Featured, News

This Family Spent $6,000 to Save Their Home and Still Wound Up Facing Foreclosure

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Lageshia Moore of Far Rockaway, N.Y. says her family spent $6,000 in hopes it would save them from foreclosure. “Some people might say, ‘OK, just get a new house.’ But it wasn’t that simple,” says Moore.

When Lageshia Moore and her husband found their home in 2006, they thought it would be a perfect place to raise their family. The $549,000 Far Rockaway, N.Y., duplex even had future income potential if they could find a reliable tenant and rent out one half of the house.

In order to purchase the property and avoid primary mortgage insurance, the couple took out two mortgages to cover the costs.

Like millions of Americans who purchased homes at the peak of the housing bubble, their timing could not have been worse. Moore, a teacher, left her job in 2007. It soon became impossible to meet their $4,000 total monthly mortgage payments. By the summer of 2008, they were deep in default, and the recession sent their home value plummeting.

They were officially underwater on their house, and the family was living solely on Moore’s husband’s income as a driver. Eventually, they were notified that their lenders had begun the foreclosure process.

“Some people might say, ‘OK, just get a new house.’ But it wasn’t that simple,” Moore said. “This was the house where we were raising our family. My husband is very proud and homeownership means a lot to him — so we weren’t going to just let it go.”

Instead, Moore and her husband did what many families facing foreclosure do: They began looking desperately for “foreclosure relief” companies, law firms, and groups who promised help. A nonprofit connected them to a court-appointed attorney, but it didn’t stop the foreclosure process. So they turned to companies that advertised foreclosure relief on radio stations and online.

Over the course of six years, the family handed over thousands to a handful of relief groups they thought could stop the foreclosure. “We were desperate, and we thought, ‘OK, we’ll hand over this money to someone and they’ll just fix it,’” Moore said.

One of those foreclosure relief companies was Florida-based Homeowners Helpline, LLC. In 2015 the family gave the company a total of $6,000: an initial $2,000 down payment, and then $1,000 in four monthly installments. By that time Moore had found a new job, but the family hadn’t paid the full mortgage amount in years.

Moore shared the contract with MagnifyMoney, in which Homeowners Helpline says it will “perform a mortgage loan review and audit,” including actions like sending a cease-and-desist letter and a “Qualified Written Request” for information about the account to the family’s lenders.

Here’s what Moore says happened: Homeowners Helpline connected her family with a New York City lawyer who “kept asking for endless paperwork, month after month after month,” and who eventually stopped answering their calls, she claims. They finally got in touch with him just before the house was set to go up for auction, she said, and he told them the efforts to stop the auction had failed.

“We were horrified,” Moore said.

Homeowners Helpline told MagnifyMoney a different story. Sharon Valentine, a processor at Homeowners Helpline who worked on Moore’s husband’s case, said the family was slow to hand over needed paperwork and “unrealistic about their expectations.”

Crucially, Valentine said, the family didn’t tell Homeowners Helpline the house was actively in foreclosure until they mentioned the auction. “And then it was like, ‘Wait, what?’” Valentine said. The company would have taken different actions had they known about the foreclosure proceedings, she added.

“We can’t help you effectively if you don’t give us all of the information and the paperwork,” Valentine said. “In general, some clients come in and they hear their friend was able to get a 2% [mortgage] rate or cut their payments in half, and it’s like, ‘Well, that’s a very different situation.’ We try to help educate, but sometimes you can’t change that expectation.”

The Best Help is Free

But there is a free resource to educate panicked homeowners about expectations and provide foreclosure assistance — as well as help them avoid scam companies that will steal their money. NeighborWorks America runs LoanScamAlert.org, which aims to be a one-stop shop for people with questions about or problems with their mortgages.

The Loan Modification Scam Alert Campaign launched in 2009, when Congress asked NeighborWorks America to educate and help homeowners. LoanScamAlert.org offers resources including information about how to spot and report scams, and lists of trusted authorities who can help. Its main goal: Drive people to call the Homeowner’s HOPE Hotline, at 888-995-HOPE (4673), which is staffed 24 hours a day by counselors who work at agencies approved by the U.S. Department of Housing and Urban Development (HUD).

“We provide them with a single, trusted resource,” said Barbara Floyd Jones, senior manager of national homeownership programs at NeighborWorks America. “It gets confusing when you see companies with all of these similar names advertising on the radio or TV, and then you have to research them. We want to let people know they don’t have to pay a penny for assistance.”

Anyone — regardless of income or other factors — can contact the counselor network to receive free advice and help. Homeowners aren’t always aware of the myriad government-affiliated groups that can provide assistance, or of the federal and state programs created to speed loan refinances and modifications, Floyd Jones said.

“We can never promise that everyone will be able to save their home; there are a variety of circumstances,” Floyd Jones said. “But we can promise a trusted counselor will listen, take a look at your paperwork if you want, and tell you all of your options.”

In fact, if a homeowner grants permission, the counselor can contact the mortgage lender directly to discuss options to stop the foreclosure, modify the terms of the loan, or otherwise make a deal. If need be, homeowners will also be connected with vetted legal assistance — although Floyd Jones noted not every situation requires a lawyer.

True to LoanScamAlert.org’s name, the hotline counselors also take complaints about mortgage-related scams: third-party companies that take the money and run, or slip in paperwork that unwittingly gets homeowners to sign over the deed to the house.

The Federal Trade Commission received nearly 7,700 complaints about “Mortgage Foreclosure Relief and Debt Management” services in 2016 — down from almost 13,000 in 2014, but still a significant figure.

“Stopping phony mortgage relief operations continues to be a priority” for the FTC, said spokesman Frank Dorman.

Both the FTC and LoanScamAlert.org offer tips to avoid scams — and to make sure you’re taking advantage of all federal and state programs that could help.

Red Flags:

  • They ask you to pay before any services are rendered.
  • Pressure to pay a fee before action is taken, sign confusing paperwork, or hire a lawyer off the bat. As with any scam, fraudulent mortgage relief services rely on high pressure to push vulnerable homeowners into taking action. Companies shouldn’t ask for “processing fees” or “service fees” early in the process, Floyd Jones said, as early foreclosure-stoppage efforts don’t cost anything. Be wary of signing any document, as you could unwittingly surrender the home’s title or deed to a scammer.
  • They make promises they can’t keep. 

    Promises or guarantees they’ll save your home from foreclosure — or even claims like “97% success rate!” No one can guarantee results.

  • They say they’re affiliated with the U.S. government. 

    Companies that claim to have an affiliation with a government agency. Some scammers may claim to be associated with the government, charging fees to get you “qualified” for government mortgage modification programs like Hardest Hit Fund. You don’t have to pay for these government programs — and lenders, particularly big banks like Wells Fargo and Bank of America, may be able to offer you their own modification options directly.

  • They want you to send your mortgage payments to them.

    Companies that tell you to start paying your mortgage directly to them, rather than your lender. They may promise to pass the money along, but they could pocket it and disappear.Companies that ask you to pay them through unconventional methods: Western Union/wire transfers, prepaid Visa cards, etc., instead of a check. They’re trying to get your money in a way that’s hard to trace.

As for Lageshia Moore and her husband, the family ultimately filed for bankruptcy — a move that can stop the foreclosure process, but only temporarily — and are now working with a law firm on a loan modification she hopes will reduce their payments to a manageable monthly sum. In giving advice to others, she reiterates the simplest but most important tip: “Just do your research.”

“You’re panicked, but you have to do your due diligence,” she added. “Really sit down and weigh the pros and cons: foreclosure, short sale, etc. What does this process or contract really mean? It’s an emotional time, but you have to try to keep the emotion out of it. That’s what I would tell myself.”

What to Do if You’re Facing Foreclosure:

  • Call a HUD-certified counselor at 1-888-995-HOPE. You’ll get advice and help for free, and while counselors can’t ever promise to save a home, they’ll be happy to take a look at any paperwork or information about your case, contact your lender about options if you grant permission, and connect you with vetted legal assistance if need be.
  • If you’re not facing foreclosure yet, but you’re worried that you’re about to run into trouble, contact your mortgage lender’s loss litigation department. They may be willing to work with you. Your lender can also tell you whether you’ll qualify for government programs.
  • Overall, don’t let desperation stop you from taking the time to research any potential actions, including signing on with a relief company. Explore the company’s background and track record. Check online for reviews from other homeowners — and be sure to look up phone numbers too. Many scam companies simply shut down, reopen under a new name, and retain the same phone number.
Julianne Pepitone
Julianne Pepitone |

Julianne Pepitone is a writer at MagnifyMoney. You can email Julianne here

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Featured, Health, News

How Weight Loss Helped This Couple Pay Down $22,000 of Debt

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Photo courtesy of Brian LeBlanc

About two years ago, Brian LeBlanc was fed up. The 30-year-old policy analyst from Alberta, Canada, had struggled with his weight for years. At the time, he weighed 240 pounds and had trouble finding clothes that fit. He decided it was time to change his lifestyle for good.

LeBlanc started running and cutting back on fast food and soft drinks. He ordered smaller portions at restaurants and avoided convenience-store foods. About a year into his weight-loss mission, his wife Erin, 31, joined him in his efforts.

“The biggest change we made was buying a kitchen food scale and measuring everything we eat,” Brian says. “Creating that habit was really powerful.”

Over the last two years, the couple has shed a total of 170 pounds.

But losing weight, they soon realized, came with an unexpected fringe benefit — saving thousands of dollars per year. Often, people complain that it’s expensive to be healthy — gym memberships and fresh produce don’t come cheap, after all. But the LeBlancs found the opposite to be true.

Erin, who is a payroll specialist, also managed their household budget. She began noticing a difference in how little money they were wasting on fast food and unused grocery items.

Photo courtesy of Brian LeBlanc

“Before, we always had the best intentions of going to the grocery store and buying all the healthy foods. But we never ate them,” she says. “We ended up throwing out a lot of healthy food, vegetables, and fruits.”

Before their lifestyle change, Brian and Erin would often eat out for dinner, spending as much as $80 per week, and they would often go out with friends, spending about $275 a month. Now, Brian says if they grab fast food, they choose a smaller portion. Last month, they only spent $22 on fast food.

What’s changed the most is how they shop for groceries, what they buy, and how they cook. Brian likes to prep all his meals on Sunday so his lunches during the week are consistent and portion-controlled. They also buy only enough fresh produce to last them a couple of days to prevent wasting food.

Shedding pounds — and student loan debt

Photo courtesy of Brian LeBlanc

Two years after the start of their weight-loss journey, they took a look at their bank statements to see how their spending has changed. By giving up eating out and drinking alcohol frequently, they now spend $600 less a month than they used to, even though they’ve had to buy new wardrobes and gym memberships.

With their newfound savings, the LeBlancs managed to pay off Brian’s $22,000 in student loans 13 years early. Even with the $600 they were now saving, they had to cut back significantly on their budget to come up with the $900-$1,000 they strived to put toward his loans each month. They stopped meeting friends for drinks after work, and Erin took on a part-time job to bring in extra cash. When they needed new wardrobes because their old clothing no longer fit, they frequented thrift shops instead of the mall.

When they made the final payment after two years, it was a relief to say the least.

Now the Canadian couple is saving for a vacation home in Phoenix, Ariz., which they hope to buy in the next few years, and they’re planning to tackle Erin’s student loans next. They’re happy with their weight and lives in general, but don’t take their journey for granted.

“There were times we questioned our sanity and we thought we cannot do this anymore,” says Erin. But they would always rally together in the end.

“There are things that are worth struggling for and worth putting in the effort,” Brian says. “Hands down, your health is one of those things.”

How Getting Healthy Can Help Financially

Spending less on food isn’t the only way your budget can improve alongside your health. Read below to see how a little weight loss can tip the scales when it comes to your finances.

  • Spend less on medical bills. Health care costs have skyrocketed in the last two decades, but they’ve impacted overweight and obese individuals more. A report from the Agency for Healthcare Research and Quality stated that between 2001 and 2006, costs increased 25% for those of normal weight — but 36.3% for those overweight, and a whopping 81.8% for obese people. The less you weigh, the less you’ll pay for monthly health insurance premiums and other expenses.
  • Buy cheaper clothes. Designers frequently charge more for plus-size clothing than smaller sizes. Some people claim retailers add a “fat tax” on clothes because there are fewer options for anyone over a size 12. It might not be fair, but it’s the way things are.
  • Save on life insurance. Your health is a huge factor for life insurance rates. Annual premiums for a healthy person can cost $300 less than for someone who is overweight.
  • Cut transportation costs. Biking or walking to get around is not only a cheap way to exercise — it’s a cheap way to travel. You’ll be saving on a gym membership and limiting gasoline costs in one fell swoop. Bonus points if you go the whole way and sell or downgrade your vehicle.
Zina Kumok
Zina Kumok |

Zina Kumok is a writer at MagnifyMoney. You can email Zina here

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Featured, News

5 Lies Your Car Mechanic Might Tell You

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By Kelsey Green

Whether you’re getting an oil change, having your tires rotated, or facing a more complicated repair, like replacing the alternator, it’s possible your visit to the auto repair shop will end up being more expensive than you anticipated.

Automobile maintenance costs an average $792 per year, according to the AAA’s 2016 “Your Driving Costs” study, and you don’t need mechanics padding their bills with unnecessary repairs and charges.

Most technicians genuinely want to help, says Lauren Fix, who is known as “The Car Coach” and is the spokesperson for the nonprofit Car Care Council. But there are times when you should question what the mechanic tells you.

Here are five common lies and ways to combat them.

1. “You can use any kind of oil in your car.”

Technicians often say you can use any oil in your car despite what your service schedule or car manual states.

“Run the oil that your service schedule tells you,” Fix says. “Running the wrong oil in your engine can void your warranty.”

If your car needs synthetic oil, which is for turbocharged, supercharged engines, or high-performance vehicles, make sure your technician uses that kind.

2. “You need to fix this now before it’s a problem.”

Sometimes a technician may exaggerate a problem because he wants to talk you into paying for a repair you may not need at that time.

Check your service schedule before saying yes, because it’s the “Bible for your car,” Fix says. If you’ve lost your service schedule or you bought a used car, check out carcare.org for a customizable service schedule specifically for your vehicle. This will act as your guide.

You can save more than $1,200 a year in repairs if you follow your service schedule and are proactive with any problems, the Car Care Council states.

Fix also warns that sometimes a technician will exaggerate to make you understand that there is actually a problem with your car. Ask for a second opinion if you’re unsure.

“Even if he finds a new problem with your car while working on a problem you have already discussed, you have to assume that it is possible,” Fix says.

3. “That damage didn’t happen here.”

Sometimes it’s just a small scratch or ding. Accidents happen, even by people who are paid to repair your car.

A California shop tried to cover up severe damage to Michelle and Albert Delao’s automobile after it fell several feet from a lift in 2015, the couple says. Employees didn’t tell the Delaos what happened to their car, instead saying that the shop was waiting on a part. The store offered to pay for a rental car while their vehicle was being worked on.

When they finally got their car, Michelle says she immediately knew something was wrong.

“I could tell from little things about the way the car was driving,” she says. “It was wobbly, and we could hear glass in the passenger window, which was weird, because we never had a glass or window problem before.”

To try to resolve the problems, they purchased a new set of tires to stop the wobbling. But they got a call a month later from a technician at the shop, they say. The couple learned that the car fell several feet onto its side, piercing the bottom and shattering the front passenger window, along with other damage to the car’s body. When the technicians could not get the car off the lift, a tow truck was called to pull the vehicle down, causing more damage, they say.

When she called the manager and store to ask about the incident, Michelle says both denied anything happened until she showed the owner the pictures from the technician.

After finding out the true extent of the damage, the Delaos took their car to the dealership, which confirmed all the damage at over $20,000, totaling their car. The couple has filed a lawsuit against the auto repair shop.

The incident has given the couple a severe distrust of technicians, Michelle says.

“It’s just sad, really,” Albert says. “It’s like when people need to go to the doctor. We have to have our car. We don’t know anything about it. We’re not mechanics.”

4. “This part cost more than we anticipated.”

An easy way for technicians to make more money is by overcharging for a part or repair. If you’re not sure how much a repair will cost, get multiple quotes in writing.

“Never do anything without getting a quote in writing,” Fix says. “That is how you know someone knows what they’re talking about and will uphold that when you get it in writing.”

If you don’t like to go in blind, you can get a general idea of what a repair or part will cost with research.

“Education and information are power,” Fix says.

Fix suggests RepairPal.com, which helps people not well versed in car mechanics be more prepared for when someone gives them a quote. You can type in your car’s mechanical issue to research the problem and the reliable cost for the part and labor for your area.

5. “The cheap tires will be just fine.”

When it comes time for new tires, technicians may try to talk you into buying the cheapest brands. Don’t listen, Fix says.

“When people come in saying they need to replace tires, they need to use the same tire brand and size,” she says. “The size and brands of the tires impacts your handling, traction, and safety for your car.”

Tires recommended by Consumer Reports, for example, range from $64 to $121.

Tips for finding a reliable car mechanic

  • Go to a certified technician. Look for signs that state the shops are certified by the Automotive Service Association (ASA) or the National Institute for Automotive Service Excellence (ASE). “Find a master technician when you can,” Fix says. “They are the best in the business.”
  • Ask your friends and family. Personal experience is the best way to find a reliable technician, so ask the people you trust.
  • Check with a dealer. Along with specializing in your car, they can also help with recalls or possibly help find you a new technician if your warranty has expired.
  • If your vehicle is safe to drive, take it to another mechanic for a second opinion.
  • If your check engine light comes on, head to your local auto parts store, not a mechanic. Their equipment will find the issue, which empowers you with information before you schedule your car for service.
MagnifyMoney
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Featured, News, Tax

File Taxes Jointly or Separately: What to Do When You’re Married with Student Loans

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Married couples with student loans must make a difficult decision when they file their tax returns. They can choose to file jointly, which often leads to a lower tax bill. Or they can file separately, which may result in a higher tax bill, but smaller student loan payments. So which decision will save the most money?

First, let’s discuss the difference between the two filing statuses available to married couples.

Married filing jointly

Married couples always have the option to file jointly. In most cases, this filing status results in a lower tax bill. The IRS strongly encourages couples to file joint returns by extending several tax breaks to joint filers, including a larger standard deduction and higher income thresholds for certain taxes and deductions.

Married filing separately

Because married couples are not required to file jointly, they can choose to file separately, where each spouse is taxed separately on the income he or she earned. However, this filing status typically results in a higher tax rate and the loss of certain deductions and credits. However, if one or both of the spouses have student loans with income-based repayment plans, filing separately could be beneficial if it results in lower student loan payments.

For help figuring out which filing status is better for married couples with student loans, we reached out to Mark Kantrowitz, publisher and Vice President of Strategy at Cappex.com. Kantrowitz knows quite a bit about student loans and taxes. He’s testified before Congress and federal and state agencies on several occasions, including testimony before the Senate Banking Committee that led to the passage of the Ensuring Continued Access to Student Loans Act of 2008. He’s also written 11 books, including four bestsellers about scholarships, the FAFSA, and student financial aid.

Two Advantages to Filing Taxes Jointly:

  • Most education benefits are available only if married taxpayers file a joint return. This can affect the American opportunity tax credit, the lifetime learning credit, the tuition and fees deduction (which Congress let expire as of January 1, 2017, but is still available for 2016 returns), and the student loan interest deduction.
  • Couples taking the maximum student loan interest deduction of $2,500 in a 25% tax bracket would save $625 in taxes. But this “above the line” deduction also reduces Adjusted Gross Income (AGI), which could yield additional tax benefits (e.g., greater benefits for deductions that are phased out based on AGI, lower thresholds for certain itemized deductions such as medical expenses, and miscellaneous itemized deductions).

However, there is a potential downside to filing jointly for couples with student loans.

Income-driven repayment plans use your income to determine your minimum monthly payment. Generally, your payment amount under an income-based repayment plan is a percentage of your discretionary income (the difference between your AGI and 150% of the poverty guideline amount for your state of residence and family size, divided by 12).

  • If you are a new borrower on or after July 1, 2014, payments are generally limited to 10% of your discretionary income but never more than the 10-year Standard Repayment Plan amount.
  • If you are not a new borrower on or after July 1, 2014, payments are generally limited to 15% of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.

Because filing jointly will increase your discretionary income if your spouse is also earning money, your required student loan payment will typically increase as well. In some cases, the difference is negligible; in others, this can add up to a pretty significant cost difference.

“Calculating the trade-offs of income-driven repayment plans versus the student loan interest deduction and other benefits is challenging,” Kantrowitz says, “in part because the monthly payment under income-driven repayment depends on the borrower’s future income trajectory and inflation, not just the inclusion/exclusion of spousal income.”

Fortunately, some tools can help you run the numbers.

An example: Meet Joe and Sally

Here’s a simple scenario that shows how a change in filing status can save on taxes but cost more on student loans:

  • Joe and Sally are married with no children.
  • They live in Florida (no state income tax).
  • Joe is making $35,000 per year and has $15,000 of student loan debt with a 6.8% interest rate.
  • Sally is making $75,000 per year and has $60,000 of student loan debt with a 6.8% interest rate.

First, we can estimate Joe and Sally’s tax liability for filing jointly versus separately. TurboTax’s TaxCaster tool makes this pretty easy. Here’s what we get when run their numbers using 2016 tax rates:

  • Filing jointly, Joe and Sally would owe $13,249 in federal taxes.
  • Filing separately, they would owe $15,178.

So they would save just over $1,900 in federal taxes by filing jointly. But how would filing jointly affect their student loan payments?

We can use a student loan repayment estimator like the one provided by the office of Federal Student Aid to find out. Here’s what we get when we run the numbers and choose the Income-Based Repayment option, assuming they are new borrowers on or after July 1, 2014:

  • Filing jointly, Joe’s minimum required monthly student loan payment under a standard repayment plan would be $143, and Sally’s would be $571, for a total of $714 per month.
  • Filing separately, Joe’s minimum required monthly student loan payment would be $141, and Sally’s would be $474, for a total of $615 per month.

Over the course of a year, Joe and Sally would only save $1,188 on their student loan payments by filing separately. Even with the additional loan payments they would have to make, filing jointly would save them $712 more than filing separately.

What’s best for your situation?

Every situation is different. The simple example above comes out in favor of filing jointly, but you will need to run your own numbers to figure out what is right for you. Here are additional tips to help you figure it out:

  1. Know how much you owe. Make a list of all loan balances, interest rates, and the type of each student loan you have. You can find your federal student loans on the National Student Loan Data System. You can find information on your private student loans by looking at a recent statement.
  2. Estimate your student loan payment options. Using a student loan repayment estimator like the one mentioned above, determine your required payments when filing separately versus jointly.
  3. Calculate your tax liability. Use a tool like TurboTax’s TaxCaster or 1040.com’s Free Tax Calculator to calculate your federal and state tax liability when filing separately versus jointly.
  4. Be aware of long-term consequences. Filing separately might result in lower monthly payments today but more interest paid over time. If you make it to the 20- or 25-year forgiveness point, that could have tax implications down the line. Kantrowitz points out that “forgiveness is taxable under current law, causing a smaller tax debt to substitute for education debt. The main exception is borrowers who will qualify for public student loan forgiveness, which occurs after 10 years and is tax-free under current law.” Keep those long-term consequences in mind as you make a decision.
  5. Consider steps to lower your AGI. Your eligibility for income-driven student loan repayment plans depends on your AGI, which is essentially your total income minus certain deductions. You can reduce this number, and potentially lower both your tax bill and your required student loan payment, by doing things like contributing to a 401(k), IRA, or Health Savings Account.
  6. Keep the big picture in mind. These decisions are just one part of your overall financial situation. Keep your eyes on your big long-term goals and make your decision based on what helps you reach those goals fastest.

Other unique situations

There are a few unique situations that make deciding whether to file jointly or separately a little more complicated. Do any of these situations apply to you?

Divorce and legal separation

Sometimes, determining marital status to file tax returns isn’t cut and dried. What happens when you and your spouse are separated or going through a divorce at year end? In this case, your filing status depends on your marital status on the last day of the tax year.

You are considered married if you are separated but haven’t obtained a final decree of divorce or separate maintenance agreement by the last day of the tax year. In this case, you can choose to file married filing jointly or married filing separately.

You and your spouse are considered unmarried for the entire year if you obtained a final decree of divorce or are legally separated under a separate maintenance agreement by the last day of the tax year. You must follow your state tax law to determine if you are divorced or legally separated. In this case, your filing status would be single or head of household.

Pay as You Earn repayment plans

Pay as You Earn (PAYE) is a repayment plan with monthly payments that are limited to 10% of your discretionary income. To qualify and to continue to make income-based payments under this plan, you must have a partial financial hardship and have borrowed your first federal student loan after October 1, 2007. Kantrowitz says the PAYE plan bases repayment on the combined income of married couples, regardless of tax filing status.

Unpaid taxes, child support, or defaulted federal student loans

If you or your spouse have unpaid back taxes, child support, or defaulted federal student loans, joint income tax refunds may be diverted to pay for those items through the Treasury Offset Program. “Spouses can appeal to retain their share of the federal income tax refund,” Kantrowitz says, “but it is simpler if they file separate returns.”

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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Featured, Small Business

Confessions of a Side Hustler: How Full-Time Workers Keep Their Side Gigs a Secret

Editorial Disclaimer: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Many Americans are juggling extra gigs on top of their regular nine-to-five. According the Bureau of Labor Statistics, about 7.5 million Americans held more than one job in 2016. The figure rose by more than 300,0000 workers from the previous year, due in part to years of stagnant wages, a competitive labor market and the growth of the gig-economy. Of the multiple job holders, more than half, or 4.1 million, split their time between a full-time and part-time gig.

Having a side gig waiting tables after work is one thing. It’s when workers decide to turn their side hustle into a full-time business that things can get complicated.

For budding entrepreneurs, it can make sense to continue working full time until their new venture business is up and running. A full-time job provides a certain level of stability — like a consistent salary, health care, and other benefits.

Knowing when and if to disclose your new business with your employer is the hard part. For that reason, some entrepreneurs choose to keep their secret side hustle just that — a secret.

Some experts say an employer should know if you have any business interests outside of your daily work responsibilities. Others argue what you do on your free time is none of your employer’s business so long as you aren’t using company time or resources.

“Some employers really encourage their employees to work on side businesses because it stimulates creativity,” says Jill Jacinto, a millennial career expert at Manhattan-based career consultancy firm WORKS. On the other hand, she adds, some employers “might feel you are neglecting your current job or getting ready to make a move elsewhere.”

Beyond feeling ostracized by fellow workers or their employers, there are also potential legal conflicts or consequences to worry about, says Bruce Eckfeldt, founder of Eckfeldt & Associates, a business coaching and management training firm based in New York City and a master coach for career-assistance company, The Muse.

“Before you invest a bunch of time in your startup, make sure that your current employment agreement isn’t going to be a problem,” he says. If you happen to be launching a business in the same field as your current employer, there may be restrictions outlined in your contract that could come back to bite you.

In addition, you should do your very best to separate your new business from your day job as best you can. Separating your time and focus is a little more obvious — don’t work on your startup at your job — but you may also need to create some physical boundaries too.

“Build a solid wall between the work you do for you employer and for your startup. Separate email address, file repositories, maybe even computers and profiles if you’re really careful,” says Eckfeldt. He says this adds a physical level of separation between your day job and your startup. It also protects you against any claims you have used work time or resources on your startup. Doing so is common for many starting out, but generally considered unprofessional, and could breach the terms of your employment contract.

We interviewed several full-time workers who are secretly juggling side businesses along with their 9-to-5. We asked about their motivations, how they keep their other job under wraps, and the toll it has taken on their professional lives. To protect their identities (and their livelihoods), we have changed several of their names.

Here’s what it’s really like to live a double work life.

“I sell live crickets on the side.”

By day, Jason*, 32, is a project manager for a paint and flooring company in York, Pa.

After work, he puts on a much different hat as a pet food distributor. But he doesn’t sell Kibble ‘n Bits. His website, The Critter Depot, sells live crickets, which pet owners purchase in bulk to feed pets like snakes and large reptiles. Jason also operates a couponing blog under a pseudonym “Jason” and picks up Craigslist gigs in his free time.

“I like to get income from many sources, so I side-hustle,” Jason tells MagnifyMoney.

The husband and soon-to-be father of three says his ultimate goal is to retire as soon as possible. He plans to keep taking on extra work as long as he can manage it. He calls his full-time job “the bedrock” of his retirement plan.

“The full-time job, that’s the bedrock. That’s the foundation. If I had to sacrifice the other three [businesses], I would make sure I kept my full-time job,” says Jason. “Even if my side hustles got to the point where they were pulling in six figures alone, I wouldn’t get rid of my full-time job.”

On why he doesn’t tell his employer about his other income streams, Jason says he doesn’t want to blur the lines between his different businesses.

He’s careful to focus only on office work during office hours, and on his businesses when he’s at home. He doesn’t want to risk losing any trust at work.

“I don’t want [my boss] to think maybe I’m too zoned in on my side projects and not zoned in enough on my at-office projects,” he says.

For him, keeping his job in addition to the side income streams is all about keeping his family afloat.

“If I were a bachelor, I’d say you’ve got to put every ounce of your time into it. But the father in me says you’ve got to be level-headed because it’s not just you that’s relying on [your income], your whole family is relying on it.”

“I’m a travel agent when I’m not working on Wall Street.”

While Fred*, 45, was working at an investment firm in New York City, he developed an idea for a travel business. In 2009, he launched YLime, a concierge service that helps organize group trips for Americans looking to book travel to various countries for annual Carnival celebrations. Recently, he expanded his offerings to include travel packages to some African countries and wine tours on Long Island, N.Y.

His reasons for keeping his side business under wraps are simple: his workplace frowns upon employees having outside income.

“I’ve been on Wall Street for about 20 years now, and there is a certain culture in here. If they see you doing something else, it limits your growth,” he says. “They are not going to consider you for those positions because they assume you’ve already checked out to a certain extent.”

Although he says his company isn’t a conflict of interest for his position, he would be concerned if his higher-ups knew about YLime.

“Depending on your relationship with some people in the firm, some people may try to use that information against you,” Fred says.

“My bosses found out about my secret trucking business from a local news reporter.”

After a management shake-up at the Las Vegas gaming company where she had worked for a decade, 41-year-old project manager Marcella Williams thought her days were numbered.

Fearing she might lose her job, she decided to use her project management skills to open her own business on the side as a backup.

She launched CDL Focus, a truck rental and shipping company, in mid-2015. She rents two semi-trucks, primarily to people looking to obtain a commercial driver’s license. They can use her trucks to practice driving or to take the licensing test without going through an employer to gain access to a truck. Williams employs a driver for the other part of her business, which focuses on shipping.

She spent nearly $130,000 of her own savings and salary to bootstrap the business. In its early days, she admits it was hard to focus 100% on her day job while trying to get CDL Focus off the ground.

“The truth is, I probably spent a lot more time especially in the beginning working on the business than on my job,” says Williams. She gave her full-time job assignments priority and would shift her focus once her regular duties were completed, she says.

Williams recalls a time a potential truck client called her in the middle of a meeting with her supervisor.

“I’ve been in a meeting with my boss and my phone is ringing off the hook and he’s like, ‘do you need to get that?’” she says. In those cases, Williams says she tries to take the call after hours or send an prewritten reply so that she can respond later.

“You want to run your business and stay on top of it, but when you have a one- to two-hour conference call or meeting, you have to decide: are you going to screw over the person who is paying you?” she says.

After almost two years in operation, Williams caught the attention of a local reporter who wrote about her new venture. It wasn’t long before her employers found out.

The same day, her supervisor asked her into his office to be sure she wasn’t going to quit.

Now, she says, “[my co-workers] ask me ‘how is your trucking company going?’ in the middle of cubicle land.”

“I flip houses and sell bounce castles, and my employers have no idea.”

Austin, Texas-based Dennis* says he hasn’t quite mastered the ability to focus on his full-time job and ignore his side business until after work hours. The 31-year-old works as a logistics manager for a large technology company. About a year and a half ago, he and his wife took their savings and launched a real estate investing business.

Dennis and his wife buy, renovate, and resell homes. They learned the basics of house-flipping from a well-known investor in Austin. “Our first year we did 13 transactions,” says Dennis.

Excluding education and other startup costs, Dennis and his wife got into the market with $1,000 in direct mail advertising and about $15,000 spent fixing up their first property. They now earn between $20,000 and $50,000 on each home they flip. The couple says they brought in about $65,000 in 2016.

In 2016, Dennis also launched a pair of e-commerce stores, which sell bounce houses for children and clothing and accessories.

“I work on all three [projects] while I’m at my day job so it is hard, especially trying to keep everything a secret and not having co-workers see what I am truly working on,” Dennis says. “I know that I am not fulfilling my primary duties at my full-time job to the fullest extent of my abilities.”

To make things easier, the couple has hired a call center to take and record all calls from the real estate business, which are then addressed after Dennis comes home from work. He says he will do the same for the e-commerce stores as business grows.

His ultimate goal is to build up enough passive income to replace his corporate income. For now, he keeps his job for financial security, while he grows his e-commerce portfolio and his and his wife’s real estate business.

“The salary and stock incentives that we have right now are kind of hard to walk away from unless I had sufficient passive income that would replace what I have now,” he reasons. He has given himself two years to grow his businesses into self-sustaining operations. At that point, his stock in the company will be fully vested, and he can consider leaving for good.

“I’ve been blessed. I have a good education, and I’ve always had a good job, but ultimately my main goal in life is to be independent and not have to do the corporate grind,” he says.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Featured, How to Complain, Strategies to Save

Debt Buyers Reveal Just How Far They’re Willing to Go to Settle Unpaid Debts

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Tens of millions of Americans are pursued by debt buyers, speculators who buy the rights to collect their overdue bills. Yet few consumers realize this growing segment of the collection industry may offer them a chance to slash their delinquent debts by as much as 75%.

A MagnifyMoney investigation examined the business practices of debt buyers as detailed in disclosures to their investors. Here’s how the game is played:

  • Buyers purchase massive bundles of unpaid consumer debts with face values that often total billions of dollars. Those are the bills that banks, credit card companies, and other creditors give up trying to collect.
  • Those debts are bought at deeply discounted prices, averaging roughly 8 cents on the dollar.
  • The buyers only expect to recover a fraction of the original amounts owed. Their target is to recover from 2 to 3 times more than they paid.

The bottom line: Debt buyers can turn profits that meet their goals by collecting merely 16% to 24% of the original face values. That knowledge can be useful to savvy debtors who choose to negotiate a settlement for less.

Debt buyers “absolutely” have more flexibility in negotiating with consumers, says Sheryl Wright, senior vice president of Encore Capital Group, the nation’s largest debt buyer. Encore offers most debtors a 40% discount to settle, according to the company’s website.

“There could be an advantage in terms of negotiating a favorable settlement,” says Lisa Stifler of the Center for Responsible Lending, a nonprofit consumer advocate. “Debt buyers are willing to – and generally do – accept lower amounts.”

Stifler warned that debtors should be cautious in all interactions with debt buyers and collectors. (See “Tips to fight back against debt buyers and debt collectors” later in this article.)

In the world of debt buying, the numbers can vary. The price of bad debt portfolios ranged from 5 to 15 cents on the dollar during the past two years, according to corporate disclosures of debt buyers. The variables include the age of debt, size of account, type of loan, previous collection attempts, geographic location, and data about debtors – plus shifts of supply and demand in the bad debt marketplace.

What remains constant is the debt buyers’ goal of recovering 2 to 3 times more than the purchase price they pay for the accounts.

It is a different business model than that of traditional debt collection agencies, contractors that pursue bills for a percentage of what they recover. In contrast, debt buyers may often be more willing to wheel and deal to settle accounts with consumers.

Debt buyers raked in $3.6 billion in revenue last year – about one-third of the nation’s debt collections, according to the Consumer Financial Protection Bureau’s latest annual report.

Information is scarce on the inner workings of hundreds of debt buyers who operate in the U.S. An accurate count is not available since only 17 states require buyers to be licensed.

Of the more than 575 debt buyers that belong to the industry’s trade association, only three are publicly traded entities required to file disclosures last year with the federal Securities and Exchange Commission. MagnifyMoney looked into reports from two of those companies and found telling insights into an industry typically secretive about its practices.

An “Encore” of unpaid bills

Encore owns nearly 36 million open accounts of consumer debt in the U.S. through its subsidiaries Midland Credit Management, Midland Funding, Asset Acceptance, and Atlantic Credit & Finance.

During 2016, Encore invested $900 million to buy debt with a face value of $9.8 billion – or 9 cents per dollar. On average, the corporation recovers 2.5 times more than it pays for debt portfolios – the equivalent of 22.5 cents per dollar owed, according to its annual report to the SEC.

In that disclosure, the San Diego-based operation details how it tries to get debtors to pay.

Encore boasts that its proprietary “decision science” enables it “to predict a consumer’s willingness and ability to repay his or her debt.” It obtains “detailed information” about debtors’ “credit, savings or payment behavior,” then analyzes “demographic data, account characteristics and economic variables.”

“We pursue collection activities on only a fraction of the accounts we purchase,” stated Encore. “Consumers who we believe are financially incapable of making any payments … are excluded from our collection process.”

The rest of the debtors can expect to hear from Encore’s collectors. But the company knows most won’t respond.

“Only a small number of consumers who we contact choose to engage with us,” Encore explained. “Those who do are often offered discounts on their obligations or are presented with payment plans that are intended to suit their needs.”

While the company offers most debtors discounts of 40% to settle, relatively few take advantage of that opportunity.

“The majority of consumers we contact do not respond to our calls and letters, and we must then make the decision about whether to pursue collection through legal action,” Encore stated. In its annual report, the company disclosed it spent $200 million for legal costs last year.

In a written response to questions from MagnifyMoney, Encore refused to reveal the number of lawsuits it has filed or the amount of money it has recovered as a result of that litigation.

“We ultimately take legal action in less than 5% of all of our accounts,” says Wright. If Encore has sued 5% of its 36 million domestic open accounts, the total would be roughly 1.8 million court cases.

Portfolio Recovery Associates has acquired a total of 43 million consumer debts in the U.S. during the past 20 years. Behind Encore, it ranks as the nation’s second-largest debt buyer.

Its parent company, PRA Group Inc. of Norfolk, Va., paid $900 million last year to buy debts with a face value of $10.5 billion – or 8 cents on the dollar, according to its 2016 annual report. Its target is to collect a multiple of 2 to 3 times what it paid.

It is a high-stakes investment. The company must satisfy its own creditors since it borrows hundreds of millions of dollars to buy other people’s unpaid debts. PRA Group reported $1.8 billion in corporate indebtedness last year.

PRA Group declined an opportunity to respond to questions from MagnifyMoney. In lieu of an interview, spokeswoman Nancy Porter requested written questions. But the company then chose not to provide answers.

Asta Funding Inc., the only other publicly traded debt buyer, did not respond to interview requests from MagnifyMoney.

Tips to fight back against debt buyers and debt collectors

All types of bill collectors have a common weakness: They often know little about the accounts they chase. And that’s a primary reason for many of the 860,000 consumer complaints against collectors last year, according to a database kept by the Federal Trade Commission.

Be sure the debt is legitimate first

In dealing with collectors, you should begin by questioning whether the debt is legitimate and accurate. You can also ask who owns the debt and how they obtained the right to collect it.

In 2015, Portfolio agreed to pay $19 million in consumer relief and $8 million in civil penalties as a result of an action by the CFPB.

“Portfolio bought debts that were potentially inaccurate, lacking documentation or unenforceable,” stated the CFPB. “Without verifying the debt, the company collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.”

One unemployed 51-year-old mother in Kansas City, Mo. fought back and won a big judgment in court.

Portfolio mistakenly sued Maria Guadalujpe Mejia for a $1,100 credit card debt owed by a man with a similar sounding name. Despite evidence it was pursuing the wrong person, the company refused to drop the lawsuit.

Mejia countersued Portfolio. Outraged by the company’s bullying tactics, a court awarded her $83 million in damages. In February, the company agreed to settled the case for an undisclosed amount.

Challenge the debt in writing

Within 30 days of first contact by a collector, you have the right to challenge the debt in writing. The collector is not allowed to contact you again until it sends a written verification of what it believes you owe.

Negotiate a settlement

If the bill is correct, you can attempt to negotiate a settlement for less, a sometimes lengthy process that could take months or years. By starting with low offers, you may leave more room to bargain.

Communicate with collectors in writing and keep copies of everything. On its website, the CFPB offers sample letters of how to correspond with collectors.

As previously noted, debt buyers generally have more leeway to negotiate settlements since they actually own the accounts. A partial list of debt buyers can be found online at DBA International.

In contrast, collection agencies working on contingency may be more restricted in what they can offer. They need to collect enough to satisfy the expectations of creditors plus cover their own fee.

As part of a settlement, the debt buyer or collector may offer a discount, a payment plan allowing the consumer to pay over time, or a combination of the two.

“Through this process, we use a variety of options, not just one approach or another, to create unique solutions that help consumers work toward long-term financial well-being and improve their quality of life,” says Encore’s Wright.

A settlement doesn’t guarantee the debt will be scrubbed from your credit report

To encourage settlements, Encore recently announced that it would remove negative information from the credit reports of consumers two years after they paid or settled their debts. Traditionally, the negative “tradelines” remain on credit reports for seven years.

“We believe the changes in our credit reporting policy provide a tangible solution to help our consumers move toward a better life,” says Wright.

However, Encore’s new policy does nothing to speed up the removal of any negative information reported by the original creditor from whom the company bought the debt.

Check your state’s statute of limitations on unpaid debts

Before any payment or negotiation, check to see if the statute of limitations has expired on the debt. That is the window of time for when you can be sued; it varies from state to state and generally ranges from three to six years.

If the statute of limitations on your debt has expired, you may legally owe nothing. If the expiration is nearing, you can have extra leverage in negotiating a settlement. But be careful: A partial payment can restart the statute in some states and lengthen the time a black mark remains on your credit record.

Respond promptly if the company decides to sue

If you are sued over the debt, be sure to respond by the deadline specified in the court papers. If you answer, the collector will have to prove you owe the money.

If you don’t timely answer the complaint, the burden of proof may switch to you. A judge may enter a default judgment against you – or even sign a court order to garnish your paycheck.

Seek help from a lawyer or legal aid service if you have questions, but be careful of where you turn for help. The CFPB warns consumers to be wary of debt collection services that charge money in advance to negotiate on your behalf. They often promise more than they can deliver and get paid no matter what happens.

Mark Lagerkvist
Mark Lagerkvist |

Mark Lagerkvist is a writer at MagnifyMoney. You can email Mark here

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Featured, Life Events, News

MagnifyMoney 2017 Survey of Recent College Graduates

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An estimated 1.8 million college students will make up the U.S. class of 2017. The first few years — even the first few months — after college can feel like a financial land mine as graduates figure out how to manage their finances independently.

To give this graduating class a leg up, MagnifyMoney asked 1,000 recent college graduates to tell us what they wish they had done differently in those crucial years after graduation.

Among the most popular regrets were not being careful about debt/missing debt payments (48%) and not building their credit score up sooner (40%). One in five graduates also said they wished they had been better about saving money.

Missing a credit card or student loan payment even once can result in lasting credit score damage, and a lower credit score can make it difficult to get approved for new credit down the road.

Looking closely at the results of our survey, we can understand why so many college graduates may be struggling to stay on top of their bills — especially those who graduated with student loan debt.

Student Debt: A gateway to credit card debt

The vast majority of our survey respondents (61%) said they left school with student loan debt. On average, graduates with student loan debt said they carried $35,073.

We found some troubling trends among those with student loan debt. Not only are they more likely to say that they did not feel like they were better off their parents at their age, but they are also more likely to carry large loads of credit card debt.

More than half (58%) of graduates without student loan debt say they believe they are better off now than their parents were at their age. Graduates with student loans were less likely to agree with that statement. Half (52%) of college graduates with student loans say they are better off than their parents were at their age.

According to our survey, college graduates who left school with student loan debt were more likely to wind up in credit card debt down the road, as well.

  • 59% of all college graduates reported having credit card debt.
  • But 67% of recent grads with student loan debt report having credit card debt, versus 44% of those without student loans.
  • 20% of recent grads with student loans report credit card debt of $10,000 or more, almost twice the rate of those without student loans (11%).
  • And 24% of recent grads with $50,000 or more in student loans report having $10,000 or more of credit card debt.

2 in 5 will need longer than 10 years to pay off their student loans

A significant percentage of student loan borrowers expect to take longer than the standard 10 year repayment timeframe to pay off their loans.

  • 40% of recent grads with student loans anticipate that they’ll need more than 10 years to repay their student loans. For context, the standard repayment period for federal student loans is 10 years, however, we did not ask survey respondents what type of loans they carried (federal or private).
  • Among the grads who report more than $50,000 in debt, just 26% say they will pay off loans within 10 years. And 41% believe they will take more than 20 years, or never pay off their student loan debt.
  • Among all student loan borrowers, 7% said they will “never” be able to pay off all the debt.

Optimism for the future

One thing graduates seem to have in common — whether they carry student debt or not — is a shared sense of optimism for their futures.

  • 65% of grads without student loans feel they will be better off than their parents in the future.
  • 64% of those with student loan debt also feel they will be better off than their parents.

Even among recent graduates with the burden of $50,000 or more in debt, 60% believe they will be better off financially than their parents in the future.

Those with Master’s degrees are most confident, with 68% saying they will be better off than their parents, versus 64% of Associate’s and Bachelor’s degree recipients.

Top 3 tips to manage debt after college

Know your options. If you are struggling to pay down your student loan debt, find out if you qualify for flexible repayment options like income-driven repayment plans. Students with high-interest student loan debt can consider refinancing to lock in a lower interest rate.  Here are the top 19 places to refinance student debt in 2017.

Stay on top of your payments. Student loans will be reported on your credit report after you graduate. By making on-time student loan payments, you are already taking one of the most powerful steps toward building a solid credit score. If you fear you will miss a payment, contact your loan servicer right away. Even one missed payment can derail your credit score.

Build your credit score strategically. A 2014 study by MagnifyMoney found that the average college student will face credit card APRs of 21.4%. Carrying a balance with an APR that high can quickly lead down a long road of unmanageable credit debt. A simple way to build credit is to take out a credit card, charge small amounts each month and pay it off in full. To avoid relying on credit card debt, set money aside from your paycheck for emergencies.

Methodology

MagnifyMoney conducted a national online survey of 1,000 U.S. residents with college degrees who reported completing their most recent degree within the last five years via Pollfish from April 26 to 30, 2017.

MagnifyMoney
MagnifyMoney |

Have a question to ask or a story to share? Contact the MagnifyMoney team at info@magnifymoney.com

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Featured, Life Events, News, Strategies to Save

How Much Should I Spend on a Wedding Gift?

Editorial Disclaimer: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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When Alston Waldrip was in law school and money was tight, she thought creatively about how to buy wedding presents. For one couple, she bought a cast iron skillet for $15 and hand-decorated a sign with their last name. For another, she and several female friends each contributed $20-$25 for a bedding set.

Waldrip, now an attorney in Gainesville, Ga., kept all that in mind when she picked items with a range of prices for her November 2017 wedding registry. The lowest starts at just $16, for a bottle opener from Anthropologie.

“I would feel so guilty if someone were to pay out of their means for me,” Waldrip says. “I try to be really respectful of that.”

But how much money should you spend on a wedding present for someone? And how do you balance that cost with the other financial investments associated with attending a wedding?

Spending Guidelines: Replacing Something Old with Something New

One old gift-buying rule you can ignore is to spend as much as the cost of your plate at the reception, plus the cost of your guest’s meal, if you bring one. Nancy Mitchell, founder of The Etiquette Advocate, an etiquette training and consulting firm in Washington, D.C., says she thinks using this guideline is a mistake.

“How in the world would you know how much someone is spending on the reception and the per-person cost for the reception?” she says.

The Knot, a wedding-planning website, conducted a survey of 15,000 brides and suggested people spend $50 to $75 for co-workers and distant friends and family, $75 to $100 on friends and relatives, and $100 to $150 on close friends and relatives.

A 2016 survey by FiveThirtyEight.com polled over 1,000 people and found that, on average, people spent $50 on friends, $82 on close friends, $71 on extended family, and $147 on close family.

Mitchell says these numbers are reasonable, but emphasizes that outlining exactly how much to spend is difficult since each person’s income and resources will differ.

“I probably range from $30 if I don’t know them very well, to $50 to $75 if I know them a little better, at this point in my life,” Waldrip says.

If you’re invited to the wedding of someone with a much higher income — your boss, for example — don’t think about how much that person could afford to spend on a gift for you. Follow the general rule to spend within your means, Mitchell says.

Create a Gift Budget

Many millennials are at a point in their lives when it seems everyone they know is getting engaged, getting married, or getting pregnant. Dominique Broadway, a financial planner in Washington, D.C., who works with millennials, says setting up a monthly gift budget can prevent you from overspending.

“You need to figure out what works for you and don’t try to force yourself to walk in with the biggest, grandest gift,” she says. “You need to figure out what you can actually afford.”

Broadway says to sit down and figure out exactly what your expenses are every month and determine how much of your leftover income should be allocated to gifts for weddings, as well as baby showers and birthdays. The gift amount could be anywhere from $25 to $100 a month, depending on your financial situation.

“Buy your gift in advance if you are going to buy a gift,” Broadway added. “I think a lot of times the reason people overspend is because they’re literally picking something up on the way to the wedding.”

Kate Zepernick and her husband, Trey, attended 12 weddings last year. Zepernick, founder of TheBrideBoss.com, a website that helps brides set up wedding budgets, says she has a monthly gift budget. She purchases gifts ahead of time so she’s actually using that money each month.

“Even if a wedding is in July, I may not have a wedding in April and I may go ahead and purchase a gift for that July wedding in April so I drain that portion of my budget,” Zepernick says.

Allocate Travel Funds Early

In addition to buying the present, wedding guests may have to spend more on hotels and travel, such as airfare or gas, if the wedding is out of town.

A 2016 American Express survey of 1,800 people found that, on average, Americans attend three weddings a year and spend about $703 on each. Millennials, as a cohort, spent about $893 per wedding. And millennials who were in a wedding spent closer to $928.

Broadway says if you know you’re going to have to travel for a wedding, start researching the costs and setting aside money as soon as you get the save-the-date. She recently worked with a client who was going to travel to a wedding in September, another in October, and another in November. They worked together to figure out a ballpark figure of what each wedding would cost so the client could start saving right away for not just the travel but also the gifts.

Zepernick, who lives in Atlanta, says she starts planning even earlier by keeping an eye on social media.

“I keep a mental note when I see someone get engaged and I think I’ll be invited,” she says. “I try to keep a mental note: ‘You’re from Atlanta, that’s not going to be travel for me. OK, you’re from Ohio, that will be travel.’”

Calculate Wedding Party Costs

If you’re in the wedding party, costs like the bridesmaid’s dress, tuxedo rental, and travel to the bachelor or bachelorette party can add up even further. Don’t forget about potentially spending on pre-wedding gifts.

A 2015 American express survey found on average Americans treated their closest friends and family members well by spending $77 for bridal shower gifts, $86 for bachelorette/bachelor party gifts, and $89 for engagement party gifts.

Mitchell says proper etiquette does call for bringing a separate gift to the wedding. But if you’re buying additional gifts for the couple throughout their engagement, it’s OK to spend a little bit less on the actual wedding present.

“It just does not have to be the most expensive thing on the wedding registry,” Mitchell says.

Contributing to a group gift from the wedding party can also help you save money while making sure the couple receives a big-ticket item from their registry.

Zepernick, who is a maid of honor in a friend’s upcoming wedding, says she’s been “showering her with gifts throughout her entire engagement period.”

“It’s more important to me to be kind of consistently doing that than to kind of blow it all on a big gift at the end,” she says.

Jeanette Kazmierczak
Jeanette Kazmierczak |

Jeanette Kazmierczak is a writer at MagnifyMoney. You can email Jeanette here

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11 Sephora Savings Hacks Everyone Needs to Know

Editorial Disclaimer: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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If you can name your top 5 favorite beauty vloggers on YouTube, you’ve probably heard of a little makeup wonderland called Sephora. Bonus points if you’ve ever walked into the makeup emporium to touch up your brows with a free sample and left half an hour later and $100 poorer.

The LVMH-owned beauty store has been fairly successful since it first opened in 1969. It currently boasts 2,000 retail stores worldwide and around 15,000 of your favorite products. All of that revenue doesn’t have to come at the expense of your wallet.

We’ve done some digging to find 12 ways you can save money the next time the smell of perfume whisks you into your local Sephora retailer’s checkout counter with your credit card in hand.

  1. Loyalty Pays

Sephora is good to those who are loyal to the brand. Save on products and services when you sign up for the retailer’s loyalty program, Sephora Beauty Insider.

When you sign up, you’ll get points for each dollar spent in-store and online. The program has three tiers: Beauty Insider, VIB, and VIB Rouge, depending on how much money you spend with the leading makeup retailer.

Beauty Insiders — aka Sephora shoppers who spend less than $350 a year — get a free birthday gift and free classes, plus the option to pay $10 a year for unlimited free shipping privileges. VIBs, or Very Important Beauty Insiders, get all of the above plus additional exclusive savings and one free custom makeover for an annual $350 spent on merchandise.

Spend $1,000 a year in merchandise purchases, and you’re rewarded with the VIB Rouge level. Rouge offers all of the aforementioned perks, but you won’t need to pay the additional $10 a year for unlimited free shipping. You’ll also get other exclusive perks like unlimited custom makeovers.

  1. Get freebies by scanning the Beauty Deals page

Sephora has an entire page of its website dedicated to savvy shoppers like yourself. It’s appropriately titled Beauty Deals. It’s a little tricky to find the deals page as there isn’t a direct link to the page on Sephora’s home page, so make sure to bookmark www.sephora.com/beauty-deals.

It’s where you’re sure to find all of Sephora’s promotional codes for additional discounts and samples. You’re allowed a maximum of three free samples at checkout.

  1. Buy gift sets to save on individual products

If you’re going to purchase one or two items from a product line, you might be better off just buying a gift set. For example, the Yves Saint Laurent Black Opium Beauty Gift Set will run you $100 and comes with the Black Opium Eau de Parfum ($91), Rouge Pur Couture lipstick ($37), and Mascara Volume Effet Faux Cils ($32).

$91 + $37 + $32 = $160 value.

By getting the set, you’d save $60.

  1. Size up and save

If you buy something regularly, purchase the value size rather than smaller sizes. You’ll almost always spend less per ounce that way. For example, the regular 4.2-oz. bottle of Clinique’s Dramatically Different Gel will run you about $6.24 per ounce, whereas the smaller, half-ounce travel size option costs about $10 per ounce.

  1. Stock up on free samples in store

If you want to try out a product that’s way, way, out of your normal price range, get a free sample in-store to try before you buy. That way you won’t waste the full-size perfume you bought because of the brand more than the scent.

You are allowed up to three free samples per department in-store, and can get even more freebies online with beauty deals. Make sure to take home a sample of that expensive foundation to see if you can apply it as smoothly in your bathroom as the artist did in the store’s lighting.

Samples can also come handy when you’re traveling. So stop by Sephora and stock up on samples instead of travel-size bottles for short vacations.

  1. You can and should return products you don’t like

If you didn’t follow amazing aforementioned advice to try before you buy, it’s OK, I don’t listen to my mom either. What’s great is that at Sephora, you CAN make returns, even on makeup. Learn the return policy: you can return opened goods within 60 days in gently used condition.

  1. Shop out to in, bottom to top

Like at grocery stores, products are arranged at Sephora so that you see what costs the most, first. Check out items on the outer edges and on the bottom shelves first. They are typically cheaper than the ones you’ll see displayed at eye level according to Real Simple.

  1. Shop semi-annual sales

Sephora holds major semi-annual sales twice a year. This is another instance where your loyalty pays. Only Beauty Insiders get access to the major sale, when products are up to 20% off. The semi-annual sales typically happen in the spring and fall, usually mid-April or mid-November, and the sales normally last a few days.

  1. Use discounted gift cards

Purchase a gift card someone else is getting rid of at a discount before you shop. You can buy discounted gift cards for Sephora or department stores like Macy’s or JC Penney’s with in-store Sephora counters.

To find discounted gift cards, use sites like Gift Card Granny, which aggregates discounted gift card offers from around the web for you. Other great resources are Raise, WalletWhiz, and Cardpool.

Right now, we found Sephora gift cards available for up to 9% off through Gift Card Granny.

  1. Download a rebates app

You can get even more of the money you spent at Sephora when you shop using rebate smartphone apps like Ibotta or Checkout 51. For example, when you take a picture of your receipt after spending at least $50 at Sephora, you get $5 back on Ibotta.

With Checkout 51, you’ll browse local offers at stores, then take a picture of your receipt, and your savings will be credited to your account. When your account hits $20, you can cash out.

  1. Learn to DIY

You can save a lot of time and money on makeovers at Sephora by learning a few of the artist’s tricks yourself. Learn how to sculpt the perfect brow or apply flawless foundation at one of the retailer’s free 2-hour beauty classes.

Check online or ask the manager at your local Sephora for find out when and how to sign up for classes. If you have about 15 minutes and want a more personal experience, you can have a professional explain their process to you during a mini-makeover any day.

  1. Like, follow, subscribe

Following Sephora on its social media channels is the most obvious and easiest way to save on goods and snag freebies. Look out for posts on Sephora’s Facebook and Pinterest accounts to hear first about current sales and free samples.

 

 

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Featured, News, Strategies to Save

How the 72-Hour Rule Can Help You Save Money

Editorial Disclaimer: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Clock time deadline

How often do you make an impulse purchase, only to regret it the next day?

Journalist and money expert Carl Richards  came up with the “72-hour rule” to kick his habit of buying every book he wanted on Amazon, ending up with a pile of unread books.

Now, he says he lets a book sit in his shopping cart for at least 72 hours before hitting “buy,” and he’s saving money only buying books he will actually read. You can apply a similar practice to your spending habits.

Why wait 72 hours?

Our brains respond positively to instant gratification. It’s why so many of us find it difficult to save money or lose weight. We want the item or food now, and when there’s nothing stopping us, why wait?

You need the space between receiving the money and spending it to think. The shorter that space is, the less time you have to think and the more likely you are to spend the funds impulsively.

Tax refunds are a prime example of a time when it can be tricky to control your urge to spend. Tax refunds averaged $2,860 in 2016, according to the IRS. This year, a SunTrust survey found about 1 in 4 Americans already planned to spend their refund money on a large purchase before they even received the funds. That proportion rises to 36% among millennials and 40% among Gen-Xers, according to SunTrust.

“People often look at their tax refund as found money like lottery winnings or inheritance. The temptation to spend surprise money on something fun or frivolous is strong,” says Denver, Colo.-based Certified Financial Planner Kristi Sullivan.

You want to avoid doing that. Your tax refund isn’t lottery winnings or an inheritance. It’s your hard-earned money being returned to you with no interest gained.

That’s not great, considering the average citizen admits they can’t pull together $400 in case of an emergency.

James D. Kinney, a financial planner in Bridgewater, N.J., says “hitting the pause button on spending impulses gives the rational brain time to think” of more practical ways to use the money like getting out of debt, contributing to a college savings fund, or adding to your savings.

Although he acknowledges when you’re living paycheck to paycheck, it’s a little harder to resist a sudden — albeit predictable — boost to this month’s budget.

“People feel constrained by their paycheck all through the year, then suddenly this windfall of money gives them the ability to splurge. The temptation can be hard to resist,” says Kinney.

Here are a few ways you can manage the temptation, and the time.

Make your priorities clear

Once you know what your financial goals are — whether they are saving up for a new car or paying down student debt — the key is to look at every financial choice and determine whether or not it will help or hurt your progress toward that goal.

“A need that you haven’t already bought is rare. Wants are everywhere. Time to reflect might have you making a more mature decision with your money,” says Sullivan.

Do some soul searching to see where your financial priorities lie. You might find your need to pay off your credit card this month to avoid paying more in interest outweighs how badly you want that new gadget. Think about it.

Emergency fund and debt comes first

“Sit down and think about other pressing financial issues, and how you plan on paying for them,” says David Frisch, a Melville, N.Y.-based financial planner. He suggests you review bank statements, brokerage accounts, long-term goals, and other financial considerations, then give some thought to whether or not you’re on track to achieve them.

For example, if you realize you don’t have enough in your emergency fund to cover three to six months of expenses, you might decide to put the money there instead of spending it. Or, if your refund could completely pay off a high-interest debt like a credit card, you might decide to free yourself from the debt burden.

Treat yourself

Holding back on purchasing something you really want can be painful, but it doesn’t have to be complete torture. Sullivan suggests taking the edge off with a small reward for each day you wait. It’s a lot like crash dieting, which experts agree never works. If you deprive yourself of too many small pleasures for too long, you might see a donut one day (or maybe that new iPhone) and not just buy one but the whole dozen. But if you have a treat once in awhile, you might not be as likely to binge later.

Just make sure the reward you choose isn’t too expensive, and you should avoid getting into more debt. Your “reward” could serve as a break while you comb through your finances.

The takeaway

Take some time to think before spending whenever you receive unexpected income, and you might make better spending decisions. Maybe you need only 24 hours, instead of 72, or maybe you need a little longer to decide what to do with money, but the same lesson applies. If you’re considering a purchase that’s a “want” and not a “need,” think before you buy.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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