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Is It Difficult to Cash Out A 401K When You Quit A Job?

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When you quit a job, you typically have to decide the fate of your 401k. In some cases, the idea of cashing the account out might be particularly attractive. However, if you’ve never had to do it before, you might worry that the process is complex. If you’re wondering, “Is it difficult to cash out a 401k when you quit a job?” here’s what you need to know.

What Happens to a 401K When You Quit?

Precisely what happens to your 401k when you quit a job can vary depending on rules relating to the account. In some cases, your investments can stay right where they are, and you can tap them when you reach retirement age without much difficulty or financial penalties.

However, rolling over the 401k into your new employer’s plan or an IRA is also an option. For accounts that don’t allow the money to stay with your last employer, then a rollover might be more of a necessity, suggesting you don’t cash out.

Cashing out is technically on the table, too. You’d receive a lump sum distribution based on the account balance or the amount that’s vested. While this may seem wise, if you haven’t reached retirement age, it will trigger financial penalties along with taxes.

Is It Difficult to Cash Out a 401K When You Quit a Job?

Generally speaking, it isn’t difficult to cash out a 401k when you quit a job. Once you formally leave the position, you typically have 60 days to take certain actions relating to the money, including requesting a cash-out. If you go that route, you’ll usually have to formalize your request in writing by completing some forms, and that’s typically the most difficult step.

However, withdrawing the money can trigger early withdrawal penalties. Along with the 10 percent penalty, you’ll be taxed on the amount you take out, which can potentially reduce the value of the withdrawal by 10 to 37 percent, depending on your tax bracket.

How to Cash Out a 401K After Quitting a Job

Cashing out an eligible 401k is pretty simple. Typically, you’ll need to contact the plan administrator and complete a few forms. Once that’s done, the administrator can usually send you a check for the value of the account.

Exactly how long it takes to receive the check can vary, though most will provide the funds within 60 days of the request processing. If you have questions about the timeline, you can request an estimate from the administrator.

Did you know what happens to a 401k when you quit a job? Do you think the process for cashing out is reasonably easy? If you’ve ever left a job, did you decide to cash out your 401k, or did you go another direction? Share your thoughts in the comments below.

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Minors Still Have to Pay Taxes

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minors still have to pay taxes

Even if your children are young enough to be considered dependents, that doesn’t mean they won’t have to pay federal or state income taxes. Like adults, income earned by minors is considered taxable. If you are wondering whether your child needs to pay taxes and file a tax return, here’s what you need to know.

When Do Minors Have to Pay Taxes?

As with adults, minors have to pay taxes when their income exceeds the standard deduction or exemption. This is true regardless of whether they’re considered a dependent and can apply to both federal and state taxes.

Generally, there are two types of income that may result in minors needing to pay taxes. First, there’s earned income, which is typically money that comes from a job. With this, a child is only considered to have taxable income on a federal level if their earnings exceed the standard deduction, which is set at $12,950 for 2022. The threshold for owing state income taxes can vary, so you’ll need to check your state’s exemption amount to determine if they’ll need to pay.

Second, minors may have unearned income. Usually, this is money relating to investments or savings, such as interest or dividends. With this, the exemption is only $1,150 for 2022. Anything above that is potentially taxable.

Do Minors Get Taxes Taken Out of Their Paycheck?

If your child works for a traditional employer, taxes are often taken out of their paycheck. Most employers use the same process to ensure they meet legal requirements regarding withholding, so they treat all employees the same in that regard, no matter their age.

Like adults, minors complete Form W-4. On that, they can use the form to alter what’s withheld, allowing them to essentially have less removed than would be standard for their earnings. If a minor knows they won’t cross the standard deduction amount with their earnings, this could help them limit the amount that’s taken out of their paycheck. However, if they may exceed the threshold, that strategy could cause them to under withhold, which would leave them owing money when it was time to file.

Additionally, unless a child works for a company owned by their parents, FICA taxes – those covering Social Security and Medicare – are removed from their paycheck. There are no available exemptions to these taxes, aside from the aforementioned case of them working for a parent’s business.

Do Minors Have to File Taxes?

Technically, minors that earn less than the standard deduction and all of their income has already been reported to the IRS aren’t required to file their taxes, as they don’t owe any money to the government. However, that doesn’t mean they shouldn’t file, either through a parent’s return or on their own.

Many employers remove taxes from the paychecks of minors. If your child had taxes deducted, filing their taxes allows them to receive a refund. Without filing, that money isn’t returned, which makes submitting their tax information during the filing period essential.

For minors that earn more than the standard deduction, filing their state and federal taxes is essential. In that case, they do owe federal and state taxes. Even if their payroll deductions cover what’s owed, they need to file to formally settle the amount and either pay any additional amount owed or get a refund on the excess.

Additionally, minors that earn tips that aren’t reported to the IRS through their employer – something that’s more common with cash tips that go unrecorded by the company – they’ll need to file regardless of how much they’ve earned. That ensures that FICA taxes owed on the tip money are collected.

Finally, self-employed minors need to file their taxes if they make more than $400 in profit. Additionally, if the amount of tax owed is expected to exceed $1,000, then making quarterly tax payments is essential.

How a Minor Needs to File Taxes

There are technically two approaches a minor might have to use to file their federal taxes. First, if they make more than the standard deduction, they have to file their own return, regardless of age. Generally, minors with self-employment income should also file separately. Per the IRS, children who can’t handle the task on their own can receive assistance from a parent or guardian.

For earnings below that threshold, parents can report the income on their tax return instead. This ensures it’s properly tracked. Thus, any potential refund is capturable without the complexity of having a minor file a separate return. However, filing a separate return is an option here. This could serve as a great financial lesson that introduces your child to filing taxes, setting up for refunds, and otherwise understanding how taxes work.

If you have any questions regarding filing taxes for a minor child, speaking with a tax professional is a wise move. It allows you to get explicit guidance relating to your unique situation, which is beneficial.

Filing Requirements May Vary

Additionally, it’s important to note that state filing requirements for minor children can vary. While they often align with the federal thresholds, there can be some variances that alter the picture. As a result, you’ll want to research the rules in your area. This will help to determine if your child has to file separately or if they can be on a parent’s return. When in doubt, speak with a tax professional operating in your state for additional guidance.

Does it surprise you to learn that minors still have to pay taxes? Do you think making minors pay taxes is a smart move or that they should be exempt? Share your thoughts in the comments below.

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This Is How Much Money You Need to Retire Before 50

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retire by 50

For many people, the idea of retiring well into their 60s just isn’t appealing. Instead, they’d like to leave the workforce far earlier, giving them time to travel, explore hobbies, or spend time with family and friends. While retiring before age 50 is a challenge, it is doable if you set aside enough money. If you’re wondering how much money you need to retire before 50. Here’s what you need to know.

Is There a Magic Number That Lets You Retire Before 50?

Technically, there isn’t a magic number that means you’re in the clear to retire before age 50. The main reason for that is that everyone has a unique preferred lifestyle. Thus, altering how much money they’ll need to have available. Plus, your health might vary from the norm. Which could cause you to need to spend more or less in what’s often an expensive category.

Since how much money you’ll need is personal, don’t rely on a magic number presented by someone else, even if they’re a financial expert. Instead, you need to assess your own situation, allowing you to factor in your needs and preferences. That way, you set enough the right amount of money based on your unique situation, reducing the odds that you’ll experience an unexpected financial hardship after leaving the workforce.

Determining How Much Money You Need to Retire Before 50

As mentioned above, how much you’ll need to set aside to retire before age 50 depends on the type of lifestyle you want to maintain. If your goal is to travel the world, you may need to replace 100 percent or more of your annual working income. If you’re aiming for a modest life at home, you may be able to scale back to somewhere in the 60 to 80 percent range.

However, along with your lifestyle, you need to account for costs that may rise over time. For example, medical expenses usually go up as a person ages. While some of that might get offset once you reach Social Security age and can start receiving that income, whether that’s sufficient may depend on the condition(s) you have and the treatment that’s required.

Finally, it’s important to remember that lifespans vary. While you can use averages, family history, and current health levels to get an estimate, you may end up living for years past that point. As a result, you may need to assume that a buffer is necessary.

Calculations For Retirement

Once you consider those points, you can start performing some calculations to get a baseline of how much you may need. Generally, you want to begin with a simple equation that doesn’t involve any interest-earning potential, such as:

Annual retirement income x Number of years in retirement = Savings target

Your annual retirement income is simply the pre-tax amount you believe you’ll need to live your preferred life. For the number of years in retirement, you can subtract the age you plan to retire from your life expectancy. By doing that, you can get a rough savings target that can serve as a starting point.

The benefit of not factoring in interest is that any earnings post-retirement can serve as a buffer against a longer life expectancy, market downturns, inflation, or other challenges that may arise. Similarly, by not bringing Social Security into the equation, you’re supplementing that buffer, giving you even more protection.

How to Save Enough Money to Retire Before Age 50

Once you have the savings target, you can use a retirement calculator to determine how much you’ll need to set aside each month to hit your goal. While you’ll have to estimate your earnings, as there’s no way to know precisely how the stock market will perform, by using a slightly conservative number for your growth potential, you can make sure you won’t fall short.

Beyond that, if you want to retire before age 50, you’ll need to use a multi-faceted approach to ensure you have enough money set aside. First, you’ll want to max out any available retirement accounts. In most cases, using both an employer-sponsored option, like a 401(k), and an IRA is your best bet, as you’ll get to capture some tax advantages.

After that, you’ll need to shift onto other platforms. A traditional brokerage account typically isn’t a bad option. Often, you can invest in similar assets to your retirement account. Plus, there aren’t any penalties if you start making withdrawals before age 59 ½.

In many cases, you’ll need to be fairly aggressive with your investments as well. Otherwise, you may not capture enough growth potential to ensure an early retirement. While that does mean taking on risk – and potentially seeing some losses – with a properly diversified portfolio, forward progress is often more likely.

Making Sure You Remain on Target Over Time

As you set money aside for your retirement, you’ll want to assess your progress and potentially changing needs as time passes. By monitoring your balance, you can see if you’re getting close to the target, letting you know if you need to save more aggressively or not.

By reviewing your needs to see if they’ve changed, you can adjust your target accordingly. For example, if your health situation changes, you can account for cost differences. If inflation alters the amount of income you’ll need, you can shift the target upward to accommodate that.

In most cases, you’ll want to review your situation at least once a year. As you get closer to retirement, you may want to do a check-in every three to six months.

Also, you might want to adjust your investment allocations once retirement is near. While you’ll want to ensure you can still capture some earnings, reducing risk can possibly preserve more of your money, which may give you peace of mind as you get closer to leaving the workforce.

Once you reach retirement, you’ll still want to check your account at least annually. That way, you can potentially adjust your withdrawals should the need arise, allowing you to make sure that you’ll have enough money available to last your entire retirement.

Do you want to retire before 50? If so, do you think the amount of money above is sufficient, or are you aiming for more? If not, is the amount you need to save what’s holding you back, or is there another reason why you plan on delaying retirement? Share your thoughts in the comments below.

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Is A 401K Worth It?

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is a 401k worth it

When you’re planning for retirement, classic advice usually states to take advantage of every plan option available to you. However, while a 401K can be an asset, that doesn’t mean it’s the perfect choice for every situation. If you’re wondering if a 401K is worth it, here’s what you need to know.

The Benefits of a 401K

A 401K has specific benefits that can potentially make one a worthwhile addition to your retirement plan. One of the biggest is its tax-deferred status. When you start contributing, you reduce your tax burden immediately since the payments typically come from pre-tax dollars. If you earn more money now than you will in retirement, you’ll potentially come out financially ahead.

Employer matches are another benefit of a 401K. Many companies will match employee contributions up to a specific amount. By contributing enough to capture the maximum, you’re essentially collecting the most “free” money possible for retirement.

In most cases, 401Ks come with a wide array of investment options, too. This allows you to choose a portfolio mix based on your comfort with risk, values, financial goals, and other factors. Plus, there are typically several asset classes available, including stocks, ETFs, money market funds, and more.

Finally, many 401Ks allow people to borrow against the account. Essentially, your account balance acts as collateral, and you can pay the amount back with interest over time. In some cases, these loans offer more favorable rates. Plus, if you repay the full amount before changing to a new employer, it typically won’t impact your income for tax purposes.

The Drawbacks of a 401K

While 401Ks come with some notable benefits, that doesn’t mean there aren’t drawbacks to consider. As a defined contribution plan, you’ll send an amount to the plan every paycheck regardless of market conditions. While the concept of dollar-cost averaging could reduce any harm from investing at inopportune times, it does mean you’ll sometimes invest during periods that aren’t offering the best value.

You may also have to contend with 401K fees. Precisely what that involves varies from one employer to the next, but they can add up surprisingly quickly, offsetting at least some of your earnings or actually causing you to spend more than you make during economic downturns.

It’s also important to note that some 401K plans come with surprisingly few investment options. You may have only a small number of investments to choose from, and most of what’s available may simply be mutual funds, particularly target-date funds.

Finally, while employer matches are typically one of the benefits of 401Ks, not all companies offer one. Additionally, some have very low matches, which can make a high-cost 401K a poor choice for some investors.

Is a 401K Worth It?

Generally speaking, a 401K can be worth it, suggesting you have a plan available that meets your needs. If there is a wide array of investment options, a generous employer match, and a reasonable fee structure, and you’re in a higher tax bracket now than you will be in the future, using a tax-deferred option like a 401K could be worthwhile. However, if none of that applies, there are more flexible options available, and it could be wise to explore them instead.

Do you have a 401K? If so, do you think it’s worthwhile, or do you believe that other retirement savings options are a better fit? How do you make the most of your 401K to ensure your financial future? Share your thoughts in the comments below.

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Are Housing Prices Finally Dropping?

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Currently, inflation is running rampant, harming the budgets of most households. Plus, the Federal Reserve raised rates again, and by a higher margin than most expected. In both cases, that can make buying a home harder, which many would assume would drive down demand. While a housing market crash isn’t necessarily on the horizon, most people wouldn’t be surprised if the home prices were shifting downward. But is that actually what’s happening? If you’re wondering, “Are housing prices finally dropping?” here’s what you need to know.

Are Housing Prices Dropping?

In many parts of the country, housing prices are starting to decline. With mortgage rates rising due to increases in the Federal Reserve rates, sellers may have to take a different approach to find buyers. By reducing prices, it makes properties more enticing, which could lead to a quicker sale.

However, that doesn’t mean housing prices are universally dropping. During a four-week period that ended in late May, about one-in-five sellers dropped their asking price. While conditions have changed since, that shows that not all sellers are going to alter their listings even as the market changes.

In time, the decline in prices may become more common. However, that also depends on your location. For example, prices were still rising in the Seattle area as of early June 2022. However, the available inventory was also trending upwards, and sales were slowing, so a change is potentially on the horizon.

Generally, whether housing prices are falling near you depends on supply vs. demand. In some areas, the increasing interest rates dramatically altered demand, leading to far higher supply. In those regions, prices will typically fall faster than in hot housing markets that are only seeing slight changes in demand or have had a demand vs. supply imbalance so severe that it will take time to level out.

Is Demand for Homes Shifting?

In a broad sense, demand for homes is declining. Higher interest rates and high inflation are pulling aspiring buyers out of the market in some cases. Essentially, both of those factors made transitioning to a new house far more expensive. Plus, many potential homebuyers will hesitate to make a big financial commitment with inflation as it is currently.

Additionally, the number of active listings isn’t necessarily growing substantially in some areas. Many aspiring sellers are aware that conditions aren’t ideal for quick, high-profit home sales. As a result, those who viewed selling as optional aren’t rushing to list. Instead, listings are mainly comprised of those who feel a sense of urgency about selling their property.

Declining inventory can also shift demand. While inventory levels were low previously, it was partially because borrowing was so affordable. Buyers were quick to jump on houses with potential, largely because of concerns that they wouldn’t have options if they waited.

Now, if decline in inventory is related to hesitant would-be sellers deciding that waiting for conditions to improve is a better choice, this alters the market in a different way. It could reduce the availability of homes that buyers find enticing, which could also impact demand.

Are Housing Inventories Declining?

Whether you see a decline in housing inventory is mainly based on where you live. Among the 400 largest housing markets, inventories rose in about 332 of them as of early June. In fact, many of them are increasing by 40 to 55 percent. While that seems like good news for buyers, it isn’t entirely what it seems.

Even in areas with inventory growth in that range, many of them have levels far below what was there pre-pandemic. As a result, many regions technically have an incredibly limited supply, preventing conditions from full favoring buyers.

Additionally, not every city is seeing increases. In the top 400 markets, around 68 housing markets either have declining inventory or are approximately the same. Further, those numbers don’t account for smaller markets, which could be going either way.

Even if conditions remain the same for months, if not longer, that doesn’t guarantee that inventory levels will rise quickly. As mentioned above, some sellers have the luxury of time, so they aren’t hopping into the market. Instead, they’re waiting to see if conditions improve before listing.

However, some sellers can’t afford to wait, which will lead to new listings. In areas where sales continue to slow, that could pump up inventory levels significantly. However, it may take longer than you’d expect to reach pre-pandemic inventory, so keep that in mind.

Will Prices Drop If the Federal Reserve Raises Rates Again?

The likelihood that the Federal Reserve will raise rates again – potentially multiple times through 2022 and into 2023 – is high. Usually, rate increases are a means of limiting inflation, making borrowing less enticing and encouraging saving. As a result, it alters economic activity, which can keep prices in check.

If the Federal Reserve raises rates again, it will undoubtedly impact the housing market. When mortgages get more expensive, it reduces the number of potential buyers. In turn, it can create a buyer’s market, leading sellers to lower prices as a means of securing a sale.

However, every housing market is different. Additionally, price reductions depend on the action of sellers and available market inventory. Whether a seller can afford to wait to list until conditions improve may influence inventory levels, potentially keeping them below pre-pandemic levels for far longer than most would hope. Plus, the supply vs. demand equation may favor sellers in some markets regardless of raising rates, which could keep prices either steady or may leave them generally trending upward in specific areas.

Ultimately, prices will potentially decline on average, or growth will stagnate in many markets if the Federal Reserve raises rates again. Whether that works out well for a potential buyer mainly depends on their location, as that ultimately plays a big role in the prices they’ll see and whether they’ll benefit from a decline.

Are you hoping that housing prices will finally start dropping, or would inflation and higher interest rates prevent you from buying a house at this time? Do you think a housing crash is on the horizon and want to see if you can capitalize on that? Share your thoughts in the comments below.

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Is It Time to Sell All of The Stocks In My Portfolio?

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when to sell stocks at a loss

In mid-June 2022, the S&P 500 entered bear market territory, and the Federal Reserve increased rates by the largest margin since the mid-1990s. Together, this made investors nervous. Along with worrying about an economic downturn, some fear a full-blown recession may be just around the corner. As a result, they’re re-evaluating their portfolios and wondering if now is the time to sell stocks at a loss. If you’re trying to decide what’s best. Here’s what you need to consider.

How Market Downturns Alter the Picture

Market downturns are intimidating. This particularly true to two kinds of investors. For those nearing or in retirement, declining stock values are worrisome as they may soon impact the investor’s quality of life. The value of their portfolio serves as a source of retirement income. Thus, causing declines to have a potentially immediate impact on their short- and long-term financial well-being.

Another type of investor that often gets worried about market downturns is those that are newer to investing. For those who weren’t involved in the markets during the last major recession – such as the market crash of 2008.  There may be more fear about what lies ahead. That could make selling seem like an attractive option. Since it could prevent future financial losses.

However, what’s important to remember is that wide stock declines aren’t typically permanent. Additionally, those who maintain their portfolios and those who continue to invest can often come out ahead in the long run. This is only if they stick with it. That’s good news for buy-and-hold investors. These are investors who don’t need to tap the funds within the next few years. For them there’s a decent chance their portfolio value will recover.

But that doesn’t mean it’s never wise to sell stocks at a loss; it’s simply that making broad decisions about an entire portfolio isn’t the best idea. Investors should always look at the potential value of any particular holding to determine whether it makes sense for their goals, allowing them to make strategic choices regardless of market conditions.

When Selling Stocks at a Loss Makes Sense

There are a handful of situations where selling a stock at a loss does make sense. The primary one is when the company’s outlook has significantly changed. Now, all businesses experience some degree of ups and downs, so slight shifts in value aren’t necessarily enough to justify a sale. However, if the company’s future prospects are fundamentally altered by a particular event, it’s possible it is no longer a wise investment, and selling at a loss could be a good move.

Another reason to sell stocks at a loss involves taxes. By selling stocks at a loss, you can potentially offset any income or capital gains generated by stronger investments. The strategy is known as tax-loss harvesting, and it’s worth considering if a particular stock lost value and it no longer makes sense for your portfolio at large.

Selling stocks at a loss because you genuinely need the cash may also make sense. Along with the potential tax benefits, it may allow you to cover a cost without having to worry about incurring debt. While it’s usually better to use an emergency fund first, if that’s fully tapped and you still need cash, this might be better than selling stocks with additional growth potential.

Finally, if you need to rebalance your portfolio, selling losing stocks is usually better than liquidating strong performers or those with ample potential. It allows you to accomplish the goal while improving your overall financial picture. Plus, you could get some tax benefits, which is a bonus.

When Selling Stocks at a Loss Isn’t Wise

Usually, the main time when selling stocks at a loss isn’t smart is if the downturn is likely temporary. For companies that are stable and have the potential to grow and thrive, the odds are good that the stock price will recover. In fact, downturns could be the right time to actually purchase more stocks, as you may get them at a bargain price, giving you stronger gains when there’s a recovery.

If the stock value fell, but it comes with a solid dividend, then selling might not be the wisest choice either. That’s mainly true if the company is reasonably healthy and was simply overvalued at the time of purchase. In this case, the dividends may offset that loss, making the buy-and-hold approach a better fit in this situation. Just make sure that the value isn’t likely to decline dramatically long-term, barring normal market fluctuations or broad downturns that aren’t reflective of the company’s health.

Finally, never sell a stock if emotions are all that’s driving that choice. Investment decisions should always be based on logic, research, financial goals, and similar factors. Usually, rash choices will work against you. So, if you’re motivated by emotion, take a step back, look at the situation objectively, and then decide what’s best.

Do you have any other tips that can help someone figure out when to sell stocks at a loss? Do you think selling stocks now is a wise move, or are people better off waiting until the market stabilizes? Share your thoughts in the comments below.

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When Is It Okay For A Spouse to Quit a Job?

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Spouse to Quit a Job

As a couple, having a sound financial future is usually a goal. That’s why it can be really difficult to determine how to respond if one spouse wants to quit their job somewhat unexpectedly. If they don’t have another position lined up – or don’t plan on finding something new – you may wonder if their quitting is actually alright or if it’s unreasonable. Regretfully, the situation isn’t always cut and dry. So it’s critical to remember there are times when quitting is wise. Here’s a look at when it’s okay for a spouse to quit a job.

When It’s Okay for a Spouse to Quit a Job

The Workplace Is Dangerous

If there is one time when quitting a job without talking to a spouse first is definitively okay, it is if the workplace is unnecessarily dangerous. While companies should do their part to protect their workforce from harm. Some don’t do this well. Some may order employees to cut corners in a manner that needlessly puts them in harm’s way. Others may forgo maintenance. Thus, increasing the odds of dangerous mechanical failures that could harm an operator.

If your spouse is in a risky role and their employer keeps putting their safety on the line because it refuses to follow tried-and-true protocols or regulatory mandates. Exiting immediately could be essential. Otherwise, your spouse could end up catastrophically injured. Which is something that comes at a far higher cost than losing a paycheck.

There’s a Health Issue

Similar to the point above, if a job is causing or aggravating a serious health issue – or preventing your spouse from taking proper steps to care for a condition – quitting might be a necessity. There are scenarios where a person’s job can have a major impact on their health, either purely based on the nature of the role or the environment in which they do the work. In those cases, the only remedy is usually to leave. If they don’t, they may continue to deteriorate, potentially irreversibly so.

If a job is causing significant mental health damage, that’s also a justifiable reason to leave. For instance, if there’s toxic management, bullying, or similar conditions leading to severe depression or anxiety. Quitting might be the best way to get re-centered and on the road to recovery.

A person’s health isn’t something they should have to sacrifice in the name of a paycheck, particularly if the situation is getting severe rapidly. That’s why, in those scenarios, quitting is often okay.

Burnout Is a Problem

In many cases, burnout is a far bigger burden than people expect. There are both mental and physical side effects to burnout, leaving a person pretty miserable. That’s why, if burnout is the issue, quitting might not be a bad choice.

However, quitting over burnout without taking some key steps could be irresponsible. For example, if your spouse is burned out because they’re bored at work, ideally, they should speak with their manager. They may be able to take on additional duties that keep them engaged, effectively solving the issue.

The same is true if they’re overworked. At times, a meeting with their manager to discuss the situation could lead to changes, allowing them to conquer their burnout.

But not all sources of burnout are easily solved. First, managers can refuse to make any changes, making the problem inescapable without quitting. Second, if the burnout is related to the field or industry being a bad fit, leaving the role may be a must. Finally, if burnout is tied to the workplace, such as an aspect of the culture, heading for the exit is potentially essential.

Since burnout isn’t typically catastrophic, it may be preferable that your spouse find a new job before leaving. However, if the impact of burnout is severe, a quicker exit could make sense.

An Ethical or Legal Issue Arises

There are times when a person may be cruising along at work, only to witness an incident that makes staying problematic. For example, seeing a higher-up make an unethical choice could put an employee in a bind. The same goes for signs of illegal activity.

Even if your spouse isn’t directly involved, remaining in a workplace where an ethical or legal issue could rear its ugly head isn’t always wise. As a result, they may need to quit without any notice, mainly as a means of protecting themselves from a potentially risky situation.

A Multitude of Other Reasons

The examples above outline some extreme situations that most would agree make quitting – even spontaneously – primarily justifiable. However, they, by all means, aren’t the only ones.

Every person’s workplace and job are different, so your spouse’s could come with challenges not outlined above. Additionally, every person is unique, so what’s tolerable to one person may be a dealbreaker for another.

While quitting is a big decision that impacts all members of a household, spouses can’t necessarily force their partner to keep a job. Trying to do so usually only brings negativity and resentment to the relationship. The same goes for chastising a spouse who’s already quit, as that’s a reactive approach that won’t help you both find solutions to any challenges the choice creates.

How to Navigate a Spouse Quitting Their Job

If your spouse quits their job unexpectedly, you’re free to ask why they made that decision. You may discover that there were issues or challenges you weren’t initially aware of, making their quick exit completely justifiable. However, even if that isn’t the case, take in what they share and avoid being outwardly judgmental. Instead, shift gears to become solution-oriented.

Review your budget with your spouse to determine how losing that income impacts your finance. See if you need to cut back and, if so, what you should change. After you pare down, see if tapping your emergency fund is a requirement or if you can proceed while leaving your savings intact.

After that, speak with your spouse about their career plans. Find out if they intend to launch a job search, acquire new skills to make a career change possible, or have other ideas for how they’ll proceed. Determine if there are steps you can take to support their transition, as that may help them move forward with greater ease.

Work Together On A Solution

If your spouse isn’t sure about their professional future, work together to find a reasonable solution during the interim. For example, they may be able to secure a part-time job to help make ends meet while they use the rest of the time they would usually spend working if they were full-time to explore various options.

Ideally, you want to work together to figure out what comes next. That way, you can get back on the same page, allowing you to make progress as a team. Often, that can do a lot when it comes to repairing any potential damage to the relationship, making it easier to remain future-oriented and move forward.

Can you think of any other times with it’s okay for a spouse to quit a job? Has your spouse had to quit their job unexpectedly, and you’d like to offer advice to others in the same boat? Share your thoughts in the comments below.

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What Should You Do With a Sudden Large Sum of Money

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A sudden windfall is a boon, giving you a quick financial boost you may not have expected. However, figuring out what to do with a large sum of money that arrives quickly isn’t always easy. There are numerous potential pathways, and figuring out which is best may be tricky. If you’re wondering what you should do with a sudden large sum of money, here are some options that are worth considering.

Stop and Breathe Before Spending a Dime

Before you do anything else, pause for a moment and breathe. A sudden windfall may come from an emotionally challenging situation, such as the death of a loved one that resulted in an inheritance, a lawsuit award or settlement after a traumatic event, or selling a business you molded over the course of years. In any of those cases, what you’re feeling now may not align with your state once the dust settles.

Since that’s the case, you want to stop and breathe before spending any of the money. That can prevent you from making emotional decisions, allowing you to wait until you can think logically about what to do with the windfall.

Speak with a Tax Professional

Another critical initial step after receiving a large sum of money is to speak with a tax professional. Depending on the source of the cash, the total amount, and other details, there could be tax implications that you need to prepare to navigate. If you don’t find out about them now, there’s a chance that you’ll spend money you should have held back for an upcoming tax payment.

Usually, a single appointment with a tax professional can ensure you understand what the windfall means from a tax perspective. Additionally, they can discuss the potential implications of using the money for specific purposes, allowing you to learn more about how decisions may impact your tax liability.

Create or Boost Your Emergency Fund

If you either don’t have an emergency fund or the one you have isn’t large enough to cover at least three months of living expenses, consider using the money to boost your emergency fund. That gives you a critical financial safety net, ensuring that an unexpected financial hardship doesn’t derail your life.

You may even want to go as far as six months of living expenses. Again, it’s a buffer against the unknown, allowing you to have a resource you can tap down the line should the need arise.

Pay Off High-Interest Debt

If you already have a solid emergency fund, consider making high-interest debt your primary target. Along with costing you money, carrying large quantities of high-interest debt – usually in the form of credit cards – can harm your credit score.

By paying it down as much as possible, you reduce a financial burden while improving your credit report. That makes it a win-win, particularly if you have financial goals that often come with new debt, such as buying a home.

Bolster Your Retirement Savings

Another smart step to take is to bolster your retirement savings if you don’t have much set aside. Even if you have access to a 401(k) at work, you can typically open an IRA. With an IRA, you can send some of the windfall – up to the annual contribution limit – to that account. Then, you’re going the extra mile to secure your financial future.

Just make sure to research contribution limits or speak with a retirement professional who can give you those details. That way, you can maximize your savings while doing things correctly.

Make a Down Payment on a Home

If you’ve dreamed of home ownership and can reasonably afford a mortgage, but don’t have a down payment available, consider using some of that sudden large sum of money for a substantial down payment. As long as you put at least 20 percent down, you can avoid PMI. By going beyond that, you reduce your monthly payment and increase the amount of equity, both of which work in your favor.

Just make sure you don’t purchase more house than you can afford, both from a monthly payment and from a tax and maintenance perspective. The windfall may make more expensive homes seem more plausible on the surface. However, you need to keep the long-term picture in mind, particularly if the money you’ve recently acquired won’t necessarily last long.

Pay Off Your House

If you already have a home, paying off the mortgage is a smart move. It eliminates a major monthly payment from your budget while also allowing you to avoid further interest. Plus, owning your home outright can make it easier to sell later, should the need arise.

Even if you can’t pay off your house, paying down the debt is a good idea. It lets you reduce the amount of interest you’ll pay and shorten the total repayment period, allowing you to clear the mortgage faster than you would otherwise. Plus, if you need to reduce the monthly payment, you could do so with a refinance, something that’s easier to pull off when the amount you owe is far below the fair market value.

Open a Brokerage Account and Invest

For those who tackled everything above and still have money left (or don’t want to buy a home), opening a brokerage account and investing could be a wise decision. It creates opportunities for your money to grow without the restrictions associated with retirement accounts.

In some cases, you can tap a financial adviser through your bank or credit union, allowing you to get advice for free. Otherwise, consider finding one on your own, opting for a non-commission adviser whenever possible.

Then, focus on assets that come with low fees and built-in diversification. Both mutual funds and ETFs can be great starting points. Look for ones that align with your goals and risk tolerance, allowing you to reduce risk while ensuring your money has a chance to grow.

Have a Little Bit of Fun

When you end up with a sudden large sum of money, give yourself permission to have a little bit of fun. Just make sure you do it responsibly. For example, depending on the amount of money, you might want to designate 1 to 10 percent as cash you can spend on something you’d enjoy.

Usually, it’s best to look at your broader financial picture first. Then, you can determine what percentage is reasonable based on your other goals and how committing to the points above would benefit you. That allows you to choose an amount that won’t feel irresponsible, all while giving you a bit of freedom.

Do you have any other tips that can help someone with a sudden large sum of money make wise financial choices? Have you ever ended up with a windfall and want to share your experience? Share your thoughts in the comments below.

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This Is How to Plan A Budget Friendly Summer Vacation

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Taking a summer vacation is a great way to relax and recharge. The challenge is that travel can be expensive, making it hard to have fun without breaking the bank. Fortunately, it is possible to plan a budget-friendly summer vacation. Here’s how.

Remain Flexible About Dates and Locations

When it comes to keeping costs down, few things work in your favor quite like flexibility. If you’re willing to travel on less popular dates, you can save quite a bit on airfare and accommodations. Similarly, if you’re open to a wide range of destinations, you can figure out which ones offer up the best bargain.

Now, it’s easy to assume that only unconventional summer destinations will have great deals, but that isn’t always the case. Popular options can, too, especially in areas that rely heavily on tourists to support the local economy. Remaining open-minded simply lets you capitalize on opportunities as they arise.

Time Your Airline Ticket Purchase

While you might be able to score last-minute deals on airfare, if you want a nearly guaranteed window where prices are typically lower, start exploring about two to three months before your vacation. During that window, ticket costs are usually near their lowest.

Otherwise, if you’re highly flexible about your destination, look closer to one month before your vacation. Then, let deals determine the location of your vacation.

Get Accommodations with a Kitchen

Dining out usually costs a bundle. Fortunately, you can mitigate that expense by choosing accommodations with a kitchen. Whether it’s an extended stay hotel with a well-equipped kitchenette or an Airbnb with a full kitchen, being able to cook lets you make food purchases from grocery stores instead of restaurants.

If you’re planning a road trip for your summer vacation, consider renting an RV instead of staying at hotels. You can often find options with kitchens included. Plus, some can tow standard vehicles, allowing you to have a car handy.

In the end, having access to a kitchen is a great way to vacation on a tighter budget. You can explore locally sourced fresh foods without having to head to restaurants, letting you experience what the region is all about for less.

Focus on Free Attractions and Events

Most major cities have a broad selection of free attractions and events, allowing you to explore the area without busting your budget. Whether it’s concerts in the park, free-entry days at museums, or landmarks that you can simply approach, it lets you have fun for less.

If you’re coming up short on options, then look for discounted tickets to other attractions. In some cases, city passes let you explore a range of attractions for far less than the door price. Plus, they usually feature some of the most popular options. You can also check sites like Groupon for discounts.

Are you planning a budget-friendly summer vacation and have more tips that you’d like to share? Have you used any of the strategies above and want to tell others about your experience? Share your thoughts in the comments below.

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Is Paying Points A Good Way to Reduce Your Mortgage Rate?

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For many people, buying a house is the most expensive purchase they’ll make during their lives. Since that’s the case, it isn’t uncommon to look for ways to reduce the monthly payments and overall cost. While negotiating is undoubtedly a great option, paying for points is another viable approach. If you’re wondering what mortgage points are, how they work, and whether they’re a good way to reduce your mortgage rate, here’s what you need to know.

What Are Mortgage Points?

Technically, mortgage points are a fee borrowers can pay as they set up a mortgage for a purchase or refinance. Homeowners can choose to pay the cost in exchange for securing a lower interest rate, though the fee is actually optional. There’s no requirement to buy points, so homeowners can choose to forgo the expense and keep the original interest rate offered.

How Mortgage Points Work

In some ways, mortgage points are a way to prepay interest. In exchange for a fee, the lender agrees to give you a better rate. Essentially, you’re compensating the lender for lost income, as the lower rate means they’ll earn less off of your loan over its life.

Mortgage points reduce an interest rate associated with a home loan by a set amount. In most cases, one point shrinks the interest rate by about 0.25 percent. For example, one point would turn a 5 percent interest rate into a 4.75 percent rate.

It’s important to note that each lender can set the value of their points. As a result, some may offer 0.25 percent per point, while others may reduce the rate by 0.125 percent, 0.2 percent, 0.3 percent, 0.35 percent, or any other amount they choose. However, the reduction must be disclosed to borrowers in advance, ensuring they know precisely what they’re getting in return for the fee.

If a borrower decides to buy points, they pay the cost at closing. The points are listed in the mortgage documentation, ensuring the new rate is officially part of the loan structure. Once the homebuyer closes, the rate after the deductions for any points purchased remains in place for the life of the loan.

The Cost of Mortgage Points

As with mortgage point values, each lender can determine its own cost for purchasing points. However, most lenders charge a fee of 1 percent of the loan total per point. For example, if you were financing $300,000, you’d pay $3,000 per point. If you wanted two points, that would cost $6,000.

While it may seem like 1 percent is the minimum amount you can pay, that isn’t always the case. Some lenders do allow borrowers to purchase fractional mortgage points. Using the example above, a homebuyer may be able to spend $1,500 to get a half-point on a $300,000 loan.

If they do, they secure an interest rate reduction that’s half the full point amount. For instance, if a whole point reduces the interest rate by 0.25 percent, a half-point would be worth 0.125 percent. For an initial interest rate of 5 percent, that half-point leads to a 4.875 percent interest rate instead.

Pros and Cons of Mortgage Points

Mortgage points do come with pros and cons. When it comes to the benefits, the biggest is that paying points can save you money over the life of your loan, particularly if you plan on staying in place long-term. If you want to confirm the savings, you’ll need to compare the total interest paid based on the two possible interest rates. That way, you can see the overall savings and compare that to the cost of the points.

If you don’t intend to stay in the home forever or may refinance in the future, you’ll want to find out if you’ll save enough to offset the price of any points. Usually, that involves calculating the breakeven point, which is the month that your interest savings covers the amount you spent on points. Precisely when that occurs varies depending on your loan terms, though you can use an online calculator to make determining when that happens easier.

Paying points may also help you qualify for a home loan if the monthly mortgage payment is higher than a lender finds comfortable. When you reduce the interest rate, the monthly payment goes down, potentially to the point where you become eligible for your preferred loan.

Tax Deductible

In some cases, the cost of your mortgage points is also tax-deductible. Since it’s considered prepaid interest, it can lead to deductions similar to traditional home loan interest payments. Precisely what that’s worth depends on your tax situation, so you’ll want to speak with a tax professional to see if this provides suitable value.

When it comes to drawbacks, the biggest is the higher upfront cost. While you might be able to convince the seller to cover the cost in exchange for a higher offer, paying out-of-pocket is far more common. That means paying potentially thousands of dollars in addition to your down payment, which may not be easy.

It’s also that paying points will cause you to pay more for your mortgage than you would without them. If you unexpectedly need to move or decide to do a cash-out refinance to consolidate debt or tackle some upgrades before the breakeven point, paying points costs you extra money instead of saving it.

If you’re looking at an adjustable-rate mortgage (ARM), reaching the breakeven may be impossible. Usually, the points only count during an initial fixed-rate period. If the breakeven point doesn’t occur during that window, then the points could also cost you more.

Is the Cost of Mortgage Points Negotiable?

Generally speaking, the cost for mortgage points isn’t negotiable. However, if you have exceptional credit and a solid down payment, you may be able to negotiate to lower the cost of certain other expenses, like origination fees or certain closing costs. By doing so, mortgage points may feel more affordable, even if the price of each point remains the same.

Is Paying Points a Good Idea?

Whether paying points is a good way to reduce the cost of buying a home depends on your unique situation. If you know with a reasonable amount of certainty that you’ll remain in the house and with your current lender until at least the breakeven point, it’s worth considering. Anything after the breakeven point is pure savings, giving you a clear financial benefit.

Similarly, if you can afford your dream home, but the lender is hesitant to fund a mortgage with a particular monthly payment because of your income level, paying points could be worthwhile. It could let you reduce the monthly amount to the point that leaves your preferred lender comfortable, allowing you to qualify when you otherwise wouldn’t.

Otherwise, it may be best to skip mortgage points. Those who plan to leave before the breakeven point won’t secure a savings. In fact, anyone who makes extra payments may struggle to recoup the cost if they ever move.

Similarly, refinancing before the breakeven point results in a loss, making points an awful idea. Finally, if paying points means not having enough for a down payment to avoid PMI, get the most favorable initial interest rate, or secure a lower homeowner’s insurance rate, then it may be better to go without paying for points.

Look at your overall financial picture and the plan for your home. That way, you can determine whether points are genuinely right for you.

Do you think that paying points to reduce your mortgage rate is a smart approach when you’re getting a mortgage? Do you believe that other techniques are more effective when it comes to securing a great rate or keeping costs down? Share your thoughts in the comments below.

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