here are a few ways to keep your assets separate.

1. Keep Your Inherited or Premarital Assets Separate

The word “commingling” is often synonymous with “lottery winnings” to one spouse; and “gambling losses” to the other. If you have an account that has funds in it that you either owned prior to the marriage or received during the marriage as inheritance or a non-marital gift that you mixed in to your earnings or joint funds from another bank account – then poof! The entire account becomes marital. Why? Because the courts consider money to be “fungible” meaning that once that marital dollar goes in, you can’t tell which dollar is coming back out. (Remember the baking soda.) To prevent problems and/or confusion in case of divorce, you can keep your premarital/inherited assets separate during marriage.

2. Don’t Put Your Spouse’s Name on the Title of Your Real Estate or Bank Accounts

Many people own a home prior to getting married. Oftentimes, especially if that home is where the married couple lives, the homeowner decides to throw the other person’s name onto the deed or the title of your financial accounts. While you could argue down the road, that you only did if for estate planning purposes, meaning that the spouse would be able to get the house and the money if you died first, that argument almost always fails in court.

To be certain, you don’t have to have this argument, just don’t put the other person’s name on the deed or your bank accounts – unless you are completely prepared to hand half of their value over to the other spouse in a divorce.

3. Be Careful About What You Use Your Earnings For

It is easy enough to decide to keep your own property in your own name and not add someone’s name to a deed or to a financial account. The rub comes when it maintaining that premarital property. This is where one or both of the spouses use their paychecks or other joint funds to pay down the debt on that property, or to make renovations or improvements to that property.

Now the court is going to be faced with trying to carve out which part of the value of the property might be marital and what part of the value has remained non-marital – a tedious and tortuous task. To keep it all clean, just use your funds from your premarital or inherited account to maintain your non-marital property, too.

By following these few simple steps, you should be able to keep the property you owned prior to the marriage, or inherited during the marriage as your own separate asset, without having to spend lots of money to litigate what was yours in the first place. You and your spouse can enjoy the fruits of your joint labor, and what the two of you built during the marriage.

[Editor’s Note: You can monitor your financial goals like building good credit for free on Credit.com.]

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So, About Those ‘Free’ Wedding Loans…

Never mind, dearly beloveds: A Seattle-based startup is reneging on its vow to offer free wedding loans, repayable only upon divorce.

SwanLuv made headlines late last year when it announced plans to offer $10,000 to engaged couples looking to fund their dream weddings. These funds would remain free, so long as the pair stayed together, company CEO and founder Scott Avy told Credit.com back in December. Upon divorce, each ex would have to pay the full amount of the loan, plus all the interest that accrued over the course of their marriage, split right down the middle.

The pitch (at the time at least) was that all the interest SwanLuv made off of divorces would be used to fund more loans. The company would make revenue through advertising partnerships, Avy said, though he provided few other details on how his service would actually work.

Well, it appears the business model did not come together as planned since on Feb. 15 (the startup’s advertised launch date), SwanLuv announced it would no longer be a lending platform. Instead, it plans to help couples crowdsource funds for their big day from friends, family and community members.

“Due to overwhelming demand (nearly two billion dollars at $10,000 per couple) and unanticipated legal regulations/restrictions in the lending space, rather than pull out we came up with a tool we believe still helps couples with their wedding financing,” Avy said in a written statement posted on the company’s Facebook site and forwarded to Credit.com, when asked for comment on the change. “We sincerely apologize to anyone we have upset by adjusting our funding platform.”

The Unhappy Couples

According to Avy, surveys the company conducted among prospective users showed high interest in a wedding crowdfunding platform, which, per its Facebook page, still entails paying the money back upon divorce, just to dear old mom and dad, Aunt Sue or anyone else kind enough to contribute toward your nuptials.

Still, the company’s about-face hasn’t been entirely well-received, as many people who had registered on the site took to social media to air their grievances.

“I’m BEYOND upset about this!” one commenter wrote on SwanLuv’s Facebook page. “Do you honestly think that some of us haven’t tried crowdfunding or asking everyone we can think of for help. I feel completely betrayed. I waited MONTHS to be told to start a crowdfund?!”

Another woman who had been hoping to use a SwanLuv loan to fly family out for her wedding posted a video to YouTube, taking issue with the reversal. “I and a few other applicants did not receive the survey that Swanluv claims to have sent out,” she wrote beneath the vlog. “Frankly, I am immensely disappointed in all of this.”

Some consumers were more sympathetic to the startup’s plight.

“With as much grief as you are receiving from everyone, I appreciate that instead of throwing in the towel you guys are adjusting into something that will work in the meantime,” another Facebook commenter wrote. “Thank you for working through it instead of giving up!”

Of course, the fact some people reported difficulties accessing the site during the past few days only contributed to the outrage. Per Avy’s Facebook post, the outage was related to server overload, not a formal closing of business. “We are currently working on a stable solution to the volume of site traffic we are experiencing,” he said.

You Still Have Options for Paying for Your Wedding

The overwhelming interest in SwanLuv’s initial offering isn’t exactly surprising. These days, weddings can cost couples a small fortune. An annual survey from TheKnot put the average 2014 wedding cost at $31,213, up from $29,858 the year before. 

If you’re having trouble financing your big day, you could potentially lower the cost of your wedding by saving during a long engagement, cutting back on unnecessary expenses and taking on additional jobs or side gigs ahead of the big day. You also can look into a low-interest credit card or personal loan. Just be sure to read the terms and conditions carefully and shop around for competitive rates. It can also help to check your credit scores before applying so you can qualify for the best offers. (You can pull your credit reports for free each year at AnnualCreditReport.com and view your credit scores for free each month on Credit.com.)

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How Late Can I Sign a Pre-Nup?

sign a pre-nup

Q. How soon before a marriage should a pre-nup be signed? My daughter is getting married in five weeks and her fiancé still hasn’t given her the pre-nup so she can have an attorney review it. His father owns a large company and she believes he does not want her to make any changes. She has been with him for eight years. — Nervous mom

A. This may become a sticky situation for your daughter.

There are no set number of days before a marriage that a pre-nup, or premarital agreement, must be signed, said Ken White, a certified matrimonial attorney with Shane and White in Edison, N.J.

White said premarital agreements are governed by statute — the Uniform Premarital Agreement Act, N.J.S.A. 37:2-31.

“Per the law such an agreement must be in writing, must be signed by the parties before the marriage, must have a statement of all assets belonging to the parties at the time of the agreement attached to it, and both parties must either have independent counsel or specifically waive, in writing, their right to have an independent attorney review the agreement,” White said. “The agreement becomes effective upon the marriage of the parties.”

He said the timeline/deadline issue comes into question when a party seeks to enforce a premarital agreement. Specifically, he said, the enforceability of a premarital agreement can be challenged if a party successfully proves that he or she entered into the agreement under duress.

For example, if just before the wedding ceremony with all one’s family and friends waiting in the banquet hall, one party turns to the other for the first time and states, “I will not marry you unless you sign the premarital agreement this moment,” White said.

“Under such a circumstance, the party challenging the enforceability of the agreement may argue that he/she did not have a sufficient opportunity to review, consider and otherwise comprehend the agreement before signing it, and only signed it because he/she felt as if a gun had been placed to his/her head and knew of no other way to avoid the humiliation of facing all his/her family and friends, accordingly the agreement was signed under duress/coercion,” White said.

To avoid such challenges, White said most attorneys advise that a premarital agreement should be drafted, reviewed and signed as early as possible before the marriage.

“Many of my peers will not participate in the drafting/executing of a premarital agreement unless it happens at least 90 days before the wedding ceremony,” he said. “I myself use a 30-plus day deadline, and will refuse to participate in the process if less time is available.”

But, there is no set rule, White said, and you may be able to find attorneys willing to participate in the process at the last moment, despite the potential pitfalls associated with such action.

Good luck to your daughter.

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