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Investing, Life Events

Great Financial Planning Networks for Millennials

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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It’s often said that if customers speak, the market will listen. Well, when it comes to financial planning, millennials have spoken, and they’ve made it clear the planning and advisement services of generations past will not suffice.

And true to form, the market has responded. After years of shunning or altogether shutting out clients in their 20s and 30s, or at best, attempting to force-feed them the same services as their parents, the finance industry is in the midst of an about-face, as a host of new and innovative financial planning networks designed specifically for the younger generation are making waves in the marketplace.

It’s that last point that matters most. Millennials don’t want just any financial planning services. They want services designed specifically for them. So, what exactly does financial planning designed specifically for millennials look like? In keeping with the millennial spirit, there are no official guidelines, but when you build a shortlist of the best financial planning networks for millennials (we’ll do just that momentarily), you notice they generally revolve around a few core principles. For the most part, they’re all:

  • Millennials seem impervious to sales pitches and are highly cognizant of hidden costs. They want to know exactly how much they’re paying and what they’re getting in return. This means fee-based financial services are a must.
  • Inclusive and flexible. The best planning networks for millennials welcome clients regardless of how much they have to invest or where they’re investing it from. In other words, no required minimum deposits, and no geographic restrictions.
  • Education oriented. Millennials aren’t interested in being told what to do. They want financial advisers to be more like coaches — or better still, partners.
  • Digital and social. Suit-and-tie meetings behind the closed doors of a stuffy office are not for millennials. Millennials want to socialize, interact, and share ideas where they feel most comfortable — online and on their smartphones.

In some form or another, the best financial planning networks for millennials connect in ways traditional approaches never could.

Here are two standouts:

XY Planning Network

The XY Planning Network is a network of fee-only financial advisers who focus specifically on Gen X and Gen Y clients. There are no minimums required to get started as a client, and advisers in the XY Planning Network are not permitted to accept commissions, referral fees, or kickbacks. In other words, no high-pressure sales pitches or hidden agendas. Just practical financial advice doled out at a flat monthly rate. The organization is location independent offering virtual services that enable any client to connect with any adviser regardless of where they reside.

Garrett Planning Network

A national network featuring hundreds of financial planners, the Garrett Planning Network checks many key boxes for millennials. All members of the Garrett Planning Network charge for their services by the hour on a fee-only basis. They do not accept commissions, and clients pay only for the time spent working with their adviser. Just as important for millennials, advisers in the Garrett Planning Network require no income or investment account minimums for their hourly services.

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Best of, Life Events, Personal Loans

Top 4 Personal Loans for an Engagement Ring

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.

Engagement ring

Updated November 08, 2017
Getting engaged is an exciting yet nerve-wracking milestone. You’re eager for your partner to say “yes” and hoping she’s impressed by what she sees when you open the box.

The best way to afford the ring of her dreams is planning early and saving up. Financing an engagement ring should be your absolute last resort. After all, there are other larger expenses that come after marriage including moving, buying a home or starting a family that you could spend that money on instead.

Still, if you decide financing is right for you, here are a few personal loans that provide funds for engagement rings:

Earnest

Rates from 5.25% APR

Earnest has the lowest interest rate of the loans on our list and no origination fee. Loan terms are 1, 2 and 3 years. Earnest will lend you $2,000 to $50,000. Other than your credit score, Earnest will look at your income, education, earning potential and other factors to decide if you’re eligible for the loan. There’s no origination fee and no prepayment penalty. There is, however, a hard pull of your credit report.

Earnest could be a good option if you have limited credit history, but an offer letter or current position that pays you more than enough money to cover loan payments. After submitting an application, you’ll get a response within 2 business days.

LendingClub

Rates from 5.99% APR

LendingClub is a peer-to-peer loan marketplace where people who need to borrow money are matched up with investors. You can get a loan for up to 5 years. You can borrow up to $40,000. The origination fee is 1% to 6%. Your origination fee is assigned based on your credit profile. The higher your credit score the less you’ll pay for origination. You can check to see if you’re approved and your rate without harming your credit score.

After applying for LendingClub, peer investors will see your profile in the marketplace and hopefully fund your loan. Once your loan is funded by investors and your application documents check out, you’ll get the money wired to your account.

To get the very best rates through LendingClub you’ll need an excellent credit history, low debt-to-income ratio and a high credit score among other factors.

LendingClub loans are not available in Iowa or West Virginia.

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Karrot

Karrot is not currently offering new loans. Should you have an outstanding loan, Karrot states they are still servicing those loans.

Karrot gives out personal loans from $5,000 to $35,000. Loan terms range from 3 to 5 years. The loan has an origination fee of 1.05% to 4.75% that’s non-refundable and deducted from the loan upfront. Karrot doesn’t charge prepayment penalties. Other than origination, fees will only come into play if you skip out on a payment, have a check returned or request copies of your loan documents.

Shopping for loan rates on the site won’t ding your credit score. Karrot doesn’t go into specifics about the credit score you need to qualify, but you do need to at least have a credit history and a bank account to verify your income.

Prosper

Rates from 5.99% APR

You can borrow as little as $2,000 and up to $35,000 from Prosper, another peer-to-peer lending marketplace. Loan terms are 3 and 5 years. Prosper loans have a 1% to 5% origination fee, but no prepayment penalties.

At a minimum, you must have a 640 FICO score to qualify for Prosper. You also need to have a debt-to-income ratio less than 50%. Shopping for rates with Prosper won’t impact your credit score either.

Honorable Mention – LendingKarma

LendingKarma isn’t a lender. Instead, it’s a site that manages loans between people who know each other. As a rule of thumb, you should avoid borrowing or lending money to friends and family since involving money in relationships tends to cause drama.

But, if someone you know agrees to help out and you’re both on the same page, LendingKarma can make your life easier. LendingKarma takes care of the logistics of borrowing including the contract, payment schedule and friendly reminders. The fee for contract administration is paid one time and $50 to $100 per loan.

Final Thought

Financing an engagement ring is not something we recommend. It’s just not worth going into debt over. Explore all of your options instead. Here are a few:

  • Get what you can afford in cash now and upgrade when you have more money.
  • Try unclaimed diamond and discount jewelry stores to get a deal.
  • Skip the diamond altogether for gems that are a little more affordable like amethyst or sapphire. These gems are popular now anyway.
  • Buy a stone similar to a diamond like moissanite or a replica until you can get a real one. If you choose a “fake” starter ring, make the decision as a couple. You don’t want her to find out from another source that her ring isn’t a true diamond.

At the end of the day, an engagement ring is supposed to symbolize commitment. Sadly in some ways it’s morphed into a symbol of status. That doesn’t mean you should feel pressured to get a ring (or ask for a ring) you can’t afford. Do what’s best for you.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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Best of, Life Events, Reviews

Wedding Loans: Find Better Options with Lower Rates

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.

Frugal Wedding

Updated November 03, 2017
Did you know that the average cost of a wedding in the United States is around $31,200? That’s the number uncovered in a 2014 survey conducted by The Knot, a top resource for wedding planning. A figure that doesn’t even include the honeymoon.

If you’re planning a wedding, you’re probably well aware that your big day isn’t likely to be cheap, especially if you have a guest list that exceeds 100.

So what can you do if you can’t afford your dream wedding and aren’t willing (or ready) to compromise on cost? You may have already come across wedding loans, but it’s important to know a few things before you sign for one.

This guide is intended to walk you through the pros and cons of a wedding loan, what to look out for with lenders, other methods you can use to affordably finance your wedding, and finally, what alternatives are available if you realize that a loan isn’t the right option for you.

Wedding Loans Are Personal Loans in Disguise

When searching Google for “wedding loans,” you’ll find plenty of lenders offering them. However, you should know that a wedding loan is really just a personal loan that anyone can get. They’re not specifically meant for weddings. In fact, if you fill out an application for a personal loan and have to choose the purpose of the loan, you’ll likely have a few options to choose from.

Lenders are aware that people are searching for “wedding loans” just like they’re searching for “home renovation loans” and “vacation loans.” They create these specific pages you find for those keywords (so they get more search engine traffic), when they actually offer more than just wedding loans.

What this means is that you should broaden your search to all personal loan lenders. You don’t have to specifically search for wedding loans as, in most cases, you can use a personal loan for a wedding (or anything, for that matter). The good news is that there are plenty of personal loan lenders out there for you to shop around with.

What to Watch Out For

As with any loan, you want to get the lowest APR possible. Unfortunately, because lenders have these “wedding loan” pages, you may not be aware that other types of loans are offered at a lower APR. If you find yourself on such a page, try going to the lender’s homepage to see how the rates compare.

promo-personalloan-halfFor example, upon searching “wedding loans,” Karrot’s wedding loan came up in the results. The landing page says it offers APRs as low as 8.99%, but if you visit the main page, you’ll see that personal loans are available with APRs starting at 6.44%. For the most part, the APR you’re eligible for won’t depend on the purpose of the loan; it will depend on your credit history. It’s worth digging deeper so you’re not caught paying more than you have to.

As you go through search results, you may also find that there are sites specifically for wedding loans that are a bit misleading. For example, MyWeddingLoans.com looks like a legitimate site, but when you click “apply,” it leads to LendingClub’s website.

The URL of the application also contains a “partner ID,” which means it’s an affiliate of LendingClub and receives a commission every time someone applies through that link. MyWeddingLoan discloses this in the fine print on its “Terms of Use” page. It’s important to know that MyWeddingLoans isn’t the actual lender or the company you’ll be dealing with if you obtain financing.

Other “wedding specific” lenders, such as Promise Financial, claim there are no hidden fees and prepayment penalties. While its fees aren’t necessarily “hidden,” there are fees to watch out for, such as an origination fee. You need to make sure you read the fine print for any loan you’re considering; otherwise it may cost you more.

[Four Times You Shouldn’t Use a Personal Loan]

What Will a Wedding Loan Cost You?

Do you think weddings are expensive? Then you should know how costly personal loans are. You’re going to pay interest on your loan, which means you’ll end up paying more than what you borrow. Let’s look at an example.

Say you want to finance $20,000 of your wedding as you’ve already saved $10,000. $20,000 on a 3-year term at a fixed APR of 7.246% results in a monthly payment of $619.79. You’ll pay a total of $22,312.44. If you choose a 4-year term at a fixed rate of 8.247%, your monthly payment will be $490.58, for a total amount of $23,547.84.

Both of these are actual examples, and in each case, you end up paying a few thousand dollars in interest. The APR you’re eligible for is largely based on your credit score. Having a higher credit score and a longer credit history will make lower APRs available to you.

If you’re absolutely set on borrowing money for your wedding, then it literally pays to increase your credit score prior to applying for a personal loan. Do yourself a favor and check your score using a free tool like Credit Karma or Credit Sesame, and download your free credit report at annualcreditreport.com. Is your score below 700? Then have a look at 6 ways you can improve your credit score before you shop for a loan.

As you’ll see below, some lenders have APRs with a large range. To get on the lower end of that range, you should have a score close to 700. Having a score below 600 will put you on the high end of the range, which will make the loan less affordable.

Least Expensive Wedding Loan Options – Good Credit Required

These lenders are your best bet if you must take out a personal loan to afford your wedding. They have the lowest APRs, lowest fees, and the most flexibility. These are all online lenders for a reason – traditional banks tend to have pricier personal loans.

We recommend shopping around to all the lenders that make the most sense for your situation. Similar inquiries to your credit made within a 30-day period will only count as one inquiry, so your credit score won’t take too much of a hit.

SoFi: One of the leading online lenders in almost all categories, SoFi offers borrowers excellent terms. There’s no origination fee to worry about, and fixed APRs range from 5.49% to 14.24% if enrolled in autopay. Variable rates range from 5.19% – 11.34% with a cap of 14.95%. You can borrow a maximum of $100,000 (hopefully you don’t need that much for your wedding) on terms of up to 7 years. There’s no minimum credit score required, although your accounts should be in good standing.

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Earnest: Another good choice for personal loans, Earnest offers borrowers up to $50,000 on a 3-year term with no origination fee. You need a minimum credit score of 720 to be approved.

LightStream: You can borrow up to $100,000 on terms ranging from 2 to 7 years. APRs range from 5.99% to 15.69%, and there’s no origination fee. The minimum credit score needed to apply is 680. LightStream’s maximum APR is slightly higher than SoFi’s and Earnest’s, and it’s the only lender out of these choices that requires a hard credit pull.

Upstart: We recommend looking at SoFi and Earnest first, only because of the lack of an origination fee. However, if your credit isn’t the best, lenders such as Upstart can help. You can borrow up to $50,000 on a 3 or 5-year term with APRs ranging from 9.45% to 29.99%. Origination fees range from 3.655% to 8% depending on the terms of your loan, and a minimum credit score of 640 is required.

Prosper: This is a peer-to-peer marketplace where people can invest in your loan. As a result, requirements are a bit leaner, but you’ll pay for it with higher APRs and an origination fee. APRs range from 5.99% to 36.00%, origination fees range from 1% to 5%, and the maximum amount you can borrow is $35,000. You can borrow on 3 or 5-year terms, and need a minimum credit score of 640 to qualify.

LendingClub: Another great option is LendingClub, which has a minimum credit score requirement of 600. It works in much the same way as Prosper as it’s also a peer-to-peer marketplace lender. Again, you can borrow up to $40,000 for up to 5 years, and APRs range from 5.99% to 35.89%, with origination fees ranging from 1% to 6%. LendingClub is not available in Iowa or West Virginia.

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PenFed: Pentagon Federal Credit Union offers personal loans starting with a fixed interest rate of 9.99%APR for 36 months. You do need to be a member of the credit union, but anyone can become. You pay a one time dues to Voices for America’s Troops for $14 or National Military Family Association for $15 in order to become eligible for a PenFed membership.

As you can see, Upstart, Prosper, and LendingClub all have high APR caps. If your credit isn’t in the best shape, you’ll likely be approved for a rate on the higher end.

Also note that aside from LightStream and PenFed, all of these lenders allow you to apply for a pre-approval without a hard credit pull. That means you can see your potential terms before committing, and your credit score won’t be harmed in the process. Just remember that these rates and terms are estimated; those rates and terms may change after a hard credit pull.

[How to Create a Frugal Wedding]

Credit Card Options for Those With Good Credit

We wouldn’t normally recommend that you finance your wedding on a credit card, as purchase APRs are typically much higher than APRs on personal loans. However, if you have the means to pay off the debt quickly, then you might want to consider these 0% APR offers. This gives you a way to avoid paying interest on your debt for a short period of time.

Please keep in mind when using this method that you should be absolutely certain you could pay off the amount you finance within the 0% APR introductory period. If you don’t, you’ll be subject to very high interest rates after it expires, negating the entire point of this strategy.

For that reason, it’s a good idea to know how much you’re planning to finance beforehand. You can use that number to calculate how much you’ll have to pay per month to get your balance paid off. Make sure it’s realistic for your situation.

Citi Simplicity: This card has a 21-month 0% introductory APR. That means you have just shy of two years to pay off your balance before the regular purchase APR kicks in. The Citi Simplicity card also has no late fees, no annual fee, and no penalty APR if you’re late in making a payment. These benefits make it a great everyday use card after you’re done paying off your wedding charges.

Chase Slate®: With this card, you can save with no transfer fee and get a 0% introductory APR for 15 months on purchases and balance transfers made within the first 60 days. This is one of our favorite balance transfer offers.

If you don’t qualify for any of these offers, you can try checking around local credit unions and community banks for low interest credit cards. Many of our top recommendations have APRs ranging from 6.25% to 9%. While these aren’t ideal, they may be more affordable than a personal loan, depending on your credit.

Because credit cards are revolving debt, if you go this route, do not be fooled into making just the minimum payments. Do your best to pay extra and get the balance paid off within 3 years or less.

We also want to mention the possibility of using a 0% APR balance transfer offer. This should only be considered if you have strong credit (otherwise you might not be approved for one). If you must charge wedding expenses to your card and can’t pay them off right away, or you plan on using your credit card to finance most of your wedding, then you can still avoid paying interest with this option.

[Find the Best 0% APR Balance Transfer Offers Here.]

Top Wedding Loans for Those With Bad / Poor Credit

There are a few solutions available for couples with bad or poor credit that don’t qualify for any of the above offers, but they come with a hefty price tag. We’re hesitant to recommend going this route in the first place, but if your wedding can’t wait and you don’t have time to improve your credit score, these options might be worth looking at.

Avant: With no prepayment fee and APRs ranging from 9.95% to 35.99%, Avant could be a good option. You could borrow $2,000 to $35,000 and need a credit score of 580 to apply. Through Avant, you could get your money as soon as the next business day. Loans through Avant are available in all states except Colorado, Iowa, West Virginia, and Vermont.

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OneMain Financial: This company is known for making loans to those with less than stellar credit, and its rates reflect that reality. You can only borrow a maximum of $10,000 on terms of 3 or 5 years. While there’s no origination fee, the APRs range from 17.59% to 35.99%, and you need a minimum credit score of 600 to apply.

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FreedomPlus: With APRs ranging from 4.99% to 29.99%, this loan is similar to Avant in that you’re probably looking at an APR closer to 29.90%. There’s also an origination fee ranging from 1.38% to 5% that you need to watch out for. You can borrow up to $35,000on a term of up to 5 years, and need a minimum score of 600 to qualify.

Note that with the exception of Avant, all of these lenders use a hard credit pull when you check your rate. (Avant does not use a hard pull to check your rate, but will complete a hard pull if you decide to take out the loan).

Consider Creative Alternatives to Borrowing

As you can tell, financing all or part of your wedding may cost a lot more than you anticipated. If it’s at all possible, we suggest using one of the alternatives below as opposed to going into debt for your big day.

While it’s undoubtedly a day you want to remember forever, starting out married life with a bunch of debt (especially if you already have consumer debt or student loans to deal with) doesn’t feel great. It also doesn’t bode well for your relationship, considering arguments about money are a top reason for divorce.

Instead of taking chances with debt and your sanity, try these alternatives instead.

Hold off on the wedding: According to another survey conducted by The Knot in 2014, the average length of an engagement is 14 months. That’s not a long time to save up $10,000, let alone $30,000 (the estimated average cost of a wedding). That would take a monthly savings of $714 and $2,142 respectively. Instead of rushing to the altar, try lengthening your engagement to lessen the financial burden. Giving yourself more time to save is a wise idea; what’s the rush?

“Crowdfund” your honeymoon: We don’t literally mean asking strangers on the internet to fund your honeymoon, but you could ask your family and friends to “crowdfund” your honeymoon by using sites like Honeyfund. It’s a honeymoon registry that allows you to ask for cash from your wedding guests in a classier way, and hopefully, they feel more comfortable giving it. Remember, that $31,000 figure didn’t take the honeymoon into account. Now isn’t the time to go further into debt for your dream vacation.

Side hustle for extra money: If you’re really hurting for money, you need to find a way to earn more of it. Side hustling can be a great option if you have marketable skills that are in demand, especially online. These extra jobs should also be flexible – what’s better than working from home? You can also try picking up extra shifts at your job, working overtime, or getting a part-time job temporarily to cover costs. This doesn’t have to be forever; you just need enough stashed away in your wedding savings fund to cover your needs.

Reevaluate your wedding budget: Speaking of needs, are you going over your original wedding budget? Something might have to give. It’s time to take another look at it. For example, maybe you need to narrow your guest list down. Perhaps you need to reconsider your dream venue if it’s costing you an arm and a leg. Can you have DIY decorations and invitations? Postage often costs couples much more than they thought; classy invitations from Paperless Post can help offset that cost. The Knot has a list of common wedding expenses and what percentage of your budget can be expected to go toward each here if you need a comparison.

Know how to deal with deposits: Many items, such as the venue, food, and photography, will require a deposit. That means you don’t need to pay an overwhelming amount in one lump sum, but it does mean that you need to come up with something to reserve these things. If you have anything saved for your wedding, you should earmark it for deposits first to ensure you can pay the upfront cost.

You can pay for deposits with cash or check, but some advice says to pay via credit card to cover you in case something happens. As most deposits are non-refundable, if you’re unhappy with the services provided, or if services aren’t provided, you can contact your credit card company and dispute the charge as long as you do so within 60 days of the event. Some vendors and merchants might do wrong by you, and miscommunication can occur. Using your credit card gives you a better chance of recovering your money.

Of course, you should only charge expenses that you have the cash to cover. Putting your wedding expenses on a credit card and then not paying it off in full can be extremely expensive – the average credit card APR is 15%!

Remember to keep in mind that the deposit is only one portion of what you have to pay. You’ll need to come up with the rest of the funds prior to your wedding. Do your best to save up before then. If it helps, create a separate “wedding expenses” savings account so you won’t be tempted to raid it for another reason.

[How to Effectively Combine Income and Debts After Marriage]

Be Realistic and Create a Plan

You now have all the information you need to create a plan to fund your wedding. You might find that it’s not as easy as you thought it would be, but don’t let that dampen your spirits. If your wedding means that much to you, you’ll find a way to make it happen. Whether you take on side jobs to earn more, slash everyday expenses (such as cutting cable and brown-bagging lunch), or work toward improving your credit score, you can make room in your regular budget for your wedding.

Just stay realistic on costs and include your future spouse in all discussions pertaining to your finances. Now is the time to work as a team, not to surprise each other by going into debt to afford certain aspects of your wedding. Talk it through –your future spouse may have a great idea on how to lessen the financial burden of your wedding

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Life Events

How to Make a Career Change in Your 40s

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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Chandrama Anderson was the senior director at a technology start-up in the heart of Silicon Valley when she decided it was time for a career change. At the time, she was in her early 40s and grieving the recent deaths of her daughter and grandparents.

She decided she wanted to do what she called “work of the heart.” For her, that meant pursuing a career as a family therapist.

Having earned her undergraduate degree in journalism and creative writing, she would have to go back to school for a master’s in order to transition to psychology. She quit her lucrative job at the tech firm and enrolled at John F. Kennedy University in Pleasant Hill, Calif., where she earned a master of arts in counseling psychology/holistic studies over the course of three years.

Going back to school after working for 25 years was daunting, but she didn’t let the intimidation factor stop her.

“A person said to me, ‘You’ll be 48 when you’re a therapist,” she recalls. “I replied, ‘I’ll be 48, or I’ll be 48 and be a therapist.’”

Fifteen years since she quit her job, Anderson, now 57, is the president of Connect2 Marriage Counseling, a couples counseling practice in Palo Alto. She oversees a team of therapists who see people primarily for marriage counseling, premarital counseling, grief and relational issues.

Running her own team of therapists wouldn’t have been possible if Anderson hadn’t taken a risk and made a career change later in life, when she truly felt it was time.

As Anderson’s example shows, switching careers in one’s 40s is definitely doable. But it does require the right amount of planning and forethought.

Kerry Hannon, a retirement, personal finance and career change expert — and the author of numerous books, including “What’s Next? Follow Your Passion and Find Your Dream Job” — says there’s been an uptick in the number of people switching careers in their 40s and even their 50s.

Indeed, a 2014 study from USA Today and Life Reimagined, an organization dedicated to helping people reimagine their lives, found that 29 percent of people ages 40-59 were planning to make a career change in the next five years. Numerous factors are at play in such findings, but Hannon believes that among the biggest, it’s easier to start a business and ramp up one’s education online today.

Many people who change careers at this stage in life, Hannon says, do so because of defining and often tragic life experiences, such as a death in the family or a serious illness. That played a factor in Anderson’s metamorphosis.

“They pause and they say: ‘Is this what it’s all about? Is this what I really want to be remembered for? Is this how I want to spend the rest of my life?’” Hannon says.

There are certain roadblocks to changing careers in middle age: Financial readiness is one, and workplace age bias another. One 2013 AARP study found that three out of five older workers said they had experienced or witnessed age discrimination at work.

Hannon believes making a career switch at this age can be done if one takes the right steps.

Move for the right reasons

Before anything else, take a long, hard look at why you’re intent on making this change.

“First, do your soul-searching about why you want to make this jump, this transition to something new,” Hannon says. Put another way: Really drill into your motivation and figure out if this is your passion, or if you’re simply in a rut at your current job.

To say Mounir Errami put some serious thought into becoming a doctor in his 40s would be an understatement. After working several different jobs over the course of his career, Errami — now a doctor at University of Texas Southwestern Medical Center in Dallas — knew he wanted to return to medical school at the age of 38. He had initially started medical school at 18 in Lyon, France, but dropped out. He then pursued a Ph.D. in biochemistry and bioinformatics, as well as an MBA, and started two business.

His first business went under and once he was in his late 30s, he sold his second one, a software company. He then took a few years off to spend with his family.

After a reset, he knew he wanted to return to medical school, lest he always have regrets.

If he hadn’t made that choice, he says, “it would’ve been sort of an unfulfilled quest that I had started and never finished.” He adds, “I’m very happy I’ve done it.”

Once you’ve identified your intended path, take a look at the marketplace, Hannon says. “What’s the market for it? What’s out there? Who’s currently doing it? Reach out to those people. If possible; network with people who are currently doing the kind of work that you would like to do.”

Just because you think you know your new life is calling, that doesn’t mean it’ll fulfill your every dream. After all, it’s still a job. Figure out if you’re OK with the inevitable downsides of a new career before diving in.

“If possible, it’s really, really important to do the job first,” Hannon says. “Volunteer or moonlight. Something might feel dreamy and like, ‘Oh my gosh, I always wanted to do this,’ but when you’re actually doing it every day, it might not have that glamour to it that you thought.”

Facing a pay cut

For some workers, the whole point of pursuing a new career in their 40s is to leave one low-paying field for a job with better financial prospects. But in reality, the opposite may be true.

“You absolutely have to get financially fit,” Hannon says. “It’s really critical.” She says it’s likely you’ll earn less when you begin your new job — either because you’re a newcomer or you’ve started your own new venture, in which most of the money goes into the business. Coupled with the fact that most career changes occur on a three- to five-year timeline, factoring in a return to school and additional training, you’ll want to save up.

If you’re taking a substantial pay cut, focus on paying down lingering debts or downsizing your lifestyle to fit your new, reduced income.

“At a certain life stage, you might also be able to downsize your home,” she says. Indeed, some people in this demographic might have children who have already left home.

Anderson and Errami were both fortunate to be in a solid financial condition before entering school. Anderson says she inherited some money from her mother and grandmother, while Errami used funds saved from his previous business.

Not having to worry about finances when switching careers means you can focus on the path ahead, in all its nuance.

“If you’re financially fit, then you have options,” Hannon says. “Then you give yourself the opportunity to try different paths, to try new things and move in a different direction without that burden of a must-have salary.”

Don’t quit your day job just yet

Changing careers after decades in a certain field isn’t something to be taken lightly. As previously discussed, it’s vital to make sure you aren’t just restless in your current position. Hannon says you should really identify your “why” before making any drastic decisions.

“What’s the motivation?” she asks. “Is it that you’re just bored with your job right now? Because there are lots of ways to fix that.”

Perhaps you need to work in the same field, but move to a different company. Or perhaps you need a new position within your existing field.

And if you ask yourself these questions and are still fairly certain you want to switch careers, do not quit right away. Saving up around six months’ worth of salary is a great way to ensure you’re financially ready for a change. If you don’t have this much money in the bank, stay at your current job for a bit longer and try moonlighting or working a side gig in your desired field.

Going for it

Once you’ve decided you’re ready to switch careers, Hannon suggests taking these four steps:

  1. Go slow. Take your time and do one thing every day toward making the change. Start out by asking someone in your intended profession for coffee.
  2. Again, don’t be so quick to quit your day job. There are exceptions to the rule, but most people shouldn’t quit their job. Instead, volunteer or get a side job.
  3. Take baby steps. This doesn’t mean you can’t get started right away. Just don’t spend a huge portion of money or dedicate an immense amount of time to your new career path until you’re absolutely certain it’s the right fit.
  4. Don’t be afraid. Hannon says she has spoken with hundreds of people who have made later-in-life career transitions. She says they invariably say, “I wish I had done it sooner.”
Jamie Friedlander
Jamie Friedlander |

Jamie Friedlander is a writer at MagnifyMoney. You can email Jamie here

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Health, Life Events

You Could Be Paying for More Insurance Than You Need

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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Tiffany Hamilton knew as a college student that she would one day be an entrepreneur. With that in mind, she made sure to enlist the help of a financial planning company when she bought her first life insurance plan at 21, as she was just getting her start in real estate.

That first policy was a $20,000 term-life plan that cost her about $80 a month. When her salary increased, she decided she needed more coverage than that. As a single woman with a burgeoning business, she wanted to make sure she had enough coverage to take care of any debts and leave something for her mother..

Her insurance representative at the time encouraged her to up her coverage. So at 25, she converted her policy to a $1 million whole life policy.

“I thought by going to a financial planner, sitting down and answering the questions, and then going off of their recommendations, I thought I was doing the right thing,” Hamilton told MagnifyMoney. “Yes, the $1 million would give my mom X, Y and Z, but was that in my best interests?”

Now 35 and running her own real estate business based in Tallahassee, Fla., Hamilton has lately been wondering: Is it possible to be overinsured?

How much insurance is too much insurance?

As we grow in our careers, home life and families, paying for life insurance becomes another one of those obligatory items on our financial to-do lists, like establishing a 401(k) or an emergency fund. But the sheer volume of life insurance options available may have created a unique problem: Some of us might be overly insured. That is, our insurance coverage may be wildly disproportionate to our salaries and overall net worth.

Joel Ohman, a Tampa, Fla.-based certified financial planner and founder of Insuranceproviders.com, said it’s also easy to end up with a policy that has more bells and whistles than you genuinely need.

Generally speaking, life insurance is a type of coverage that provides a payout to a selected beneficiary in the event of the policyholder’s death. This is often called the “death benefit.” Many people aim for a death benefit that includes a payout substantial enough to cover a few years of the deceased’s salary, funeral expenses and any outstanding debts.

Those with families may also want to include money to pay off a house, children’s college funds and more.

Of course, there are other options for anyone who has a large estate, want to make charitable contributions, needs special tax breaks or has other complicated financial circumstances to consider.

“Unless there are complex estate planning requirements or the insured has exhausted all other investment options, then typically the idea to use life insurance outside of a straightforward death benefit payout is a fool’s errand that will only result in a fancier car for your insurance agent,” Ohman said.

The cost of being overinsured

The difference in premiums between insurance plans can be striking, and if you’re not sure precisely what to get, it’s easy to throw up your hands in frustration. But if you simply choose a plan that may “sound right” without carefully exploring all your options, you could easily wind up paying for more coverage than you need.

Most insurance websites include insurance calculators to make it easy to figure out what your costs could be for a variety of different plans. Using State Farm’s calculator for example, a $500,000, 20-year term policy for a 30-year-old woman in Arizona is about $33 a month. Comparatively, a whole-life policy is $460 a month. That’s a difference of nearly $5,000 a year.

In Hamilton’s case, she realized she was paying thousands of dollars more for insurance than she needed to. In 2016, she converted her $1 million whole-life policy into a $500,000 universal-life policy.

“That cut my budget down by almost $10,000 a year,” she said.

John Barnes, a certified financial planner and owner of My Family Life Insurance, said those cost savings can be important for families.

“My take is, you can be doing something else with that money,” he said. “Families today are squeezed. I’m not about to overextend them, I’m going to get them the right amount.” The additional savings, he said, could go toward retirement, college tuition or other financial need.

Ohman said that a simple term-life policy is a great way to get inexpensive insurance that will still take care of most families’ needs.

“When people are looking for pure life insurance, they want to protect their loved ones if something should happen to them, and they want them to be financially taken care of in a worst-case scenario,” he said. “Ninety-nine percent of the time, then, that cheaper term life insurance product is going to be the best fit.”

Chris Acker, a chartered life underwriter, chartered financial consultant and independent life insurance broker in Palo Alto, Calif., said he almost always recommends term-life insurance to his clients, particularly young families.

“If you’re talking about people in their 30s,” Acker said, term insurance “is hands down the best way to go.”

That’s because it’s an inexpensive way to get insurance that provides coverage for your entire family. Plus, you can always get additional insurance later. But he cautions against applying one piece of advice across all situations.

“The bottom line is, there’s no right answer,” he said. “No two cases are the same.”

Types of life insurance

There are two main types of life insurance: Term insurance and permanent insurance. When consumers typically think about life insurance, they are looking for an option that will provide their families with financial stability if the unthinkable happens. If you work full time for a company, it’s possible that your workplace has a some type of life insurance policy, often equal to one year of the employee’s salary.

But some experts recommend that families purchase their own insurance plan outside of their employer because employer-sponsored life insurance typically falls short of their family’s actual needs.

Permanent insurance does exactly what the name implies: It provides lifelong coverage. In addition to the death benefit also provided by term-life insurance, permanent insurance also accumulates cash value. But with that added benefit comes pricier premiums.


Whole Life


Variable life


Universal life


Variable universal life

Whole life is the most common type of permanent insurance. With a whole life policy, the premium never changes. Part of the premiums goes into a savings component of the policy, which builds cash value and can be withdrawn or borrowed. That cash value also has a guaranteed rate of return.

Variable life offers the same death benefit, but allows consumers the option to seek a better return by allocating premiums to investments like stocks and bonds.

Universal life lets you vary your premium payments and gives a minimum death benefit as long as the premiums are sufficient to sustain it.

Variable universal life insurance is a sort of mix between variable and universal life, meaning consumers can vary premium payments and can also allocate them among investment subaccounts.

Best for: Those who want a policy that offers cash value and stable premiums. There are also tax advantages to this type of policy.

Best for: Those who want the same advantages as a whole-life policy, plus the option of allocating premiums toward different stocks and bonds.

Best for: Those who want the same advantages of any permanent policy with the option of varying premium payments. For example, those who may want to start with a lower premium that increases as their finances do

Best for: Those who want the option to vary premium payments, but also the option to allocate those payments toward different stocks and bonds.


Term-Life Insurance

Term-life insurance provides coverage for a specified amount of time — let’s say 15 or 20 years. Customers pay a premium each month and are covered through the specified term. This is typically the cheapest insurance option.

Best for: Those whose need for coverage will disappear or change at some point, like when a debt is paid or children reach adulthood and go to college. Also good for those looking for a low-cost option.

Even within term- and whole-life insurance, there are additional products you could be offered, like mortgage life, return of premium (in which your premium is returned if you outlive your initial term) and final expense (which covers just funeral expenses). There’s even an option that would provide lifetime protection for your estate upon your death. With all the available options, it’s easy for the costs to add up.

Tips to choose the right life insurance

Use a life insurance calculator. Wealthy families, those with special-needs family members and others in unique situations will also have different insurance needs. Most insurance websites offer calculators to help consumers decide how much coverage to take. The consumer website lifehappens.org also offers step-by-step guidance on choosing insurance, along with a needs worksheet.

Get multiple free quotes. Consumers can also get free quotes from multiple insurers from sites such as My Family Insurance, InsuranceProviders.com and http://myfasttermquotes.com/, which are independent-agent sites for Barnes, Ohman and Acker. Keep this in mind: Getting a quote doesn’t obligate you to work with a particular company or insurer.

Choose the right advisor. It’s also important to understand that hiring an insurance agent or financial planner is just like any other relationship: You want someone who works best for you and inspires comfort. Hamilton said she not only interviewed potential reps this last go-around, she also requested references and asked them about their company philosophy before making a decision. LifeHappens suggests that consumers use referrals to find an insurance provider.

Seek out independent agents. When it comes to actually choosing an agent or financial planner, Ohman suggests looking into independent agents that aren’t tied to a particular insurance company. That’s because a “captive” agent can only recommend those products that his/her company provides, whereas an independent agent can recommend any number of companies. That doesn’t mean they don’t have your best interests in mind, just that they aren’t able to provide customers with options outside their company offerings.

“The only products that they know about, the only products that they’re even allowed to bring to your attention,” Ohman said, are “their own products.”

Understand what it means to be a fiduciary. Another thing to consider is whether the company or adviser you’re working with is a fiduciary. “One of the big advantages you get with working with an insurance agent who has that CFP designation is that they are supposed to be working as a fiduciary, which means they put your financial interests first,” Ohman said.

Those who hold a CFP designation like Ohman are expected to provide fiduciary care to their clients. It’s also perfectly OK to ask your agent if he or she is, in fact, a fiduciary.

By the way, this doesn’t mean that other agents can’t or won’t provide clients with the type of insurance that works best for them. But don’t hesitate to ask if they’re paid on commission and whether a bonus or trip is tied to a particular transaction.

Check the insurance company’s ratings. Once you get a recommendation, he says, make sure the company has at least a A rating or better from independent agencies that rate companies’ financial strength. There are four independent agencies that provide this information: A.M. Best, Fitch, Moody’s and Standard & Poor’s. Do your research and find the ratings from each of the four agencies, because some companies may highlight a positive rating from one agency and play down a lower rating from another agency.

Trust your gut. Barnes said regardless of whom you choose to represent your insurance needs, make sure you have a level of comfort.

“Don’t be discouraged, there are some great independent agencies,” he says. “If it doesn’t feel right during the process, trust your gut.”

That means continuing to be open-minded, but also not allowing yourself to purchase an insurance product you don’t want or can’t afford. During that first meeting or so, Barnes says the agent should spend time getting to know you and your situation without necessarily trying to sell you on a product.

Similarly, Acker says it’s OK to question your agent to make sure you’re getting the best policy for your needs and lifestyle: “Don’t be bullied into buying what someone else says you should buy.”

For her part, Hamilton says she also looked into whether companies were commission- or fee-based. That’s because a fee-based company will charge a set rate, which can ease the worry of having an overzealous rep who may offer expensive products to boost his or her commission.

Because many good policies also offer a conversion option, you’re not “stuck” forever with something that doesn’t actually work for you. That means you have the option to change policies, as Hamilton did. Some consumers also choose to buy additional policies down the road.

But, and this is key, you shouldn’t let uncertainty or the fear of overpaying keep you from getting at least a simple policy.

“Think about today — the immediate need; protect that right this second,” Acker says. “Then that gives you time to work on your financial planning. Then you can figure out if you want to keep the insurance.”

Crystal Lewis Brown
Crystal Lewis Brown |

Crystal Lewis Brown is a writer at MagnifyMoney. You can email Crystal here

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Investing, Life Events, Retirement, Strategies to Save

Think Twice Before You Max Out Your 401(k)

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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Financial planners can’t emphasize the importance of saving for retirement enough: The earlier you start saving and the more you contribute, the better. But should you max out your retirement account? And if so, how do you do it? 

Unfortunately, there’s no solution suitable for all; every individual has a different financial situation.  

But let’s start with the basics: The maximum amount of money you can contribute to your 401(k), the retirement plan offered by your company, is currently $18,000 a year if you are under age 50, and $24,000 if you are 50 or older. If you were starting from scratch, you would have to tuck away $1,500 a month to max it out by year’s end.  

This is a big chunk of money. And although there are multiple benefits to saving for retirement, you may want to think twice before hitting that maximum.  

Remember, this is money that, once contributed, can’t be withdrawn until age 59.5 without incurring penalties (with some exceptions).  

What’s more, putting away a significant portion of their savings to max out their retirement fund doesn’t make much sense for some workers.  

If you are fresh out of college and your first job pays $50,000 annually, you’d need to save 36 percent of your paychecks to max out your 401(k) for the year.   

“Everyone needs to save for retirement, and the more dollars you could put in, the earlier, the better, but you also need to live your life,” says Eric Dostal, a certified financial planner with Sontag Advisory, which is based in New York. “To the extent that you are not able to do the things that you want to accomplish now, having a really really robust 401(k) balance will be great in your 60s, but that would cost now.”  

A few things to consider BEFORE you max out your 401(k)

  1. Do you have an emergency fund for rainy-day cash? If not, divert any extra funds to establish a fund that will cover at least three to six months’ worth of living expenses.  
  2. Do you have high-interest debt, such as credit card debt? High-interest debts, like credit cards, might actually cost you more in the long run than any potential gains you might earn by investing that money in the market.  Still, if you can get a company match, you should try to contribute enough to capture the full match. It never makes sense to leave money on the table.  
  3. Do you have other near-term goals? Are you planning to buy a house or have a child anytime soon? Do you want to travel around the world? Do you plan to pursue an advanced degree? If so, come up with a savings strategy that makes room for your nonretirement goals as well. That way you can save money for those big-ticket expenses and will be less likely to turn to credit cards or other borrowing methods. 

Maximize your 401(k) contributions

If your emergency fund is flush, your bills are paid and you’re saving for big expenses, you are definitely ready to beef up your retirement contributions.   

First, you’ll want to figure out how much to save.   

At the very least, as we said above, you should contribute enough to qualify for any employer match available to you. This is money your employer promises to contribute toward your retirement fund. There are several different ways a company decides how much to contribute to your 401(k), but the takeaway is the same no matter what — if you miss out on the match, you are leaving free money on the proverbial table. 

If you are comfortable enough to start saving more, here is a good rule of thumb: Save 10 percent of each paycheck for retirement, though you don’t have to get up to 10 percent all at once.  

For instance, try adding 1 percent more to your retirement fund every six months. Some retirement plans even offer automatic step-up contributions, where your contributions are automatically increased by 1 or 2 percent each year. 

Larry Heller, a New York-based certified financial planner and president of Heller Wealth Management, suggests that you increase your contribution amount for the next three pay periods and repeat again until you hit your maximum.  

“You will be surprised that many people can adjust with a little extra taken out of their paycheck,” Heller said.   

Once you’re in the groove of saving for retirement, consider using unexpected windfalls to boost your savings. If you get an annual bonus, for example, you can beef up your 401(k) contribution sum if you haven’t yet met your contribution limit.  

A word of caution: If you’re nearing the maximum contribution for the year, rein in your savings. You can be penalized by the IRS for overcontributing. 

If your goal is to save $18,000 for 2017, check how much you’ve contributed for the year to date and then calculate a percentage of your salary and bonus contributions that will get you there through the year’s remaining pay periods.  

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen at shenlu@magnifymoney.com

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Life Events

What To Do If You Inherit A Home

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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The thought of inheriting a home might at first put images of dollar signs in your head. But if you have inherited property from a loved one, it’s not as simple as passing over a set of keys. There are all sorts of legal and tax hoops to jump through if you want to make the most of your new asset.

If you are in a situation where you stand to inherit property or have already done so,  you’ll need all the facts to make the best decisions concerning your new asset. This guide will explore some topics you’ll want to explore further to make the most of your inherited home .

Get a lawyer

As soon as you are aware of a potential inheritance, seek legal help from an experienced estate planning lawyer who’s also familiar with real estate law. A lawyer will navigate court proceedings and help you make strategic, informed decisions that can have an impact on the final value of your inheritance. Since laws governing inheritance and probate vary from state to state, it’s crucial to find an expert with knowledge about the laws in your state for specific recommendations.

Check for any liabilities

It’s entirely possible to inherit property with encumbrances or interests attached to it. The existence of additional heirs, even estranged ones, could mean that the property actually belongs to a number of people. These interests must be figured out and settled in order for one or more people to take ownership of the property as an inherited asset.

Also, there could be liabilities like back taxes, unpaid utility bills or child support expenses that result in liens against the property. There could even be additional mortgages or reverse mortgages against the home. If you inherit a home with a mortgage(s), that debt must be paid off before you can take legal possession.

If there are multiple heirs involved, along with tons of outstanding debt against a property, you may decide not to pursue claiming it based on the value of the home. The trouble of probating the will and acquiring the property could outweigh what you stand to gain based on appraised value.

Get an appraisal and estimate your tax liability

Taxes go hand in hand with inheritances, especially when inheritances involve property. The amount of these taxes will depend on the value of the real estate. That’s another reason why getting an appraisal of the inherited property is recommended.

An appraisal of the inherited home can be useful for determining inheritance, estate or capital gains taxes. Each state is different and may impose only an inheritance tax or an estate tax or both.

If you sell the home, you’ll only need to report your inheritance on your tax return for the year you sell the home. You’ll report this activity on Schedule D of your tax return. The date-of-death valuation (i.e. stepped-up basis) is what is used to determine the value of the estate to be taxed.

There is an exception to taxes on a sale: if you move into and live in the home. In this case, it’s considered your personal residence and not an investment property. For the most part, personal residences that are sold do not need to be reported on a tax return if the owner has lived there for two years or more.

If you decide to keep the home and rent it out, you’ll have to report your rental income and expenses on Schedule E of your Form 1040  for tax filings. Once you sell it, you’ll use your stepped-up basis to pay taxes on the profit of the sale as mentioned above.

A home appraisal gives property a value in dollars based on the home’s characteristics and nearby homes with comparable features. You’ll want to determine the value of the home as soon as you can. Why? As mentioned, the value of your inheritance could be affected by a number of variables: taxes, the presence of multiple heirs, even outstanding debts against the property.

You’ll want to get an appraisal as close to your relative’s date of death as you can, to determine the tax situation. Your “initial investment” amount is set at this date and will be the basis for calculating taxes due (should you profit from the sale of the home).

For example, if Grandpa Joe purchased a home for $60,000 in 1965 and died in 1995, you’ll want to know the value of the property in 1995 to understand how much the home has grown in value. If the home appreciated to $135,000 by 1995 and you sell it for $140,000 any time after this, you’ll owe taxes on that $5,000 profit. This amount would be much less than taxes based on profits made from the 1965 purchase amount.

If you decide you don’t want to pay the capital gains taxes on the inherited home, you’d have to live in the property for at least two years.  Once you sell the property, $250,000 of the profit will not be taxed ($500,000 for married couples.) There are many other ways to further shelter profits that exceed this amount, but this is a good starting point.

Estates with property  worth several million dollars or more will have to pay an estate tax. This tax is on your right to transfer property at death. Currently, estates worth almost  $5.5 million will owe up to 40 percent in estate taxes.

An appraisal will help you make strategic moves with your inherited property. So, the sooner you obtain one, the sooner you can make make decisions to move forward (or not) with the property.

Set yourself up for a smooth transfer

There are many ways that real estate can be transferred from the deceased (decedent) to an heir. With a few exceptions, as soon as someone dies, any assets titled in the decedent’s name transfer to his or her estate.

Once the court determines that you are a rightful heir to the estate, you’ll obtain a court order that grants you rights to possess the property. From here, you’ll want to make sure the title and deed to the property are in order for a proper transfer.

An experienced real estate lawyer should be able to handle all the research related to the property to make sure you don’t run into problems with either the initial transfer or a sale down the road.  John W. Graziano, an attorney based in Lee, Mass.,suggests heirs obtain a title search and insurance to ensure their rights to occupy, rent or sell the property they’ve inherited.

The state you live in (or own property in) creates this estate entity.  In the probate process, the state will attempt to distribute estate assets to all heirs on record.

Real estate, unless previously directed by the decedent, will also pass into an estate for distribution. The complexity of the probate process and timeline depend greatly on the type of estate your relative had and whether there was a will, a living trust or some other circumstance. All such variables factor into the manner in which you receive your real estate inheritance.

For each situation, you’ll need to know your options and what to expect from the transfer process.

Case #1: My relative had a will

In this case, your relative has expressed the desire to give you the property.  In somes states, a will can help expedite the probate process because the wishes of the decedent are plainly stated. You’ll need to file a copy of the will with the local county court to begin the probate process so that assets, including real estate, can be distributed.

Case #2: My relative did not have a will

If there was no will, the decedent’s assets will enter into a “intestate” probate proceeding.  In this case, you can still start the probate process at your local county courthouse. A judge will decide how to divvy up assets since your loved one did not leave any instructions for disposition of assets.

For those who die without a will, the courts will distribute assets according to the state inheritance laws. These laws, known as intestate inheritance laws, will dictate who gets what in probate proceedings. The most likely heirs of an estate’s property are spouses, children and siblings, but the court will have the final say.

Even if your relative did not have a will, an experienced probate attorney knows how to handle the process of opening the estate. The lawyer will present evidence to the court, informing it of the existence and whereabouts of living heirs for estate asset distribution.

Case #3: My relative had a living trust

Sometimes a person may transfer ownership of property to an entity called a living trust. A trust is a legal document that tells a trustee, chosen by the creator of the trust, how assets should be handled in the event of death or incapacitation.

Unlike with probate, which is handled by public courts, the distribution of assets in a trust can be handled privately, quickly and with less expense. Assets in a trust do not have to go through probate. That’s why many people choose trusts instead of, or alongside, a will.

If your relative had a trust that owned the real estate you are due to inherit, then the trustee will transfer ownership of this asset to you via deed, title or both.

Case #4: I am a joint owner of the property

If you are a joint owner or joint tenant of a real estate asset, there is no need for probate, in most cases. With joint tenancy, the ownership of the deceased’s property passes to survivors in the joint tenancy.

Though joint tenancy can be in place for many reasons, this is most common when a married couple own property together. When a spouse passes away, the transfer can be as simple as providing a death certificate to the title company. The company can easily update the title with this information. If this applies to your situation, you’ll still want to consult your CPA and/or attorney for next steps regarding this arrangement.

Case #5: My relative had a small estate

In some states, there is a “small estate” process that allows you to skip probate altogether. In many cases, you can claim real estate and other minor assets via affidavits or briefer court proceedings.

Each state, however, has its own threshold for the dollar amount that would classify an estate as “small.” In some states, there are also expedited proceedings for estates that only contain real estate. If you can receive your property inheritance without the longer, more extensive process of probate, a small estate proceeding is ideal.

Make a plan to sell, refinance or keep the home

There are different options available to people who inherit a home. Depending on your goals you can choose to sell it, rent it out or live in it.

Selling the home you’ve inherited

In this case, you’ll want to make sure that you care for the home until the sale is complete. Make sure all expenses are paid, like the mortgage, property taxes and utilities. Keep the properly well maintained and in livable condition so that there are no problems when it comes to selling the house. When the sale is complete and the balance of the mortgage or any other debt in the estate paid off, the sale proceeds can be divided among heirs.

A home with a mortgage usually has a due-on-sale clause to require full payment when the borrower dies. However, this clause is suspended in two cases:

  • Because of the death of a joint tenant
  • Property is transferred to a relative resulting from the death of a borrower.

This means that the heir can keep making payments on the property under the existing terms of the mortgage. However, if there are other plans to sell the property or transfer interest from one or more heirs to another, you will have to pay off the existing mortgage.

Keeping the home to rent it out

If you are looking to become a landlord and rent the home, you can take ownership of the property. There may be additional steps to take if a mortgage still exists on the property or if there are are additional heirs involved. You should know, too, that there are tax implications to receiving rental income (discussed below), but it could still be a viable way to get more cash from your inherited property

Keeping the home and live in it

Finally, you could keep the home and use it as your primary residence. Again, with a mortgage and multiple heirs involved, there will be more steps to that you can have official ownership.

Refinancing the mortgage

If one or more of the heirs decide to keep the inherited property as an rental income property or a primary residence, the mortgage on the home may have to be paid off before taking ownership (except in the cases mentioned above).

Though a mortgage cannot be issued to an estate, lenders will typically work with the estate’s attorney for a solution that satisfies the mortgage debt. This may include selling the home or allowing an heir to refinance the balance of the mortgage due on the home.

If there’s more than one heir to the estate and one decides to take sole ownership of the home, this heir could arrange a refinance and purchase transaction. In this type of transaction, the proceeds of the refinance can be used to purchase the other heirs’ interest in the home.

Final thoughts

Inheriting a home can be silver lining when grappling with the death of a loved one. However, if you don’t take all the steps required to obtain rightful ownership, the property could be another source of hassle and a monumental time-suck.

Graziano urges heirs to work with a lawyer on all aspects so they understand the inheritance process. In this way, they can get the most value from their inherited assets, with the the least amount of hassle and the fewest surprises.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Life Events, News, Retirement

Why Sabbaticals Could Be the New Pre-Retirement

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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.

“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.
Jamie Friedlander
Jamie Friedlander |

Jamie Friedlander is a writer at MagnifyMoney. You can email Jamie here

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Life Events

7 Ways to Lower the Cost of Divorce

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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As a newlywed, the very last thing on your mind is probably getting divorced. But, unfortunately, divorce is something you may encounter — there were over 813,000 divorces in 2014 alone, according to the latest CDC data, compared to 2.1 million new marriages.

The cost of getting divorced can be just as expensive as getting married. Some estimate the legal fees alone can cost thousands of dollars, not to mention other costs that may be involved in changing your life post-divorce.

The difference is, when you get married you likely had time to prepare your finances. This may not always be the case when you get ready to get divorced.

So, what can you do if you can’t afford to get divorced? Here are some options that may be able to help lower the high cost of divorce.

Shop around for the right attorney

Brette Hankin, a business development manager for S&T Communications in Colby, Kan., says she visited several divorce attorneys to find one that was within her price range.

“The first lawyer I talked to said the retainer fee would be $10,000,” she says. “There was no way I could afford that.”

Eventually, Hankin visited other attorneys in her community and was able to find one who was more affordable.

“The lawyer I chose had a $5,000 retainer fee and was willing to return whatever money was not used for my case,” she says.

Ask friends and family for referrals to good attorneys in your area, or see if your state’s bar association has a way to search for attorneys specializing in divorce/family law.

Work out a “limited scope” arrangement or a payment plan

To help clients who may not be able to pay for their entire legal fees up front, some attorneys may also be willing to take payment plans, or work in a limited scope. Limited scope means they only handle certain parts of your case and you can handle the others.

“In cases where a client cannot afford traditional representation, I will sometimes represent a client in what is referred to as limited scope representation,” says Darlene Wanger, Esq., an attorney based in Los Angeles. “This means that I could represent a client for a single hearing, and then I am no longer the attorney of record.”

To cut costs even more, Wanger says she sometimes acts behind the scenes as a consulting attorney, helping clients fill out paperwork and working through the process without appearing in court.

“Never appearing in court can save a very large expense,” Wanger says.

If you still feel sticker shock at the cost of your legal fees, ask your attorney if you can work out a payment plan. This can help relieve some of the pressure to pay their fees all at once.

Reduce your filing fees

If you’re the spouse filing the divorce petition, ask about the filing fee with your local courthouse. The fee for filing a divorce petition varies based on the state and county in which you live and file your divorce. Filing fees can vary from $70 in Wyoming to $435 in California.

For simple divorces, without children or a large amount of property, you can usually fill out the petition yourself. This can save you from paying attorney fees.

Many individuals who are unable to afford a divorce don’t realize that they can get the divorce petition filing fee waived as well. A judge will review a written affidavit stating your economic hardship so the filing fee can be waived.

Keep things amicable (if possible)

When people think that they can’t afford to get divorced, it’s usually because they’ve heard about long, drawn-out court battles that cost thousands. But if you work with your spouse as much as possible, you can save a lot of money on attorney fees and court costs.

For example, after the filing of a divorce petition, the responding spouse will generally file an answer, even if they agree with everything stated in the petition.

While this can speed up the divorce process, it will cost more money. Any time an answer is filed with the court, it is subject to another filing fee. You could apply for the fee to be waived again, or if you and your spouse are in agreement, the answer could be written as a formality but not filed with the court.

Filing a joint petition for divorce can also save money as neither spouse would have to be served by a sheriff or certified mail.

Get divorced for free

Lizzie Lau, a 47-year-old travel blogger, used as many resources as she could to help her save money during her divorce. She was able to get divorced for free in California, the state with the highest filing fee.

“Initially, I assumed I would have to pay several hundred dollars in filing fees even though I had no income and no support,” Lau says. “But I went to the courthouse and talked to them. I was told that based on my income the fee would be waived, and as long as we didn’t go to court, it would be free. Although, they told me it was pretty rare for a divorce to go through without going to court. I assured them that I was going to be the exception to the rule.”

Lau got the filing fee waived for her petition. Plus, she and her spouse worked together to avoid other costs. Because they were in agreement, he didn’t file a response, and they were able to get divorced without appearing in court, saving them from paying for attorneys and other court costs.

File a pro se divorce

Part of Lau’s strategy included filling out her own legal paperwork and representing herself for her divorce case. This is called a pro se divorce, meaning you represent yourself without an attorney.

This is not a strategy that would work well for divorce cases involving disputes over child custody or property and asset division.

There are a wealth of resources online that can assist people with filing pro se divorces by explaining things in common language.

Prepare for life after divorce

One of the other overlooked costs of getting divorced is the cost to set up a new household. In Hankin’s case, her ex-husband kept the family home while she moved to an apartment.

“He offered to let me stay in the family home, but I couldn’t afford the house payment,” she says. “Instead I got an income-based apartment.”

In other cases, assets may have to be sold if neither party can afford to keep them. Hankin says she got financial help from her parents and did her best to save money and live frugally.

“You don’t think about the costs of setting up a new household until you have to do it,” Hankin says. “Getting pots and pans, furniture, restocking your pantry. All of those things you never think about. We were married for 19 years before we got divorced.”

Hankin shopped at garage sales to save as much as possible. She also got a second job and cashed in her retirement savings. “I felt that it was my only option,” she says. “Now I’m starting from scratch to save for retirement again.”

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

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How to Get ‘Unstuck’ From Your Starter Home

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.

Source: iStock

Andrew Cordell bought his first home at the worst possible time — 10 years ago, right before the housing bubble burst.

He’s not going to make that mistake again.

“We had immediate fear put in us as homeowners,” says Cordell, 40. “We know how dangerous this can be.”

So the small “starter home” he purchased in Kalamazoo, Michigan back in 2007 now feels just about the right size.

“When we bought, we figured we’d get another home in a few years,” he says. “But the more we settled, the more we thought, ‘Do we really need more space?’ We don’t actually need a large chest freezer or a large yard. Kalamazoo has a lot of parks.”

Apparently, plenty of homeowners feel the same way.

It’s a phenomenon some have called “stuck in their starter homes.” Bucking a decades-long trend, young homeowners aren’t looking to trade up — they’re looking to stay put. Or they are forced to.

According to the National Association of Realtors, “tenure in home” — the amount of time a homebuyer stays — has almost doubled during the past decade. From the 1980s right up until the recession, buyers stayed an average of about six years after buying a home. That’s jumped to 10 years now.

Expected Median in Tenure in Home
Source: 2017 National Association of Realtors® Home Buyer and Seller Generational Trends

 

Other numbers are just as dramatic. In 2001, there were 1.8 million repeat homebuyers, according to the Urban Institute. Last year, there were about half that number, even as the overall housing market recovered. Before the recession, there were generally far more repeat buyers than first-timers. That’s now reversed, with first-time buyers dwarfing repeaters, 1.4 million to 1 million.

This is no mere statistical curiosity. Trade-up buyers are critical to a smooth-functioning housing market, says Logan Mohtashami, a California-based loan officer and economics expert. When starter homeowners get gun-shy, home sales get stuck.

“Move-up buyers are especially important … because they typically provide homes to the market that are appropriate for first-time buyers,” he says. When first-timers stay put, the share of available lower-cost housing is squeezed, making life harder for those trying to make the jump from renting to buying.

Getting unstuck from your starter home

There are plenty of potential causes for this stuck-in-a-starter-home phenomenon — including the fear Cordell describes, families having fewer children, fast-rising prices, and flat incomes. But Mohtashami says the main cause is a hangover from the housing bubble that has left first-time buyers with very little “selling equity.”

Buyers need at least 28 to 33 percent equity to trade into a larger home, and often closer to 40 percent, he says. Those who bought in the previous cycle might have seen their home values recover, but many purchased with low down payment loans, leaving them still equity poor.

That wasn’t such a problem before the recession, as lenders were happy to give more aggressive loans to trade-up buyers. Not any more.

“In the previous cycle you had exotic loans to help demand. Now you don’t. [That’s why] tenure in home is at an all-time high,” Mohtashami says. “Even families having kids aren’t moving up as much.”

Fast-rising housing prices don’t help the trade-up cause either. While homeowners would seem to benefit from increases in selling price, those are washed away by higher purchase prices, unless the seller plans to move to a cheaper market.

“You’re always trying to catch up to a higher priced home,” Mohtashami says.

Cassandra Evers, a mortgage broker in Michigan, says she’s seen the phenomenon, too.

“It’s not for lack of want. It seems to be the inability to afford the cost of the new home,” she says. “It’s not the interest rate that’s the problem, obviously because those are at historic lows and artificially low. It’s because to buy a ‘bigger and better house,’ that house costs significantly more than their current home. The cost of housing has skyrocketed.”

U.S. Homebuyers and Student Loan Debt (by Age)
Source: 2017 National Association of Realtors® Home Buyer and Seller Generational Trends

There’s also the very practical problem of timing. In a fast-rising market, where every home sale is competitive, it’s easy to lose the game of musical chairs that’s played when a family must sell their home before they can buy a new one.

“Folks are concerned about selling their current house in one day and being unable to find a suitable replacement fast enough,” Evers says.

Cordell, who lives with his wife and eight-year-old son, says the family considered a move a few years ago and briefly looked around. But they quickly concluded that staying put was the right choice.

“We looked at some homes and we thought, ‘I guess we could afford that. But we don’t want to be house broke’,” he says. “We don’t want to take on so much debt that ‘What else are we able to do?’ What if one of us loses our job? I guess you could say we have a Depression-era sensibility. … Who would want to get upside down on one of these things?”

The Urban Institute says this stuck-in-starter-home problem shows a few signs of abating recently. Repeat buyers were stuck around 800,000 from 2013 to 2014. Last year, the number pierced 1 million. But that’s still far below the 1.5 million range that held consistently through the past decade.

There are other signs that relief might be on the way, too. ATTOM Data Solutions recently released a report saying that 1 in 4 mortgage-holders in the U.S. are now equity rich — values have risen enough that owners hold at least 50 percent equity, well above Mohtashami’s guideline. Some 1.6 million homeowners are newly equity rich, compared to this time last year, and 5 million more than in 2013, ATTOM said.

“An increasing number of U.S. homeowners are amassing impressive stockpiles of home equity wealth,” says Daren Blomquist, senior vice president at ATTOM Data Solutions.

So perhaps pent-up repeat homebuying demand might re-emerge. Evers isn’t so sure, however.

“Most folks I talked with are no longer interested in being house poor and maxing out their debt to income ratios. They seem to be staying put and shoving money into their retirement accounts,” Evers says.

The Cordells are content where they are in Kalamazoo and plan to stay long term. If anything would make them move, it’s not growing home equity but a growing family.

“If we ended up with a second (kid), I suppose we’d have to look,” Cordell mused. “But we have no plans for that.”

4 Signs You’re Ready to Trade Up Your Home

  • YOU’VE GOT PLENTY OF EQUITY: Your home’s value has risen enough that you safely have at least 28 percent equity and, preferably, more like 35 to 40 percent.
  • YOU’RE EARNING MORE: Your monthly take-home income has risen since you bought your first home by about as much as your monthly payments (mortgage, interest, insurance, taxes, condo fees, etc.) would rise in a new home.
  • YOU STAND TO MAKE A HEALTHY PROFIT: You are confident that if you sell your home, you’d walk away from closing with at least 30 percent of the price for your new home — or you can top up your seller profits to that level with cash you’ve saved for a new down payment. That would let you make a standard 20 percent down payment and have some left over for surprise repairs and moving costs that will come with the new place. Remember, transaction costs often surprise buyers and sellers, so be sure to build them into your calculations.
  • YOU CAN HANDLE THE RISK: You have the stomach for the game of musical chairs that comes with selling then buying a home in rapid succession. Also, if you are in a hot market, you have extra cash to outbid others or a place for your family to stay in case there’s a time gap between selling and buying.



Bob Sullivan
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Bob Sullivan is a writer at MagnifyMoney. You can email Bob here

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