What Happens to Debt When You Get Married?

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According to the New York Federal Reserve, total student loan debt in the U.S. has reached $1.3 trillion, while more than 44 million Americans have student loan debt. Between these figures and soaring credit-card debt, paying off all we owe can take some people years, if not decades. 

The problem can seem particularly acute for young couples, more and more of whom are getting married with tens or even hundreds of thousands of dollars to pay off. In many instances, one partner has significantly more debt than the other. 

When Jeff and Cassandra Campbell of Austin, Texas.,  got married in 2006, Jeff was $61,000 in debt — his was a combination of credit card debt, a second-home mortgage and a car loan. Cassandra was debt-free, but the couple immediately agreed that with marriage, his debt was now the burden and responsibility of both of them.   

“I believe that successful couples combine everything when they say, ‘I do,’” says, Jeff, 53. “It’s no longer my income or your debt, it’s ours.”
 

Deciding how to tackle a single spouse’s or partner’s debt is no simple thing. It might be nice to chip in to help pay down your beloved’s debt, but in the eyes of the law, marriage doesn’t necessarily mean you have to. 

What happens to debt when we marry? 
 

Adam S. Minsky, a Massachusetts-based lawyer and expert in student loan law, says that although it varies by state, most of the time debt brought into a marriage only affects the spouse who brought it in.   

“Generally speaking, certainly where I practice here in Massachusetts, there is no way to make a spouse liable for a debt,” he says.
 

An exception might be if the couple did a form of refinancing once they got married and now jointly own the debt together. But if one spouse brought a debt into the marriage and both spouses paid off the debt together, the other spouse would not be liable for the debt, and that debt wouldn’t affect his or her credit score.

“As long as [the debt] only stays in one of their names, it’s only going to be reported for one of them,” Minsky says. 

There are, of course, slightly different rules when it comes to couples who are divorcing. For example, if a spouse helped pay off the other’s debt in marriage, that circumstance is often taken into account in divorce proceedings, Minsky notes. 

Learning the legal nuances of spousal debt, having necessary premarital conversations and understanding  optimal strategies for paying off debt can allow a couple to avoid the uncomfortable and frustrating conversations that might accompany one spouse having significantly more debt that the other.
 

Here are some tips on how to tackle debt as a couple:  

Have those tough (but essential) conversations before getting hitched.

Minsky says his greatest piece of advice for couples in which one partner has significant debt and the other doesn’t boils down to this: Talk about it openly before marriage. 

“Communication is the most important thing,” he says. “Because you don’t want to get married and then find out there’s a bunch of debt you didn’t know about, or you didn’t fully understand the nature of the debt, or you didn’t have a plan. I’d say develop that communication and be comfortable talking about it.” 

Eric Bowlin, 32, a real estate investor based in Worcester, Mass., says he and his wife, Jun — whom he met during graduate school—always approached their finances as a team. Eric says Jun accepted his roughly $85,000 debt ($60,000 of which was related to student loans) before they got married in 2009. But a tough conversation ensued when Eric wanted to make a large real estate investment before they had paid off the debt.  

“I deployed to Afghanistan” around 2010, he says, “and when I got home, we had saved about $100,000. We could have easily paid off all my student loans, car and half the multifamily house we owned, but I told her I wanted to use every dollar to invest in more real estate and I wanted to drop out of our Ph.D. program.” 

He says despite Jun’s hesitation, she agreed. “To this day I’m amazed she ever agreed to let me do that,” Eric says. He spent all of his savings, maxed out all his credit cards and borrowed about $40,000 from friends.  

“She was crying at night and I couldn’t sleep because of the stress,” he says. But his decision paid off. He has since built up a successful real estate portfolio, and the couple paid off their debt in 2016.
 

Employ strategies for paying the debt off together.

Once you and your partner have agreed to tackle the debt together, come up with a solid plan.  

“I’ve seen trouble happen when married couples never really talked about [debt], and then it’s a thing,” Minsky says. “Or they didn’t really come up with a plan and now there’s complicated feelings of resentment or guilt or shame.” 

The plan a couple employs will vary based on an array of variables: the amount and type of debt, income level, housing situation, location and more. The Campbells, for example, didn’t decide to pay off their debt until the birth of their first daughter. 

Shortly thereafter, they discovered the “snowball method,” popularized by personal finance personality Dave Ramsey, and decided to pay off their debts from smallest to largest.

They put retirement savings and vacations on hold, paid cash for everything except bills and generally limited their eating out and social activities. They became debt-free about five years ago.

Jeff’s advice for newly married couples is to agree on a budget before each month. 

“Some spouses will naturally be more of the spender, saver or math nerd,” he says. “So while it’s not crucial that both be involved in doing everything, the discussion should happen prior to the start of each month about where ‘our’ money is going to go, and what out of the ordinary expenses may be happening.” 

 Don’t forget about your taxes.

Minsky advises giving thought to how you will file your taxes, especially in the case of student loan debt.

For example, if one spouse mostly has federal student loans and is going to do an income-driven repayment plan, there could be incentives for filing taxes as an individual as opposed to making a couple’s joint filing. That way, the income of the spouse without student loan debt won’t be factored in.   

We have previously explored the nuances of deciding whether or not to file jointly or single when spouses have student loan debt. 

Have a story to share? Send us a note at info@magnifymoney.com.

The post What Happens to Debt When You Get Married? appeared first on MagnifyMoney.

I’m a Single Mom With a 6-Figure Business. Here Are the 3 Rules I Live By Every Day.

Emma Johnson and her two children. ( Courtesy of Emma Johnson)

Emma Johnson thrived, both financially and professionally, after enduring a complex, costly and painful divorce in 2009.

Johnson, now 40, a journalist and founder of WealthySingleMommy.com, an online community of professional single mothers, was at that time pregnant with her second child, working just 12 hours a week and living paycheck to paycheck. The fear of not being able to support her children on her own drove her to juggle multiple jobs and painstakingly manage her finances.   

Today she’s an entrepreneur with a successful digital marketing business, which includes her blog and podcast targeting professional single mothers, along with a new book, “The Kickass Single Mom: Be Financially Independent, Discover Your Sexiest Self, and Raise Fabulous, Happy Children.” In the book, which debuted Tuesday, Oct. 17, Johnson tells her personal journey as an entrepreneur and mom. She also maps out financial management strategies she hopes other single mothers can use, both to improve their finances and to establish a career they love.  

“Money is power and money is control,” Johnson tells MagnifyMoney. “Men have been very comfortable with that since a long time. And women are never going to have equality in the world, we’ll never have control of our life individually … until we have our money and just as much as men.” 

We spoke with Johnson about the three mantras of her daily life.  

1.Create a lifestyle that you can afford now.

Johnson lived a comfortable life, largely dependent on her ex-husband’s income and benefits while she worked part time. She found that separating from her husband also meant learning to recalibrate her money mindset. 

Legal expenses from the divorce quickly piled up, and she decided to return to full-time freelance work, which meant shelling out $2,000 a month for child care. She knew she had to live frugally in order to make ends meet. Some of the immediate changes she made: Stop buying new clothing for herself. And find as many useful secondhand items for her children as she could. 

“You absolutely have to go frugal,” she says. “I don’t care how rich you were before you were divorced or your kids’s dad is. … Your lifestyle is determined by how much money you have coming in the bank right now.” 

For other single mothers looking to cut spending, she has suggestions both big and small — downsizing to a smaller home, for instance, or just getting rid of unnecessary expenses like a cable subscription or a rarely used gym membership. 

When you are successfully living beneath your means, especially as a breadwinning single mother, Johnson says you can finally start to feel as though you’ve got control over your life again. “You have no control of your life,” she says, “if you are worrying about paying your rent.”   

2. Focus on earning more — unapologetically.

Single mothers shouldn’t just focus on saving more. They should also be unashamed about taking steps to earn more, Johnson says.   

The median income for families led by a single mother in 2014 was about $24,000, far below the $88,000 median for married-parent families in which Mom was the higher earner and the $84,500 median for households where Dad was the principal earner, according to a Pew Research Center report. 

Emma Johnson

The surprising upside of her divorce, Johnson found, was that she realized she had unintentionally suppressed her own financial and professional goals during her marriage to preserve the status quo. 

“Our society definitely values monogamous partnerships and marriage, and women genuinely do want that, but it often comes at a price for reaching our own potential,” she says. 

For Johnson, embracing her ambition wasn’t just a matter of choice. She was granted only one year of child support from her ex-husband, and the clock was ticking. She set about beefing up her income from freelance assignments, taking on everything from corporate blog posts to journalistic articles.  

By the time child support ended, she felt financially stable enough to refinance the the apartment in Queens, N.Y., that she and her ex-husband had bought in her own name. Roughly half a year later, she says, she had lined up enough consistent writing work to confidently support her family independently for the first time.   

Something else happened when she re-entered the labor force full time. She found she had bigger career ambitions than simply writing. She started WealthySingleMommy.com in 2012 as a hobby and slowly grew a loyal audience. (She reports 100,000 unique monthly visitors and 190,000 monthly page views.) 

A few years later, she experimented with monetizing the effort, snagging a mix of brand partnerships, speaking engagements and eventually, a book deal. While she worked on building the WSM brand, she continued to work as a freelancer (her primary income source).  

Finally, in 2016, Johnson says, she made an “internal shift” to focus on her business full time because she saw in it a better financial opportunity.  

“I really feel like it was an important internal shift I had to make because all the freelance writers I knew were [complaining] about not making money,” she says.  

This year, she expects to bring in $400,000 in revenue.  

3. Outsource labor — time is money.

Efficiency is the centerpiece of Johnson’s finance management philosophy. She quickly learned the value of paying professionals to take on some tasks in order to free up hours she could use to work, spend time with her children or focus on her personal needs.  

“You have to be very diligent with how you use all of these things — your time, your money, your energy, your headspace and your emotions,” she says.  

Johnson says that over the years she has invested heavily in child care, housekeeping and outsourcing chores (like laundry) that that take time away from work and her children and aren’t enjoyable. In her book, she writes that she has a handyman on call.  

To be sure, not all single mothers earn enough to outsource, a fact Johnson acknowledges. But she still encourages women not to feel guilt over delegating some household duties in pursuit of that extra quality time. She argues that it’s a worthy investment for peace of mind and efficiency. 

The bottom line: ‘You have go to bigger’

An advocate for gender equality, Johnson says her ultimate goal with the new book is to empower women across society — not just single mothers — to pursue their passions and become role models for a next generation with increasingly abundant resources and opportunities available. 

She hopes single moms will stop taking pity on themselves or viewing their situations as detrimental. “I want women to start seeing themselves as more than they are, and that their family status can be an an asset,” she says. 

For women living in small communities, Johnson’s advice is that maybe they should consider relocating for better job opportunities or finding work that they could be doing virtually.  

The fear of being on one’s own, Johnson says, can become the biggest motivator for pursuing a big goal, be it starting a business or returning to school. And she is convinced that the risks women take and sacrifices they make along the way will eventually pay off. 

“You have to go bigger,” she says. “You have to go bigger because there is less security.” 

The post I’m a Single Mom With a 6-Figure Business. Here Are the 3 Rules I Live By Every Day. appeared first on MagnifyMoney.

New CFPB Rules Get Tougher With Payday-Lender Debt Traps

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In early October, the Consumer Financial Protection Bureau announced it would implement long-awaited new rules aimed at limiting the power of payday and title lenders. The bureau director, Richard Cordray,  has been a vocal critic of the nonbank lenders, and the agency has been working on new rules to regulate lenders in this space for several years.

“The CFPB’s new rule puts a stop to the payday debt traps that have plagued communities across the country,” Cordray said in a statement. “Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.”These rules will apply to both brick-and-mortar and online lenders.

What changes are happening

Lenders are going to have to prove that a borrower can afford to repay the loan

One of the major rules is a “full-payment test” that will determine if borrowers can “afford the loan payments and still meet basic living expenses and major financial obligations.” Payday lenders typically don’t run a credit report on borrowers and only usually look at a pay stub to determine if you qualify.

Most consumers end up unable to repay the loan when it comes due, usually a couple weeks later. According to the CFPB, more than 80 percent of all payday loans are rolled over or renewed. The same is true for title loans, with 20 percent of borrowers losing their vehicle to title loan companies. Because there is little regulation on interest rates, these loans usually have APRs of 300 percent or more.

However, borrowers can avoid the full-payment test if the lender meets the following requirements: It must make 2,500 or fewer covered short-term or balloon-payment loans per year and earn no more than 10 percent of its revenue from such loans.

It won’t be as easy for lenders to access funds in borrowers’ bank accounts

Another issue is that many payday and title loans require access to the user’s bank account, where payments will be automatically debited. If the user does not have the amount available in his or her account, the account will be overdrawn. This usually results in the consumer being charged overdraft fees on top of the hefty interest already going to the payday lender.

According to the CFPB, “these borrowers incur an average of $185 in bank penalty fees, in addition to any fees the lender might charge for failed debit attempts, specifically, a late fee, a returned-payment fee, or both.”

One of the rules that the CFPB installed is a limit on attempted debits, so the lender has to get authorization from the consumer to debit the account more than twice. The CFPB also hopes to limit the amount of times a loan can be extended, as a way to decrease the fees the borrower must pay.

Borrowers can repay debt more gradually

To avoid the full-payment test, payday lenders can lend up to $500 if they structure the payments so the borrower can pay them off “more gradually.” However, there will be strict rules in place for this type of loan.

For example, lenders won’t be able to offer gradual repayment plans to customers who have recent or outstanding short-term or balloon-payment loans. They also can’t make more than three loans in quick succession and can’t make loans under this option if the consumer has already had more than six short-term loans or been in debt for more than 90 days on short-term loans over a rolling 12-month period.

Few options for borrowers in need

The CFPB’s long-awaited rules may help protect borrowers from predatory lenders, but don’t solve a key issue: There just aren’t that many viable alternatives for people who need to borrow small sums quickly.

A report from the Milken Institute, “Where Banks Are Few, Payday Lenders Thrive,” found that neighborhoods with more banks tend to have fewer payday lenders, and vice versa. There was also a strong correlation between payday lenders and neighborhoods with higher African-American and Latino populations as well as a greater instance of payday lenders where there are fewer high school and college graduates.

Jennifer Harper, who researched predatory lending in Chattanooga, Tenn., as part of the Financial Independence Committee for the Mayor’s Council for Women, said she hopes there will be a solution for consumers that doesn’t require them to take out a payday loan.

“We want to find an alternative to payday lending that would still allow people to access they need, without those crazy interest rates,’ she said. “Getting that quick access to cash may be fine for that day, but then it really puts a burden on the borrower long-term.”

Jason J. Howell,  a certified financial planner and fiduciary wealth adviser in Virginia, agrees with the new regulations taking place.

“The CFPB is taking the opportunity to protect the most vulnerable consumers: lower-income borrowers that are typically ‘un-banked,’” he said. “The proposed rule would reduce fees that make payday loans especially hard to pay back; and that could also reduce the issuance of these loans in the first place.”

The post New CFPB Rules Get Tougher With Payday-Lender Debt Traps appeared first on MagnifyMoney.

The Risky Way Retirees Use Reverse Mortgages for Extra Income

If you’re approaching retirement, you’re probably already aware that taking Social Security at age 62 results in getting a much smaller benefit than someone who waits until full retirement age. For most retirees today, full retirement age is 66 or 67, but you can earn an even larger pay out if you can wait till age 70 to start tapping in to your benefits.

Living off your existing savings while you wait the extra eight years to start receiving Social Security benefits can be challenging. For that reason, an increasing number of financial experts are encouraging retirees to use a reverse mortgage as a source of additional income while they wait to start drawing on their Social Security benefits.

Using a reverse mortgage for extra income in retirement can be risky — so risky, in fact, that the Consumer Financial Protection Bureau (CFPB) recently spoke out against it.

“A reverse mortgage loan can help some older homeowners meet financial needs, but can also jeopardize their retirement if not used carefully,” CFPB Director Richard Cordray said in a statement. “For consumers whose main asset is their home, taking out a reverse mortgage to delay Social Security claiming may risk their financial security because the cost of the loan will likely be more than the benefit they gain.”

Still, retirees with significant equity built up in their homes might be tempted to tap into that equity to bridge the gap between when they retire and when they can maximize their Social Security benefit.

A quick recap of what a reverse mortgage is and how it works:

A reverse mortgage is a special type of home loan that allows homeowners age 62 and over to withdraw a portion of the equity they have in the home. Instead of paying interest and fees each month that amount is added to your overall loan balance. When you no longer live in the home, the total loan must be paid back and you will pay no more than the value of the house. With a reverse mortgage you are no longer responsible for the regular monthly payments on your mortgage loan but you are required to keep the home in good condition, as well as paying the property taxes and homeowner’s insurance.

Most reverse mortgages are federally insured by the Home Equity Conversion Mortgage (HECM) program, which requires a strict set of rules and regulations that must be met in order to qualify. Some of those requirements include: occupying the property as your principal residence, continuing to live in the home and not being delinquent on any federal debt. The U.S. Department of Housing and Urban Development has a full list of requirements here.

The pros of using a reverse mortgage

Using a reverse mortgage can provide some additional, predictable income during retirement. Whereas relying solely on your investments could result in unstable returns depending on your portfolio. But a reverse mortgage loan isn’t a bottomless source of cash.

The amount of money you can receive from a reverse mortgage first depends on your principal limit. That’s the amount a lender will be willing to loan you based on a several factors, like your age, the value of the home and the interest rate on your loan. This is where older borrowers have an advantage. According to the CFPB, “loans with older borrowers, higher-priced homes, and lower interest rates will have higher principal limits than loans with younger borrowers, lower-priced homes, and higher interest rates.”

Another big advantage of reverse mortgages are that the proceeds are generally tax free and will not affect Medicare payments.

The risks of a reverse mortgage

It reduces the amount of equity you have in the home, which can complicate a future sale. The equity in your home is generally defined as the amount of ownership you have in a property less any remaining debt. With a regular mortgage you borrow money from the bank and pay down the balance over time. With each payment the loan balance goes down and your equity increases.

You’ll lose home equity. Since a reverse mortgage allows you to borrow from the equity you have in the home, your debt on the home increases and the equity is lowered. A reverse mortgage may limit the options for someone looking to sell their home in retirement, because the loan must be paid upon the sale and there may not be enough equity left to purchase a new home.

It increases your overall debt. As seen in the images above, a reverse mortgage reduces the amount that you own in your home and adds that amount back into your loan balance. This increases your overall debt.

The cost of a reverse mortgage can outweigh the benefits of increasing your Social Security payments. Though you are borrowing from the money you’ve paid into your home, a reverse mortgage isn’t free. Just like your regular initial mortgage you will have to pay interest and fees. Reverse mortgages are very similar and usually include costs such as: mortgage insurance premiums (MIP), interest, upfront origination fees, closing costs and monthly servicing fees.

In the figure above, the CFPB estimates a reverse mortgage will cost $21,600 for someone who uses the option from age 62 to age 67; but the lifetime gain in Social Security from 62 to 67 is $29,640.

Monetarily, in this scenario a reverse mortgage makes sense. However most borrowers use a reverse mortgage for seven years not five as in the previous example. This would bring the cost to $31,900, approximately $3,900 which is more than the lifetime benefit of waiting until 67 for Social Security.

You’re putting your home at risk. You could also lose your home if you no longer meet the loan requirements. This includes not living in the home for the majority of the year for non-medical reasons or living outside of the home for 12 consecutive months for healthcare reasons.

You’re putting your heirs at risk.  When you pass away your heirs will have to pay back the loan, usually by selling home. If there is money left over after the sale, they can keep the difference. However, if the loan balance is more than the value of the home and they want to keep the home they will need to pay the full loan balance or 95% of the appraised value, whichever is less according to the CFPB.

When does it make sense to use a reverse mortgage for income in retirement?

In general, Chartered Financial Analyst Joseph Hough says reverse mortgages are best for retirees who are in good health and expect to live long after retirement. Also, it can be one of the few options retirees have when their retirement income is simply not high enough to cover their basic needs.

Speak with a financial advisor who can help you weigh the particular pros and cons with your specific situation. Every person is different, and there is no one size fits all answer.

When does it not make sense?

A reverse mortgage may not be a good fit for those in bad health due to the risk of losing the home. If you’re planning on selling your home, having a reverse mortgage can complicate the issue because it reduces the amount of equity you have. You could be left in a scenario where the proceeds of the sale do not cover a purchase of a new home because of the cost and fees associated with reverse mortgages.

What are some other ways I can maximize my SS benefit?

Working beyond 62 may be the best option to maximize your Social Security benefit. Doing so allows more time to save for retirement and pay off any debt. You could potentially increase your overall Social Security benefits if your latest year of earnings is one of your highest. Also, if you’re married, consider coordinating your Social Security decisions with your spouse. Other alternatives to a reverse mortgage include selling your home and downsizing to a less expensive place or selling your home to your adult children on the condition you get to live rent-free, says Houge.

The post The Risky Way Retirees Use Reverse Mortgages for Extra Income appeared first on MagnifyMoney.

The Pumpkin Spice Tax: Retailers Charge More, Shoppers Get Less for Pumpkin-Flavored Products

Cue the pumpkin spice tax rebellion.

A MagnifyMoney analysis of pumpkin spice-flavored items at several grocery stores and coffee shops found that customers often pay a premium for that perennial autumn flavor — in essence, a “pumpkin spice tax” that can be up to 133 percent higher on a per-unit (ounces) basis.

In the study, we compared the prices of the pumpkin spice and standard flavors of more than 200 food and beverage items at a half-dozen Manhattan-area retailers and restaurants in late September. We reviewed items in person at Trader Joe’s, Whole Foods, Fairway, CVS, Starbucks, Pret a Manger, Panera, Dunkin’ Donuts and McDonald’s. We supplemented our findings with a review of products at three online retailers — Walmart.com, Target.com and FreshDirect.com.

Pumpkin spice mania has reached a fever pitch in recent years, as retailers have rushed to incorporate the flavor into just about every item in our pantries — from cookies and cereals to bagels and waffle mixes.

Not only are some retailers charging significant surcharges on pumpkin spice-flavored products, but consumers are often paying more and getting less in return.

Read on for our full analysis. Or skip ahead to:

Retailer Spotlights:

Key Findings:

Pumpkin spice fans often pay more for less. Many retailers don’t just charge more for seasonal items — they give shoppers less product for their money. On FreshDirect.com, for example, a 6.5-oz. Pumpkin Pie Spice version of Land O’Lakes Spreadable Butter sold for $2.99, while the 8-oz. Land O’Lakes Spreadable Butter With Canola Oil sold for about 10 cents less, or $2.89. On a price per ounce basis, the Pumpkin pie spice option sold at a 28 percent premium. We found many more examples of retailers charging more for pumpkin-flavored products but offering less product.

Trader Joe’s was the worst pumpkin spice tax offender. Some retailers are more aggressive with pumpkin spice surcharges than others.. It claimed three of the top 10 highest pumpkin spice tax rates in our study. Among 10 products analyzed at Trader Joe’s, for example, we found an average pumpkin spice tax rate of 62%. By comparison, the average pumpkin spice tax rate at Target.com was just 14% across 20 items.

Coffee drinkers’ highest pumpkin spice premium? Welcome to Starbucks. The highest tax on the seasonal coffee drink was charged by the Pumpkin Spice Latte’s originator, Starbucks. The coffee chain charged $5.25 for its 16-oz. Pumpkin Spice Latte — exactly one dollar more than its 16-oz. Caffe Latte, sold for $4.25, in Manhattan’s Chelsea neighborhood. That’s an effective pumpkin spice tax rate of 23.53%.

McDonald’s, Dunkin’ Donuts and Whole Foods don’t charge a seasonal premium on most items. MagnifyMoney observed no significant pumpkin spice premium on any of the 10 seasonal items we identified at Whole Foods Market. Nor did we observe a premium on pumpkin spice drink options at McDonald’s or Dunkin’ Donuts.

The Top 10 Pumpkin Spice Tax Rates

Across all items reviewed, millennial-centric retailer Trader Joe’s charged the highest premiums on its pumpkin-flavored products. It claimed three of the top 10 highest pumpkin spice tax rates in our study.

The retailer is also one of several in our study that not only charges more for pumpkin-spice products but often offers less product by weight as well. That means shoppers are spending more but getting much less for their money.

Take Trader Joe’s Pumpkin Pancake and Waffle Mix as one example. The national chain charged $1.99 for its 32-ounce Buttermilk Pancake and Waffle Mix and $2.99 for its 21.2-ounce Pumpkin Pancake and Waffle Mix variation — $1 more for a product with 10 fewer ounces.

Based on the sticker price alone, shoppers may think they paid 50% more for the pumpkin spice version. But on a price-per-ounce basis, they paid more than twice the price — an effective pumpkin spice tax rate of 133%.

Trader Joe’s certainly wasn’t the only retailer taking advantage of the pumpkin spice hype.

At first glance, a Target.com shopper might see no difference in the price of Nabisco’s Oreos vs. the pumpkin spice version. As of late September, they had the same sticker price of $2.99. But the pumpkin spice version came with just 10.7 ounces — 3.6 ounces less than the original flavor. On a price per ounce basis, that’s an effective pumpkin spice tax rate of 33%.

See some of the highest-taxed items below. Percentages may be rounded, and list prices are used for comparisons. Per-unit cost is based on per-ounce figures where available, or per unit/count):

Pumpkin Spice Tax

Retailer

Product

Sticker Price

Price Per Oz./Unit

Per Oz./Unit

Sticker Price

1. Trader Joe's

Buttermilk Pancake
and waffle mix — 32 oz.

$1.99

$0.06

133%

50.25%

Pumpkin Pancake and
waffle mix — 21.2 oz.

$2.99

$0.14

2. Trader Joe's

Joe Joe's cookies —
20 oz.

$2.99

$0.15

87%

0.00%

Pumpkin Joe Joe's —
10.5 oz.

$2.99

$0.28

3. Trader Joe's

Joes O's —
15 oz.

$1.99

$0.13

69%

35.18%

Pumpkin O's —
12 oz.

$2.69

$0.22

4. Walmart.com

Twinings of London
Winter Holiday Spiced
Apple Chai, K-Cup
Portion Pack — 12 ct.

$8.11

$0.68

59%

60.17%

Twinings Pumpkin
Spice Chai Tea Keurig
K-Cups — 12 ct.

$12.99

$1.08

5. Target.com

Archer Farms Dark Chocolate Almonds — 13 oz.

$5.99

$0.46

59%

-33.4%

Archer Farms Pumpkin Spice Almonds — 5.5 oz.

$3.99

$0.73

6. Target.com

Krusteaz Honey
Cornbread & Muffin
Mix — 15 oz.

$1.67

$0.11

36.4%

35.9%

Krusteaz Pumpkin
Spice Muffin
Mix — 15 oz.

$2.27

$0.15

7. Target.com

Oreo Original
Chocolate Sandwich
Cookies — 14.3 oz.

$2.99

$0.21

33%

0.00%

Oreo Pumpkin
Spice Creme Sandwich
Cookies — 10.7 oz.

$2.99

$0.28

8. FreshDirect

Land O'Lakes
Spreadable Butter With
Canola Oil — 8 oz.

$2.89

$0.36

28%

3.46%

Land O'Lakes
Spreadable Butter,
Pumpkin Pie
Spice — 6.5 oz.

$2.99

$0.46

9. Walmart.com

Victor Allen's
Coffee Donut Shop
Blend Medium Roast
Single Serve Brew
Cups — 0.35 oz., 12 ct.

$3.25

$0.27

26%

26.8%

Victor Allen's Coffee
Pumpkin Spice Medium
Roast Single Serve Brew
Cups — 0.34 oz., 12 ct.

$4.12

$0.34

10. Walmart.com

Entenmann's Dark
Roast Coffee Single Serve
Cups — 0.35 oz, 10 ct.

$6.99

$0.69

23.2%

21.6%

Entenmann's Coffee
Pumpkin Spice Cups —
10 ct.

$8.50

$0.85

The above items were reviewed in-person at retailers in the Chelsea area of Manhattan on Sept. 22 and with online retailers on Sept. 25-26.

The Pumpkin Spice Latte Tax

Some may notice that the coveted pumpkin spice latte (PSL) — made popular by Starbucks after its debut in fall 2003 and now offered by coffee shops worldwide — typically carries a noticeable mark-up.

Starbucks’ grande-size PSL, for example, is sold at a 23.5% premium above the price of its non-pumpkiny caffe latte counterpart.

Pret a Manger and Panera also charge more for pumpkin lattes, although neither quite as high as Starbucks.

What you ultimately pay for your PSL may simply come down to how you like your coffee. You won’t pay a PSL tax at McDonald’s or Dunkin’ Donuts, but If you prefer Starbucks or Panera, paying the premium may be worth what you get.

Here’s what it will cost you to buy a 16-ounce pumpkin spice latte at some prominent national coffee chains in the Chelsea section of Manhattan.

Coffee Shop

Product

Sticker
Price

Pumpkin Spice
Tax Rate

Starbucks

Caffe Latte
16 oz.

$4.25

23.53%

Pumpkin Spice Latte
16 oz.

$5.25

Pret A Manger

Latte
16 oz.

$3.59

13.93%

Spiced Pumpkin Latte
16 oz.

$4.09

Starbucks

Chai Latte
16 oz.

$4.45

11.24%

Pumpkin Spice Chai Latte
16 oz.

$4.95

Panera Bread

Caffe Latte
16 oz.

$4.09

4.89%

Pumpkin Spice Latte
16 oz.

$4.29

Dunkin’ Donuts

Latte
16 oz.

$2.99

0.00%

Pumpkin Flavored Latte
16 oz.

$2.99

McDonald’s

Latte
16 oz.

$2.59

0.00%

Pumpkin Spice Latte
16 oz.

$2.59

The above items were reviewed in-person at retailers in the Chelsea area of Manhattan on Sept. 22.

Retailer Spotlight: Trader Joe’s

As mentioned above, America’s favorite favorite grocery store after Publix and Wegmans had the highest-taxed seasonal items in our analysis.

Among the highest-taxed items: Trader Joe’s Pumpkin Pancake and Waffle Mix — costing much more per ounce than TJ’s Buttermilk Pancake and Waffle Mix — and Joe Joe’s cookies.

Both the seasonal and nonseasonal Joe Joe’s are priced at $2.99 on the sticker. However, the seasonal Pumpkin Joe Joe’s cost 28 cents per ounce, while the regular Joe Joe’s cost 15 cents an ounce. In this case, customers pay almost double per ounce — something like the same price for half the cookies.

MagnifyMoney reached out to Trader Joe’s for comment but did not receive a response.

See below for a breakdown of some products.

Trader Joe's

Pumpkin Spice Tax

Product

Sticker Price

Price Per Oz./Unit

Per Oz./Unit

Sticker Price

Buttermilk pancake and
waffle mix — 32 oz.

$1.99

$0.06

133%

50.25%

Pumpkin pancake and waffle mix — 21.2 oz.

$2.99

$0.14

Joe Joe's cookies — 20 oz.

$2.99

$0.15

87%

0.00%

Pumpkin Joe Joe's — 10.5 oz.

$2.99

$0.28

Joes O's — 15 oz.

$1.99

$0.13

69%

35.18%

Pumpkin O's — 12 oz.

$2.69

$0.22

Plain bagels — 6 ct.

$2.29

$0.38

10.5%

8.73%

Pumpkin bagels — 6 ct.

$2.49

$0.42

Gluten-free buttermilk
pancake mix — 18 oz.

$3.99

$0.22

9.1%

12.53%

Gluten-free pumpkin
pancake mix — 18.5 oz.

$4.49

$0.24

The above items were reviewed in-person at the Trader Joe’s at 675 6th Ave. in New York City on Sept. 22.

Retailer Spotlight: Target

We found the highest seasonal-item, per-unit “tax” at Target.com on chocolate-covered pumpkin spice almonds.

At first glance, the seasonal almonds look cheaper than the comparable dark chocolate-covered almonds, sold in a larger package. When you look closer, you realize the pumpkin spice almonds are sold for almost 60 percent more per ounce. However, it’s important to note the discrepancy could be due to the difference in packaging.

MagnifyMoney contacted Target for comment but did not receive a response.

See below for a breakdown of the PST applied online at Target.com.

Target.com

Pumpkin Spice Tax

Product

Sticker Price

Price Per Oz./Unit

Per Oz./Unit

Sticker Price

Archer Farms Dark Chocolate Almonds — 13 oz.

$5.99

$0.46

59%

-33.4%

Archer Farms Pumpkin Spice Almonds
— 5.5 oz.

$3.99

$0.73

Krusteaz Honey Cornbread &
Muffin Mix — 15 oz.

$1.67

$0.11

36.4%

35.9%

Krusteaz Pumpkin Spice
Muffin Mix — 15 oz.

$2.27

$0.15

Oreo Original Chocolate
Sandwich Cookies — 14.3 oz.

$2.99

$0.21

33%

0.00%

Oreo Pumpkin Spice Creme
Sandwich Cookies — 10.7 oz.

$2.99

$0.28

International Delight® French
Vanilla Singles Coffee Creamer — 24 ct.

$2.64

$0.11

18.2%

20.8%

International Delight Pumpkin
Spice Coffee Creamer — 24 ct.

$3.19

$0.13

Tazo Organic Tea Latte
Chai Black Tea — 32 fl. oz.

$3.14

$0.10

10%

11.2%

Tazo Chai Pumpkin Spice
Latte Tea Concentrate — 32 fl. oz.

$3.49

$0.11

Keurig Green Mountain Breakfast
Blend Light Roast Coffee — K-Cup Pods — 18 ct.

$10.99

$0.61

9.8%

9.1%

Keurig Green Mountain Coffee
Pumpkin Spice Coffee K-Cups — 18 ct.

$11.99

$0.67

KISSES Halloween Fall Harvest
Milk Chocolates — 11 oz./approx. 69 ct.

$3.59

$0.33

9.1%

0.00%

KISSES Halloween Fall Harvest
Pumpkin Spice — 10 oz./approx. 64 ct.

$3.59

$0.36

Tazo Chai Black Tea — 20 ct.

$3.14

$0.16

6.3%

11.2%

Tazo Chai Pumpkin Spice
Tea — 20 ct.

$3.49

$0.17

Quaker Fruit & Cream Instant
Oatmeal Variety — 8 ct.

$2.59

$0.32

6.25%

5.8%

Quaker Pumpkin Spice Instant
Oatmeal Limited Edition — 8 ct.

$2.74

$0.34

Archer Farms Antioxidant Trail Mix — 9 oz.

$5.99

$0.67

-50.7%

-50.1%

Archer Farms Trail Mix Pumpkin Spice —
9 oz.

$2.99

$0.33

The above items were reviewed online, at Target.com, on Sept. 25-26.

Retailer Spotlight: Walmart

At Walmart.com, the most-taxed item was tea. Specifically: Twinings of London’s Pumpkin Spice Chai Tea Keurig Cups. Compared with the brand’s Winter Holiday Spiced Apple Chai flavor, the pumpkin spice variant costs about 60 percent more for the same number of cups. MagnifyMoney contacted Walmart for comment but did not yet receive a response.

See below for a breakdown of the Pumpkin Spice Tax applied online at Walmart.com.

Walmart.com

Pumpkin Spice Tax

Product

Sticker Price

Price Per Oz./Unit

Per Oz./Unit

Sticker Price

Twinings of London Winter Holiday
Spiced Apple Chai, K-Cup Portion Pack — 12 ct.

$8.11

$0.68

59%

60.17%

Twinings Pumpkin Spice Chai Tea
Keurig K-Cups — 12 ct.

$12.99

$1.08

Victor Allen's Coffee Donut Shop
Blend Medium Roast Single Serve Brew Cups —
0.35 oz., 12 ct.

$3.25

$0.27

26%

26.8%

Victor Allen's Coffee Pumpkin Spice
Medium Roast Single Serve Brew Cups —
0.34 oz., 12 ct.

$4.12

$0.34

Entenmann's Dark Roast Coffee
Single Serve Cups — 0.35 oz., 10 ct.

$6.99

$0.69

23.2%

21.6%

Entenmann's Coffee Pumpkin
Spice Cups — 10 ct./p>

$8.50

$0.85

Coffee-Mate Sweetened Original
Liquid Coffee Creamer — 1.5-liter pump bottle

$24.36

$0.48

18.7%

19%

Coffee-Mate Liquid Creamer, Pumpkin Spice — 1.5-liter pump bottle

$28.98

$0.57

Keurig K-Cups, Green Mountain
Nantucket Blend Coffee — 18 ct.

$10.98

$0.61

8.2%

8.74%

Keurig K-Cups Green Mountain
Pumpkin Spice Coffee — 18 ct.

$11.94

$0.66

Nestle Professional Coffee-Mate
Peppermint Mocha Liquid Coffee Creamer Singles,
Peppermint Mocha Flavor — 0.38 fl. oz. - 50/box

$15.04

$0.30

6.7%

6.3%

Nestle Coffee-Mate Pumpkin Spice
Liquid Coffee Creamer — 50-0.375 fl. oz. tubs

$15.99

$0.32

Oreo Sandwich Cookies — 14.3 oz.

$3.83

$0.27

3.7%

-22.2%

Oreo Sandwich Cookies Pumpkin
Spice — 10.7 oz.

$2.98

$0.28

Pepperidge Farm Milano Milk
Chocolate Cookies — 6 oz. pack

$3.83

$0.64

-14.1%

0.00%

Pepperidge Farm Pumpkin Spice
Milano Cookies — 7 oz.

$3.83

$0.55

Lindt Lindor Hazelnut Milk
Chocolate Truffles — 5.1 oz.

$3.78

$0.74

-16.2%

16.4%

Lindt Lindor Milk Chocolate Truffles
Pumpkin Spice — 5.1 oz.

$3.16

$0.62

Quaker Life Multigrain Cereal,
Vanilla — 18 oz. box

$3.83

$0.21

-19%

-21.7%

Quaker Life Pumpkin Spice
Multigrain Cereal Limited Edition — 18 oz.

$3.00

$0.17

International Delight French Vanilla
Non-Dairy Coffee Creamer Singles — 24 ct. box

$3.28

$0.14

-28.6%

-24.4%

International Delight Pumpkin Pie
Spice Non-Dairy Coffee Creamer Singles — 24 ct. box

$2.48

$0.10

The above items were reviewed online, at Walmart.com, on Sept. 25-26.

The future of pumpkin spice

The latest Nielsen data shows Americans’ taste for all things pumpkin spice is still going strong, but has begun to wane in recent years. Sales of pumpkin-themed consumer goods were up 6.3 percent in 2017, bringing in $414 million vs. $389.5 million in 2016.  But that was a slower rate of growth than the year prior, when sales grew by 10.8%.

Still, that won’t stop retailers from seizing an opportunity to cash in on the trend while it’s still hot, said food industry analyst and editor of Supermarketguru.com, Phil Lempert.

“A lot of that has to do with the time of year that it is packed and the amount of money that it takes to store those products…which is why at times we are going to see higher prices on those products,” he told MagnifyMoney.

Lempert added that companies have to make up the cost of carrying and storing the additional seasonal items in a warehouse.  “You want to get it out there at a fair price but you want to cover your costs otherwise you don’t have a business,” he said.

If you’re determined to get your pumpkin spice kick this year, the longer you wait to buy, the more likely you’ll be able to score a deal. Seasonal items tend to get the steepest price cuts as the season ends and retailers move to clear out their inventory.

The post The Pumpkin Spice Tax: Retailers Charge More, Shoppers Get Less for Pumpkin-Flavored Products appeared first on MagnifyMoney.

Your Netflix Subscription is About to Get More Expensive

Your Netflix-and-chill date is about to get a little more costly.

Mashable first reported that the online media streaming company is raising the price of both its mid-level and premium subscription plans by November. MagnifyMoney confirmed details of the price hikes with a Netflix rep on Thursday.

The mid-level, ‘standard’ plan will rise one dollar to $10.99 a month, while the price of the company’s ‘premium’ service will rise to $13.99 a month from $11.99.

The silver lining: Subscribers to the “basic” $7.99 plan will not see a price increase. If you happen to be reading this from another country, you are safe, too, as prices are only rising for U.S. customers.

When will my bill rise?

Existing customers should receive an email this month letting them know they will see a rise in their bills starting November. The company says it will begin sending out notifications Oct. 19. New subscribers will be charged the new prices immediately.

Under its FAQs, Netflix states it sends users an email a month before their next billing date to inform them of a price change whenever these occur. The company also displays a message with price-change details when users sign in.

Netflix has three subscription tiers. What a user pays comes down to how many screens they would like to be able watch at once. All of the plans allow users to download titles onto their mobile devices.

$7.99 — Basic

Users can only stream what they are watching on Netflix on one device at a time, and in standard definition. Users may download titles on one device.

$10.99 — Standard

Netflix’s standard plan lets users stream content  on two devices at once and in high definition if it’s available. This plan also lets users download titles to two phones or tablets.

$13.99 — Premium

At the highest tier, users may stream Netflix’s content on four devices at a time. They can also view shows and movies in high definition or ultra-high definition if it’s available. Those subscribed to the premium plan can download content on up to four devices.

Why is the price going up?

Netflix last increased its prices October 2015. The company justified the price hike in a statement on Thursday, saying it has “added a downloading feature, introduced interactive content, announced a robust slate of new content (including films) and have continued to improve the member experience.”

The company issued the following statement to MagnifyMoney:

From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience to help members find something great to watch even faster.

Over the years, Netflix has continued to expand its business internationally while simultaneously beefing up its exclusive content, produced in-house. So far in 2017, the company has announced exclusive content deals with big names like Shonda Rhimes and Adam Sandler, among others. The company also recently completed its first acquisition when it purchased the comic book publisher Millarworld in a deal estimated to have cost between $50 million and $100 million, according to The Wall Street Journal. All of that activity isn’t cheap.

Netflix is poised to spend nearly $6 billion on content alone, in 2017 and company execs say it plans to spend another $7 billion in 2018.

In addition to increased spending, Netflix is seeing competition from new and existing companies, as activity in the streaming space grows. Apple, for example, reportedly plans to spend $1 billion on original content in 2018, and — just this summer — Disney announced plans to launch its own streaming service in 2019, end an exclusive distribution deal with Netflix and pull some of its content from that service.

And let’s not forget Amazon. Business Insider reports that the internet giant is likely to spend $4.5 billion on video in 2017.

Besides that, older, well-established media giants are finally cashing in on the cord-cutting trend and launching their own services. AT&T a year ago announced its DirecTV Now service that offers consumers 100+ channels for about $35 a month.

Users questioned the Netflix increases on social media. Some users stated they would end their subscriptions, while others questioned whether Netflix would increase the quality and availability of content with subscription prices.

A previous 2011 price increase cost Netflix an estimated 800,000 subscribers. Back then, the company announced it would charge different prices for its DVDs-by-mail and streaming video plans. Time will tell if they face similar backlash this time around.

The bottom line

The prices for the middle and premium tiers are going up, which may bother anyone who shares their Netflix account with other people. But, at the basic level, Netflix’s offering is still cheaper than those offered by many of Netflix’s competitors.

For example, Hulu’s commercial-free plans start at $9.99 and HBO’s popular streaming service, HBO Now, costs $14.99 each month.

The price of Netflix’s basic plan also hasn’t changed since its 2010 launch.

 

The post Your Netflix Subscription is About to Get More Expensive appeared first on MagnifyMoney.

3 Reasons to File Your FAFSA Right Now

It’s October, and that means college-bound families can start applying for financial aid for the 2018-19 school year. the Free Application for Federal Student Aid, or FAFSA, opened Oct. 1.

Technically, families have until next summer — June 30, 2018 — to submit their FAFSA for 2018-19. But experts recommend filing as soon as possible in order to maximize the amount of aid students can receive. That’s because state, federal and school funding for various types of financial aid is often limited, and can run out.

Don’t leave money on the table. A recent study by social sciences researcher, Michael S. Kofoed at the United States West Point Military Academy found that each year, students who do not file miss out on as much as $9,741.05 in federal grant and student loan money, aggregating to some $24 billion annually.

“To get the most aid, you’re going to want to make sure you are doing it early,” says Jasmine Hicks, national field director with Young Invincibles, a nonprofit advocacy group for young adults.  Hicks has trained college-bound families on what they need to successfully fill out and submit the FAFSA.

Here are a few tips to help you file your FAFSA for the maximum amount of aid available to you.

1) Your state and college FAFSA deadlines might be even earlier than the federal cutoff.

Adding to your list of dates to remember, states and schools have their own FAFSA filing deadlines for grants and scholarships.

For example, for Delaware students to be eligible for state scholarships and grants for  2018-19, they must file their FAFSA by April 15, 2018. But the submission deadline for students who wish to be considered for Delaware State University scholarships and grants is even earlier, on March 15, 2018.

You can check here to see your state’s filing deadline. Be sure to enter your state of legal residence and the school year for which you’re applying for aid to view the cutoff date for your state. Be sure to double-check the deadline, as it could be earlier than the federal filing deadline and some states have different deadlines for different programs.

For example, Alaska’s Education Grant asks applicants to file the financial aid application as early as possible after the Oct 1 open date, since awards are made until the fund is depleted.

But the “official” FAFSA submission deadline for the scholarship is the same as the federal one.

Hicks says families should check a school’s website to check and see if there is a different filing deadline date than June 30, 2018. Some schools may require students to file earlier than June 30 to be considered for institutional scholarships and grants.

2)  The FAFSA is the key to unlocking more than just need-based aid.

If you don’t file the FAFSA, you might also remove yourself from the pool of eligible recipients for state and institutional aid, as well — even if they aren’t income-based. Many aid offerings require a FAFSA.

Here’s a list of all the federal aid for which you need to complete a FAFSA to be eligible:

  • Federal direct student loan
  • Federal work-study program
  • Federal PLUS loan (for parents)
  • Federal PELL grant
  • Federal Supplemental Educational Opportunity Grant (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant
  • Iraq and Afghanistan Service Grant

And that’s just federal aid. As we mentioned before, states and schools may use information from your FAFSA to determine if they will award you merit-based grants and scholarships. And they may have their own submission deadlines.

3) Financial aid money may run out.

Students may think they have tons of time to submit their application, but, if you wait to file, you may miss out on “free money” due to limited resources. Let’s put it another way: If the funds run out before you submit your FAFSA form, you could receive less money compared with what you would have gotten had you filed earlier — or you might get nothing at all.

If you know you will need scholarship or grant money to fund your education, you should make filing the FAFSA early your first priority. “There’s really no reason to wait,” says Hicks.

Fortunately, it’s become easier for families to tackle the FAFSA.  The Department of Education moved the application’s from January to October, beginning with the 2017 graduating high school class. Prior to the rule change, families could not submit their FAFSA until January for students attending college in the fall. The rule change allows families to submit the FAFSA form earlier, and use older tax information to fill out the form so they are able to meet early deadlines for financial aid.

Students can now use family tax information dating back as far as two years, so applicants no longer have to wait to file until their parents or guardians file their taxes for the current tax year.

On top of that, FAFSA forms now include a new  IRS data retrieval tool, which will automatically pull in your parent’s tax information from two years ago, so you don’t have to shuffle through a stack of papers looking for letters and numbers corresponding to the information you need to input.

Where to get help to finish up your FAFSA

The tax information may be easy to pull in electronically, but the FAFSA has more than 100 questions and isn’t the easiest form to decipher overall.

“Students often think of the FAFSA as a huge and daunting task,” says Hicks. “They don’t feel like they are able to do it or equipped to do it.”

Get help if you aren’t confident in filling out all the information on your own, so you don’t put off filing the FAFSA any longer. There may also be follow-up requests, like income verification, that, if overlooked or left incomplete, could delay your receiving all or part of your financial aid award.

Up to  40 percent of college-bound students who apply and are accepted to college fall prey to a phenomenon called ‘summer melt.’ They never make to campus their freshman year because of mistakes that trip them up in the process. Many of the mistakes have to do with the financial aid process and can be avoided if you get help early on.

Your high school guidance or college counselor may be able to assist you with your application.

If you feel you need more assistance than your counselor can provide, look to organizations or access programs that focus on helping students complete the forms required to give financial aid, like the College Goal Sunday Program hosted by the National College Action Network, or Reach4Success.

The post 3 Reasons to File Your FAFSA Right Now appeared first on MagnifyMoney.

More Than 40% of U.S. Adults Struggle to Make Ends Meet

iStock

You may be struggling to pay bills every month, but so are plenty of other people.

The Consumer Financial Protection Bureau on Tuesday reported that 43 percent of American adults struggle to make ends meet, based on the results of a national survey conducted in 2016 on the financial well-being of U.S. consumers.

About 34 percent of all consumers surveyed reported experiencing material hardships —  these include running out of food, not being able to afford a place to live or lacking the money to seek medical treatment — in the past year, the bureau said.  

In the survey, the bureau asked more than 6,000 participants from all walks of life to answer 10 questions about current and future financial security and freedom of choice, and to give a score from 0 to 100 on each question. The average consumer score was 54 in the survey. Not surprisingly, consumers surveyed said that their financial conditions were closely tied to their level of education, income and employment status, according to the bureau. 

Young adults are especially susceptible to financial hardships, the agency found. 

Millennials — those age 34 and below — reported an average score of 51 for their financial well-being, 10 points lower than seniors ages 65 and up and three points lower than the national average. 

The report, what the bureau calls “the first of its kind,” not only provides a view of the the overall state of financial conditions in the U.S., it also sheds light on how individuals from different demographics are faring financially. 

Adults with scores of 50 or below have a high likelihood — more than 50 percent — of struggling to pay bills and of experiencing difficult financial situations, according to the report. 

In contrast, those who reported scores of 61 and above had a much lower probability — less than 10 percent — that they would have trouble paying for basic needs.  

 Savings = stability  

Of all the factors examined, the bureau found that the amount of savings and financial cushions is the most important when it comes to disparities in people’s financial situations. 

The average financial well-being for adults with savings of less than $250 — the lowest level — is 41. That compares with 68 for people with the highest level of savings — $75,000 or more, according to the report. 

Similar differences in scores were seen with the ability to absorb unexpected expenses.  

“These findings highlight the importance of savings and other safety nets in helping people to feel financially secure, one of the basic elements of financial well-being,” the report said. 

Having some sort of financial knowledge appears to benefit financial well-being. 

The survey found that individuals with higher levels of financial confidence, knowledge and day-to-day money management behaviors tend to report better financial conditions. 

Apart from the survey, the bureau initiated  an interactive online tool allowing consumers to measure their own financial well-being.  

 7 tips to improve your financial health: 

  1. Have “rainy day” cash available. Often, people who feel they are broke don’t have the means to absorb unexpected expenses. We’ve ranked the best options for when you need cash fast.  A good rule of thumb is to set aside at least three to six months’ worth of living expenses.   
  2. Save. Save. Save. It’s never too early to start saving for retirement. Financial planners often suggest you stash at least 10 percent of your income every month. 
  3. Focus on paying down high interest debts. Sometime it makes more sense to pay off debt than to save, especially if you have high-interest debt like credit cards.  Here are four fast ways to achieve that goal.
  4. Consider changing your lifestyle. Lifestyle inflation is the ultimate budget-killer — a widespread phenomenon that occurs when people spend more as their incomes increase.
  5. Learn to ignore the Joneses. Focusing on your needs and goals rather than aligning them with the people in your life or in your social media feed is critical to being happy with the state of your finances and your life.
  6. Come up with strategies to help break your negative spending habits. For example, we’ve written about a simple $20 rule that can help break your credit card addiction. Explore other ways to break bad money habits here.
  7. Educate yourself. The more you know about your finances, the better off you’ll be. It doesn’t have to be complicated. Simply using an app to track your spending or asking your HR department for a review of your retirement savings options are good places to start. The key is to engage in day-to-day money management and establish a habit of saving and budgeting. 

The post More Than 40% of U.S. Adults Struggle to Make Ends Meet appeared first on MagnifyMoney.

How the New Federal Overtime Rule Died — And What it Means for Workers

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A new federal overtime rule had many American companies scrambling at this time last year. The federal regulation, which was set to pass on Dec. 1, 2016, would have required businesses to begin paying overtime wages (1.5 times an employee’s hourly rate) to any full-time salaried employee earning less than $47,476.

This threshold previously had been more than twice as low, with companies owing overtime pay to employees with yearly salaries under $23,660. Then, after many employers had already responded to the regulation by offering raises and adjusting exemption statuses, a federal judge in late 2016 temporarily blocked the rule, halting its effects nationwide.

Less than a month ago, that same judge permanently struck down the Obama-era regulation, leaving the state of overtime pay in limbo. The increased threshold would have affected 4.2 million workers, according to the Department of Labor, so it’s clear this decision will have wide-reaching effects.

Here’s a breakdown of what we know.

Does the rule still stand a chance?

The short answer is no. While the federal government might have tried to fight the court’s ruling, that doesn’t seem to be the Trump administration’s intention.

A week after Judge Amos Mazzant — an Obama appointee on the U.S. District Court for the Eastern District of Texas —struck down the overtime rule, the Department of Justice announced that it was withdrawing its appeal, essentially agreeing to move on from the issue.

The Department of Labor has done the same. The agency reopened public comment on overtime rules and exemption requirements back in July, with the response period ending on Sept. 25. Suzanne Boy, an employment lawyer with the firm Henderson, Franklin, Starnes & Holt, based in Fort Myers, Florida, says this is an indication that the Obama rule has been defeated.

“For all intents and purposes, it’s dead,” she says.

What’s next for businesses and their employees

There were several ways in which employers responded to the rule. Some gave raises, but others cut hours. Some companies that had switched salaried employees to hourly pay to make them exempt from overtime eligibility changed them back, Boy says.

“I have actually not heard of any client that has taken a raise away as a result of this change,” she says.

Christa Hoskins, a 26-year-old graphic designer in Fort Myers, was given a $10,000 pay bump last year, partially due to the new overtime rule. She tells MagnifyMoney her employers are letting her keep the bump, even though the regulation was struck down.

“I received last year’s pay raise due to this rule possibly coming into play since my work anniversary so happened to be around the same time,” Hoskins says.

Boy says keeping the original $23,660 threshold could help some employees in the long run, because the proposed rule change would have forced many companies to cut costs at the expense of their lowest-earning workers. For example, many employees earning thousands of dollars under what would have been the new $47,476 threshold — such as $30,000 per year — might not have received raises. Instead, they could have seen their hours scaled back or their pay structures altered to help employers circumvent the new overtime policy.

“I think that it would not have been the saving grace that it was intended to be,” Boy says. “I think a lot of people wouldn’t have obtained the big raise that the rule was touted to be.”

The fact that the Department of Labor is asking for public comments means another new rule could be on the way, with the agency likely taking at least a few weeks to analyze and consider the responses.

It’s tough to judge what a new regulation would look like. According to a statement made by Labor Secretary Alexander Acosta earlier this year, it seems possible the Trump administration could place the overtime threshold somewhere around $30,000. This figure would essentially  take the previous amount of $23,660 and adjust for inflation.

Some people are concerned it isn’t enough. Steve Zieff, a San Francisco-based employment attorney with Rudy, Exelrod, Zieff & Lowe, says he thought the Obama administration’s threshold, while not necessarily high enough, was likely better than a potential new rule.

“I think even the current Department of Labor recognizes that the salary level is way too low,” says Zieff, who specializes in overtime pay for white-collar employees. “But I’m fearful they’re not going to raise it to a meaningful level.”

The post How the New Federal Overtime Rule Died — And What it Means for Workers appeared first on MagnifyMoney.

Why Sabbaticals Could Be the New Pre-Retirement

Brad N. Shaw, a Dallas, Texas-based serial entrepreneur, took a two-year sabbatical from 2011-2013 to spend more time with his family. He’s pictured here with his family in Vail, Colorado. (Photo courtesy of Brad M. Shaw)

Serial entrepreneur Brad M. Shaw made a bold decision several years ago to take two years off from work and move his family to Vail, Colo.

Taking a two-year sabbatical had its challenges, the major one being uprooting his family in pursuit of more work-life balance and a change of scenery. But overall, he says taking time off was more than worth it — both for his family and his business.

“My daughter was growing up so fast,” says Shaw, who is CEO of a web design firm in Dallas. “As a serial entrepreneur, I was always away traveling or at the office. I wanted to be a present father and play a role in her upbringing. I also wanted to show her a life outside of the Dallas suburbia bubble.”

‘No reason to wait’

The concept of taking a sabbatical is not new. People have been taking them for decades. They’re typically thought of happening in academia, in which professors are paid to take time off for research. But sabbaticals have transcended academia and have spread into the general workforce in recent decades.

Thanks to a new wave of workers who value purpose over stability, the upswing of the gig economy, and companies that offer unlimited vacation time or paid sabbaticals, taking an extended break is becoming more of a reality for many. Many major companies in the United States offer unlimited vacation time or paid sabbaticals, such as Groupon, General Electric, and Adobe.

There’s also the reality that today’s American workers are not able to retire as early as previous generations — and they’re living longer, healthier lives. So a sabbatical can serve as a mini retirement, or a chance to take a break from the grind of 9-to-5 life.

Ric Edelman, the founder and executive chairman of Edelman Financial Services, explores this topic in his new book, “The Truth About Your Future: The Money Guide You Need Now, Later, and Much Later.” He says the combination of people living longer and being healthier in old age means the notion of retiring at 65 will be gone in the near future, both because it won’t be affordable and people will get restless.

Daniel Howard took a one-year, unpaid sabbatical in 2008 following the financial crisis to recharge and return to work with a fresh perspective. (Photo courtesy of Daniel Howard)

“You’ll be healthy enough to work, you’re going to want to work, and economically, you’re going to need to work,” he says. “For all those reasons, you’ll continue working. And so that notion that you’ll wait until you’re 60 to take that around-the-world cruise really won’t exist. There won’t be a particular reason to wait.”

Edelman says that instead of the traditional life path (go to school, get a job, retire, die), we’ll have a cyclical one in which people go to school, get a job, take a sabbatical, go back to school, take a different job, etc. Instead of having one big chunk of a 30-year retirement, people will take two years here, three years there, six months here, and they’ll enjoy time off throughout their life at various intervals.

Research has also proven that companies and the economy benefit when employees take sabbaticals. According to a report by Project: Time Off, an offshoot of the U.S. Travel Association, there has been a jump in employees taking time off in the last year. Unused vacation days cost the economy $236 billion in 2016 — an amount that could have supported 1.8 million jobs. In essence, employees not cashing in on their paid time off hurts the economy because employees are forfeiting money that could instead have been used to create new jobs.

Dan Clements, author of “Escape 101: The Four Secrets to Taking a Career Break Without Losing Your Money or Your Mind,” says the biggest benefit of taking a sabbatical is the perspective change it offers.

“People come back from sabbaticals with a completely different vision for how they want to live their life,” Clements tells MagnifyMoney. “They come back and they change jobs or they transform themselves in the company they’re in or they change their business.”

Upon returning to Dallas, Shaw says he made the decision to forgo scaling up his business in favor of running it on a smaller scale so he could be less stressed.

“The time away allowed me to reset my business ideas,” he says.

Clements thinks many companies have begun to offer unlimited vacation days or paid sabbaticals to keep up with the new generation entering the workforce, because by and large, millennials value purpose over stability. Companies want to keep employees happy by offering them the opportunity to find purpose in a way their 9-to-5 job might not be able to.

“You have a different generation of people entering the workforce for whom work means something different,” Clements says. “What they expect from work is not necessarily security and a paycheck, but what they expect is meaning from work more than previous generations have. Part of the way companies can supply that is to give people the time and flexibility to find it.”

Taking the plunge

Tori Tait, the director of content and community for The Grommet, an e-commerce website that helps new products launch, took a 30-day sabbatical in August. Her company offers paid sabbaticals at employees’ five-year mark. Tait, who lives in Murrieta, Calif., spent time relaxing in Huntington Beach, Calif., boating on the Colorado River, and living on a houseboat in Lake Mead, Ariz. Like Shaw, she says the biggest benefits for her were time off with family and a fresh perspective once she returned to work.

“I’m a working mom, so summers are often filled with me in the office, and [my kids] wishing we were at the beach,” she says. Tait says she enjoyed how during her month off, she didn’t have work in the back of her mind the way people often do when on a five- or six-day vacation.

Tori Tait, pictured with her daughters London, 10, and Taylor, 16, took a company-sponsored, 30-day sabbatical in August 2017. (Photo courtesy of Tori Tait)

Her biggest piece of advice for those planning a sabbatical is to not dwell on the planning aspect of it. “I grappled with trying to plan how I would spend my time,” she says. “Would I travel abroad? Volunteer? Finally do that side project I’ve been thinking about? In the end, I just thought, What is it that I always wish I had more time to do? The answer for me was: spend quality time with my family. So that’s what I did.”

Daniel Howard, the director at Search Office Space, a website that helps businesses all over the world find office space, took a sabbatical after the financial crisis in 2008. He says he took 12 months off to recharge in hopes of returning to work with more optimism and drive. His employers didn’t pay him for the time off, but promised him his job would be there upon his return.

He traveled with his then-girlfriend (now his wife) to Southeast Asia, Australia, New Zealand, Fiji and Central America. They left their phones at home and relied on physical maps to get around. Aside from the occasional email to family to check in, they were completely disconnected. The biggest benefit for him? “The ability to completely disconnect from my working life and the opportunity to become a more well-rounded person by immersing myself in different cultures and experiences,” Howard says.

Although many people take their sabbaticals overseas, one doesn’t need to travel around the world to reap the benefits. Extended time away from work and technology is beneficial no matter where you are.

“I think for a lot of people, a sabbatical is the first real vacation they’ve ever taken,” Clements says. “I tell people that taking a one-week vacation is sort of like trying to swim in a puddle. You wade in a little bit, and you’re barely wet, and then you have to go inside. When you actually get away from your life for two or three times longer than you’ve ever taken a break from work, you get this sense of perspective that I think most people don’t normally get a chance to experience.”

The 4 stages of preparing for a sabbatical

If you don’t work for a company that offers unlimited vacation days or paid sabbaticals, that doesn’t mean you can’t take one. Clements shares his steps for saving up for a sabbatical:

  1. Boost your earnings. Try to figure out if there’s a way you can earn more before taking your sabbatical. Can you finally ask for the raise you’ve been wanting? Can you do freelance work on the side? Can you rent out part of your home on Airbnb, or drive for Uber? Consider all of your options.
  2. Make it automatic. Have money automatically withdrawn from your bank account the same way you would for retirement, a mortgage or automatic bill payments.
  3. Put it out of reach. Once you set aside money in a separate account, make sure it’s out of reach. Put it in a savings account that isn’t accessible online or via the ATM. If you have to physically go to the bank to withdraw cash, you’ll be less tempted to do so.
  4. Stretch yourself. Don’t be afraid to make your automatic savings plan more aggressive than you think you can handle. Challenge yourself to save more than you think you need, because you can always change the amount if you have to.

The post Why Sabbaticals Could Be the New Pre-Retirement appeared first on MagnifyMoney.