Category Archives: finance tips

Creating a Living Trust

pen estate planning living trust Sustainable family finances

As I get my financial and legal affairs in order, I’ve also taken the plunge and created my own living trust. This came about over the course of the last year or so, considering how I would want assets to be passed down to Clark and others. With my divorce, I’ve also had other legal changes that need to be recognized and dealt with (deeds changing over, moving bank accounts, finalizing taxes, etc), so the timing seemed right to deal with such matters.

What is a living trust?

A living trust is essentially your estate. This makes it clear what your requested asset allocation would be in the event of your death. It is also a way to avoid probate and make things easier for your family and ensure that your wishes are honored and that your family is planned for.

It has been helpful for me to consider how I would want my finances to be dealt with, and what I would want to go to various folks. Of course, we all want to live to a ripe old age, but planning for the possibility of death is essential to not only yourself, but also your family.

Life changes, plan for it to

I also have an interesting situation of wrapping this process up with a new partner. I started this process last December. In fact, between the time of making the appointment to talk about creating a living trust, and having the conversation with my lawyer, things had shifted in my life to the extent that I asked about how to plan for the possibility of a divorce. Now, as I end the process, I find myself in a new relationship that I see myself being in for the long term. I would have been planning for the possibility of such a relationship, but actually having the different scenarios in front of you is a bit different.

Avoid Taxes

The other reason to have a living trust is to help plan for avoidance of taxes. Luckily with the estate taxes as they are, and the number of people that I would leave various assets to, it would be unlikely for any of my benefactors to face taxes unless I have considerably more than I have today (which is hopefully the case).

Grow Up and Plan for Death

It definitely feels like I have my big girl pants on when planning for my trust. I created my first will when I left to Afghanistan in 2007, but articulating my wishes and looking at my finances in more details has been a helpful process. Similar to my views on a prenuptial agreement, I find it very helpful to have a plan for what you’d like things to look like in various situation or scenarios. What might change over the next ten to twenty years? It’s good to be prepared.

A big thanks to Lori Beight at Cascade Legal Planning for her help in setting up my trust.

Do you have a will or a living trust? Please leave us a comment to share about your process.

Be well,

Miel

 

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The Financial Realities of Retirement

When you begin your first job, retirement seems so far away. It is easy to think that there are more priorities for your money than starting to save for a time so far head. Your immediate priorities may be to begin to pay off your student loan or buy your first automobile. As time goes by there is real estate then perhaps the costs of raising a family? Sometimes you might wonder whether there will ever be a time when you have a surplus at the end of each month when all your bills are paid. There is a time, however when you should sit down and think about how you are preparing for future retirement.

Set out the Picture

When you do that, you need to write down details of all your assets. It is obvious that you will include positive balances in any bank or retirement account. You may no longer have the equity in your real estate that you thought you had when the recession came along. However you need to include that equity, but it is important to be realistic. If you have investments, gold or silver or even valuable paintings you need to include these as well.

It is crucial that you take account of your financial liabilities including any personal loans, mortgages, and insurance. If you have Private Mortgage Protection (PMI) you should ask yourself whether you really need it; you certainly shouldn’t if you have paid off the bulk of your mortgage. That money could be better spent going into your retirement provisions.

Anything Obvious?

Once you have written everything down there may be some obvious courses of action. If you are carrying significant credit card balances and therefore paying a large amount of interest every month, you should be able to make savings. Today’s online lenders will listen to reasonable applications for loans. They are likely to approve an application if the applicant appears capable of making the installment payments throughout the term of the loan.

Obviously, if you earn more money each month, you will be able to put more way for the future. There are other ways to create more money by reducing your spending. You may always have had a new auto every few years. It is worth thinking whether you really need one so regularly. Indeed, used cars that have a good service record may be the answer without compromising on quality.

Urgency

The closer you are to retirement the more urgent is the need to plan. Some people are quite rightly nervous about the prospect of not working and having enough money for a comfortable life. If they have lived in the same neighborhood for years then moving out of familiar surroundings is difficult. However, there are good reasons to reduce monthly bills once regular income has dropped.  A smaller home is often the answer to the problem. Some people take the view that retiring in a nicer climate makes sense. It is not always wise to pick a regular holiday destination; living in such places full-time is different. However, it is certainly worth thinking about where to live in retirement and the financial implications involved.

Just Think Things Through

Everyone looks forward to a long and happy retirement. It does cost money to live in retirement. In some ways, it can be more expensive to live after finally finishing work and retirement. It’s not quite like being on permanent holiday, but it is possible to spend more during a day in retirement than when you were working full-time. As the years go by, life expectancy has increased. It is difficult to know how much money you will need to live in your later years because you will not know how many you have got.

That is all the more reason to think about doing as much as you can during your working life to provide for those later years. There is advice available, but ultimately it is down to the individual to decide the best way forward. What is certain is that it is far better to pay off any debt that is incurring high interest than to struggle on. If that means taking out a loan and dispensing with credit cards, then so be it.

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How to Improve the Value of Your Property

340ae2d66543453d908038e55dc2fcd7If you’re selling your home, you’re going to want to sell it for as much as possible (of course). While square footage, location and neighborhood can’t be changed, there are many things you can change that will add to the value of your property. And even if you’re not looking to sell right away, it can be worth it to spruce up your home for your own enjoyment, too. Here are 8 easy, affordable ways to increase the value of your home.

Take care of the front yard. The first thing a potential home buyer sees is the outside of your home. While you can’t judge a book by its cover, first impressions do count when it comes to selling your home. Plant flowers, water the grass, trim the bushes and clean the driveway. All of these little things will greatly improve the outside appearance of your home.

…And the back yard. Most home buyers would prefer a nicely manicured back yard in addition to a landscaped front yard. Putting some money into your back yard, including adding in a deck with Futurewood composite decking, may set your house apart from your competitor’s. Plus, you can enjoy the new back yard deck until the house sells.

Clean or replace the carpets. While home buyers know they can replace the carpets before they move in, they also know how much money this can cost them out of pocket. Don’t let old, dirty carpet stand in the way of a sale. Deep clean it once a week when it’s on the market or replace your carpet if needed.

Keep your house as clean as possible. Similar to the carpets, potential home buyers do know they can clean the house before they move in. But if you want people to fall head over heels in love with your home, you need to keep it as clean as possible. Scrub the bath tubs, wash the interior and exterior of the windows, make the kitchen appliances shine and more.

Upgrade the kitchen. It’s common knowledge that you will get the greatest return for your money by upgrading your kitchen. If you can’t spend tens of thousands of dollars on a full-on remodel, do smaller things such as changing the paint color, adding a backsplash and purchasing stainless steel appliances.

Make your home bright. Bright homes are more appealing to buyers than dim ones with few windows. Open up the curtains and blinds, make sure all the light bulbs are working and turned on and add in extra light where needed, perhaps with an eye-catching chandelier in the entry way.

Staging matters. You want your rooms to look open and spacious, not cramped and boxy. You may need to rearrange your furniture or invest in a few quality pieces you can take with you to your new house. Improving your home décor can actually make a difference in how quickly and how much you sell your house for.

Freshen up the paint. Nothing can be more inviting than a fresh coat of paint on all of your walls. Go with neutral colors throughout, perhaps adding in one or two accent walls, to appeal to a variety of buyers. You can repaint your home yourself or hire a professional, depending on your budget.

As you can see, there are many, many ways to increase the value of your home that don’t have to cost a fortune. Pick one project at a time until your home is in excellent condition and ready to be sold.

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7 Tips for First Time Homebuyers

3e2f5f558c9d443b8748b3b0a47d9f2ePurchasing your first home is one of the most exciting, yet terrifying, times of your life. Most likely, this is the most amount of money you’ve ever spent, by far. Buying a home is not an easy process, as many first-time buyers will come to find out. In order to make the process as smooth as possible, take into account these 7 tips when buying your first home.

Be patient. Homes may come and go very quickly, especially if you’re buying in a seller’s market, where bidding wars may even take place. While it’s easy to get emotionally attached to a home, especially as a first-time buyer, do your best to be patient and have confidence that the right house will come along.

Know beforehand what you can afford. What you can afford and what you may qualify for can be two very different numbers. Prior to shopping for a home, decide in advance how much you are able to spend per month and what type loan you’d prefer to have. It’s very easy to get swayed in the moment, so think long and hard about how much you want to spend before looking at houses.

Comparison shop for the loan. Your home loan is probably the largest amount of money you’ve ever borrowed. Make sure you get the best interest rate and the best terms by shopping around at different banks, credit unions and lenders. Don’t forget to online shop, too. A home loan through Newcastle Permanent, for example, offers awarding-winning packages to suit a variety of buyers.

Decide what you want in a home. It’s a good idea to make a checklist of all the “must-haves” for your first home, and then be flexible. You may be able to get a good deal on a home that doesn’t meet all of your criteria but can be changed to your liking down the line. Have a general idea of what you want but be willing to stray from your desires if it positively impacts your finances.

Think long-term regarding your home. You may only be planning on staying in the home for a few years, but what if the market goes down and you find yourself upside down in your mortgage? Since predicting the market can be an impossible task, think of your home as somewhere you will be for the long-haul. Decide how this affects what you want to spend, the location and what you’re not willing to budge on.

Look at the entire cost of the home, not just the loan. There are factors to consider other than your monthly principal and interest payment, including home owner’s insurance, HOA fees, cost of heating and cooling, distance to work, any repairs that need to be done and more. Mortgage payments tend to be lower than rent payments, which can make owning a home enticing to many if they haven’t considered all of the outside factors, including maintenance.

Put at least 20 percent down. While there are a variety of loans that do not require a 20 percent down payment, it’s in your best interest to put down as much money as possible. This greatly increases your chances of qualifying for the loan, it eliminates the need for private mortgage insurance (PMI) and it gives you instant equity in your house.

While buying a home for the first time seems fun and exciting, there are many details that need to be figured out beforehand. By keeping a level head and not letting your emotions get the best of you, you will find a home you love that suits your needs for the long-term.

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How You Can Use Your Credit Card to Boost Your Credit Score

9e344e349634408da3b4707eefdd5480If you have poor credit, a shallow credit history or no credit history at all, you may be able to boost your score through the (responsible) use of a credit card. When used properly, a credit card is a great tool for improving your credit, but when used without caution it can lead you down a sure path to debt.

Whether you have just filed for bankruptcy, are a student with no credit history or simply want to improve your credit profile before applying for a loan, a credit card can help your credit score in a variety of ways.

Prove That You Can Use Credit Responsibly

The good news about credit is that you are judged only on your ability to make your payments. Therefore, you can actually start building good credit just by buying $25 worth of gas each month and paying it off by the due date. This gives anyone the opportunity to establish their credit while paying for their daily expenses.

Knowing How to Read Your Credit Score

Your credit worthiness is calculated through your FICO score, which is a three-digit number that helps creditors determine which types of loans they should offer. When it comes to calculating your FICO score, ability to pay on time makes up 35 percent. Keeping your balances low can also help because the amount you owe on a given account is 30 percent of your credit score. That means paying on time and maintaining a low balance account for over half your score.

Establish a Longer Credit History

One thing that lenders look for when approving an individual for a loan is the average age of their credit history. Generally, you have a better chance of getting a loan if you have a credit history of at least five years. However, you don’t have to use your credit card for five years to get credit for having it. As long as the account has been open for five years or more and you have always made your payments on time, you can show lenders that you are worthy of a loan. A longer credit history is better for your credit score as it is 15 percent of your FICO score.

Credit Cards Can Improve Your Credit Mix

In addition to a long credit history, lenders also like to see that you have a good mix of both secured and unsecured loans. Having a variety of different types of loans that are in good standing helps creditors see that you’re both responsible and timely with your payments. However, staying in good standing with credit is sometimes easier said than done. If you’ve found yourself falling behind on your monthly credit card payments, nonprofit agencies like CreditGuard can help. They actually negotiate with your creditors on your behalf to lower your rates and consolidate your payments.

Opening a credit card can help you increase your credit score in many ways. It can improve your credit score, establish your credit history and show lenders that you are able to pay your debts on time. Just remember to use it with caution.

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