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Should You Ever Co-Sign on A Home With One Of Your Children

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Co-signing on a home with one of your children

As a parent, it’s normal to want to do everything in your power to help your children succeed. However, when it comes to financial matters – such as co-signing on a mortgage – it’s usually best to take a step back and examine the situation carefully before moving forward. Otherwise, you may put yourself in a bind or damage the relationship. If you’re thinking you should co-sign on a home with one of your children. Here’s what you need to consider.

What You Need to Consider Before You Co-Sign on a Home with One of Your Children

Your Financial Situation

When you co-sign on a home loan. Even if the intention is that your child will handle all of the associated costs, you’re committing to repaying that mortgage. Even when your child takes care of everything as promised, a large loan shows on your credit report. It’ll impact how lenders view your debt-to-income ratio and can affect your credit score in different ways over time.

In some cases, a new mortgage could hurt your chances of getting new financing if you need it or might lead to higher interest rates. Mainly, it’s because lenders have to assume you may be making the payments, which could make you seem overextended.

There’s also the issue of your child missing a payment or defaulting. Since your name is on the loan, their poor financial activity impacts your credit report. Additionally, you’re legally obligated to repay the loan, too. If an adverse situation arises, you may find yourself stuck in a complex legal and financial matter.

Ideally, you need to ensure that you won’t have a need for any new financing personally or that your creditworthiness remains intact even if there’s a new mortgage on your report. Additionally, you need to have the financial means to take over payments immediately if your child is at risk of missing a payment or defaulting. If those don’t apply, then co-signing is dangerous.

Why Your Child Need a Co-Signer

One of the first points you need to examine is why a co-signer is necessary for your child’s loan. Essentially, you want to know why the bank doesn’t feel they qualify – either at all or for a competitive rate – without someone else being on the mortgage.

In some cases, requiring a co-signer isn’t inherently indicative of a significant problem. For example, many younger adults only have a limited credit history. As a result, they may not have a strong credit score even though they maintain good financial habits. It’s simply because they haven’t engaged with enough financial products to show lenders their creditworthiness.

However, if high debt-to-income ratios, a poor repayment history, or something similar is causing the lender to require a co-signer, that’s potentially a different story. When that occurs, there are red flags that your child may not be a responsible borrower, which makes co-signing particularly risky.

How Co-Signing May Impact the Relationship

Co-signing on a mortgage for a child can impact your relationship. There’s a chance you may judge their behavior moving forward, particularly when it comes to how they manage their money or treat the property. A choice that you view as poor could cause hard feelings, especially if it feels as if they’re putting your financial wellness at risk.

However, even if you aren’t actually doing it, there’s a chance your child may assume that you are judging their choices. This could cause them to view the relationship differently, potentially in a harmful way, regardless of how you’re responding to the situation.

In the worst-case scenario where your child misses a payment or defaults, you’re now in a challenging situation. At a minimum, it’s going to lead to a difficult conversation regarding you having to take over the payments. This can create hard feelings, even if paying the debt is within your capability.

On the other side of the spectrum, if you can’t manage the payments either, the circumstances are far harder to navigate. Your credit is hurt because of their actions, and you may end up in collections, with a foreclosure on your record, or other serious adverse actions on your report because they failed to pay. You may view this as a severe breach of trust, and the harm to the relationship could be severe, if not irreparable.

Alternatives to Co-Signing on a Home with a Child

In some cases, there are alternatives to co-signing on a mortgage that could still help your child succeed financially. What option is best may depend on the exact reason they’re considering a co-signer.

If they need a co-signer because they lack credit history, finding a safer way to help them build there’s up might be a better choice. For instance, you could add them as an authorized user to one of your credit cards, allowing them to benefit from your good financial habits. Co-signing on a smaller personal loan that’s easier to take over if something goes awry could also work.

Another option is to provide your child with down payment assistance. That can lower the amount they have to borrow, potentially skewing things in their favor. Each parent can give a child a gift of up to $16,000 (as of 2022) per year without the child incurring any tax-related responsibilities. That can lead to a potential tax-free total of $32,000.

If you’d like to give a larger down payment, then the lifetime gift exclusion may come into play. Since that’s potentially complex, you may need to consult with an accountant or similar financial professional to determine the possible consequences of doing so.

Finally, if you’re financially able, you could purchase the home on your own. Then, rent it out to your child for the monthly mortgage payment amount. If their financial situation later improves and they can purchase the house from you, then they can get a loan, and you can transfer ownership that way. If not, then you potentially have an investment property that you can rent to others or sell.

Should You Ever Co-Sign on a Home with One of Your Children?

Ultimately, co-signing on a home with one of your children is risky. At a minimum, it impacts your credit, often limiting your access to new financing if you would need it.

However, it also puts you on the hook for a large debt. If your child may miss payments or default, repaying the loan is your responsibility. If you can’t do it, then you’ll also face the consequences of going to collections or ending up in foreclosure. Plus, co-signing on a mortgage can put a strain on the relationship.

Now, this doesn’t necessarily mean that co-signing is never a good idea. If you’re able to handle the financial part of the equation without an issue and the relationship is strong, with solid communication, then it may be alright. Just keep in mind that using an alternative may be a better choice, allowing you to offer assistance without taking on unnecessary risk.

Do you think it’s ever a good idea to Co-sign on a home with one of your children? Did you co-sign on a home loan and want to tell others about your experience? Share your thoughts in the comments below.

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Selling Your Vehicle Via a Private Sale-Follow These Steps

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Selling Your Vehicle

When you’re looking to sell a vehicle, a private sale might be the most attractive option. Often, you have the potential to get a bit more cash by going that route, as the buyer isn’t necessarily going to flip the car for a profit. However, a private-party sale is typically more complicated than the alternatives. If you want to make sure you handle it correctly, here are steps to follow when selling your vehicle via a private sale.

Get a Value Estimate

The first step you need to take is to estimate the value of your vehicle. In many cases, it’s wise to get an inspection from a mechanic you trust. While it may cost a little money, they’ll be able to find any issues that you may want to address to ensure you get top-dollar. Otherwise, you can adjust your price based on the information.

If your vehicle is in exceptional shape, then you’ll have proof of that, too. That may help you secure a higher asking price, all because you went the extra mile to get the information.

Once you know the condition, you’ll need to assess the aesthetics. Wear and tear, scratches, dings, cracks, stains, and other issues all impact the value of the vehicle. The same can go for lingering odors, particularly smoke or pet-related smells.

As you find those types of issues, you can choose to address them or leave them. With the former, you’ll have a better chance of getting a higher price, so it could be worth the effort, depending on the potential cost.

After making those decisions, you can estimate the value. There are online calculators – including one by Kelley Blue Book and another by Edmunds – that can make that process easier. They’ll take the make and model into account, as well as the mileage and condition.

Run a Carfax Report

While running a Carfax report isn’t technically a necessity, it’s a smart move. Many prospective buyers will want to see the information on the report – particularly when it comes to accidents – so it’s wise to see what’ll show up before you attempt to sell. That way, if there’s a mistake, you can get it corrected before it impacts a sale.

Plus, if the report is accurate, you can let potential buyers know that one’s been run already. Then, you can show it to them when they come to view the vehicle.

Find the Title

You’ll need the title for the vehicle to complete a sale, so you want to make sure you have your copy available. Otherwise, you’ll need to order a replacement from your local licensing or motor vehicles agency.

Getting a replacement title can take time, particularly if you want to avoid an expedite fee. However, you can’t complete a sale without one, so you want to make sure you either have it or have one on the way before you proceed.

Gather Maintenance Records

If you were diligent about maintenance, getting copies of your records can help you sell for a higher price. In some cases, you can request reports from service providers, particularly if you had the majority of your maintenance handled at one place. Otherwise, you may need to find your receipts or after-service printouts.

Thorough Clean Your Vehicle

Having a clean, tidy vehicle will make it easier to sell. You’ll want to remove all personal property before you invite others into the car, including items in glove boxes, seat pouches, compartments, or similar places. Then, clean the vehicle inside and out, ensuring every spot is addressed along the way.

What you’ll use to clean may depend on the materials present. However, it’s often best to choose options designed specifically for vehicle materials. That way, you know that they won’t damage any surfaces.

Otherwise, you can pay a company to detail your vehicle. While this can cost a little bit, it may save you some time and energy. Plus, you’ll know that the job was thorough.

Once you’ve finished cleaning, only put back genuinely essential items. Usually, that’s limited to the registration, proof of insurance, and any manuals that came with the vehicle.

Check Your Fluids (and Consider an Oil Change)

Before you sell, you’ll want to take a moment to top off any fluids. Ensuring the coolant, brake fluid, windshield wiper fluid, and oil are all where they should be makes a difference, as buyers may check those to estimate how much care you’ve given while owning the vehicle.

In some cases, going forward with an oil change – even if it isn’t time for one – is a smart decision. That way, it’s fresh and topped off, and there’s a new filter, which buyers may appreciate.

Replace Worn Windshield Wiper Blades

If your windshield wipers don’t fully clear rain from the windshield, replace them before you list the vehicle for sale. Otherwise, if you take buyers on a test drive and the weather isn’t on your side, it could make for a poor experience. If that happens, you may lose the buyer or get a lowball offer.

Contact Your Insurer

While some prospective buyers may have their own insurance that covers them during test drives, others may not. As a result, you’ll want to confirm with your insurance company that others driving your vehicle are covered under your policy while they’re behind the wheel. If that’s the case, find out if there are any conditions, just to be safe.

Take Multiple Photos

Once all of the steps above are done, it’s time to take photos for your listing. If your car is in running condition, take it to a location that will serve as a nice backdrop. Then, photograph the exterior from at least eight angles, showing the entire vehicle. If there’s damage to disclose, you may want to take some close-ups, too. That way, you can be upfront about any issues.

Since you don’t want the license plate to show in the images, you’ll need to blur the information using photo editing software. If you don’t have access to that, either cover the plates with a plain sheet of paper or remove them for the photographs, uncovering them or putting the plates back on immediately after.

For the interior, you just want to generally show the space with a picture or two. Then, get a few close-ups of any features you want to highlight, as well as any damage you’re disclosing.

Write Your Ad

Once you have the photos, it’s time to write the ad. You’ll want to cover the basics – such as the make, model, and mileage – as well as highlight features that’ll interest buyers and support your asking price.

If you’re not sure where to start, you can review currently active ads for inspiration. While you don’t want to copy what others say, it could give you an idea about what to highlight and how to format your ad.

Be aware that you may need to change up your ad for different platforms. Some sites give you more room for text than others, for example. As a result, you need to consider what works best on each platform you’ll use, ensuring you create an ad that will resonate with those specific users.

Place Your Ad

Once you’re confident in your ad, it’s time to place it. You can use low-cost resources like social media, Craigslist, or CarGurus if you prefer. An ad in a local paper may also be wise, especially if you’re in a larger city and it’ll show online and in print.

Putting a “For Sale” sign in your car window may also help. You can either list a contact number on it or point someone to an online ad. However, the latter isn’t easy to capture while the vehicle is moving, so keep that in mind.

Deal with Buyers

If your ad and images are enticing and your vehicle is well-priced, buyers will likely reach out relatively quickly. In most cases, it’s wise to favor written communication, such as text or email. That way, you can easily track what was shared in each conversation.

Initially, you want to ensure that the prospective buyer has a driver’s license. You may also want to ask if what they’re looking for in a car. That way, you can find out about any potential dealbreakers in advance.

It’s also wise to ask if they’re purchasing a vehicle for themselves or for someone else. In some cases, the latter is a red flag, particularly if you can’t speak with or meet the actual buyer, as that could be a sign of a potential scam or upcoming robbery attempt. However, there are some situations where it isn’t usually a concern, such as a parent purchasing a car for a teenage child.

Finding out when they want to buy and how they intend to complete the purchase is critical, too. If you need to sell quickly, a buyer that has to wait might not be a great fit if you’ve got other interested parties reaching out. If the buyer is using a loan, that can take time and may fall through, so you’ll need to decide if you’re willing to wait or take the risk or if you’d rather focus on cash buyers.

After you know how they intend to pay, you’ll need to arrange a meeting with the buyer. If they refuse, trying instead to pay by wire transfer and use a service to pick up the vehicle, that’s likely a scam. Insist on an in-person meeting in a safe area. Many police departments will allow people to meet in their parking lots, so you may want to reach out to your local one and see if that’s an option, as that’s one of your safest bets.

Handle Test Drives

Let others know where you’ll be, and take a friend or family member with you if possible. That way, if the buyer wants to test drive the vehicle, you can have someone already in the car, making it harder to steal. Confirm the buyer’s details before beginning, taking a picture of their driver’s license and sending that to another person not at the deal, as well as confirming it with the DMV.

If your contact comes to the meeting with another person, only let the buyer you’ve been communicating with in for the test drive. Have them follow a pre-determined route, sticking to main roads that are well-traveled to reduce the risk.

Keep a friend or family member updated as the test drive goes forward, letting them know when you pass various landmarks. That way, someone has a clear idea of where you’re at on the route.

After completing the loop, speak with the buyer about their interest and discuss next steps. Some may be ready to move forward with a purchase. Others may need to think about it. Either way, outline what’s to come and, if you’re showing the car to different buyers, let them know, ensuring they aren’t surprised if it sells before they decide.

Complete the Sale

Once you’ve found a buyer, it’s time to wrap up the sale. You’ll usually end up negotiating the price. Know what your bottom dollar is before having the conversation. Then, go back and forth with the buyer, ensuring you don’t agree to an amount below that number.

If a buyer doesn’t offer a fair price, don’t be afraid to walk away. If your price is reasonable based on the condition of the vehicle, it’s better to move on to another buyer than get bullied down too far.

With the price settled, it’s time for payment and title transfer. Make sure the buyer shows up with the agreed-upon payment amount and type. Be wary of personal checks, as those may not clear. Instead, stick with cash, cashier’s checks, or money orders, as those are far safer.

Only sign over the title after payment is received. After that, the vehicle belongs to the buyer. Deposit your payment immediately and contact your motor vehicle department to record the sale with them. Reach out to your insurer, too, removing the vehicle from your policy.

Have you ever sold a vehicle using a private sale and want to tell others about your experience? Can you think of any other steps a person should take along the way? Share your thoughts in the comments below.

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Want to Retire Now-Here’s How (5 Tips You Can Actually Use)

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want to retire now

Most people have a set plan for when they will retire. However, as we age, there’s also a chance we’ll want to accelerate that timeline at the last minute. While retiring immediately can be difficult if that wasn’t your initial plan, it may also be doable depending on your age, retirement savings, and more. If you want to retire now, here are five tips to help make that possible.

1. Review Your Income Potential

If you want to pull the trigger on retirement earlier than you originally planned, you need to take a close look at all of your potential income sources. That way, you can make sure that you could financially support yourself before you leave the workforce or, at least, your current career.

In most cases, you want to explore traditional and unconventional options. For example, if you’re at least 62, you could see if starting your Social Security benefits early makes sense. If you’re 59 ½ or older, you can also tap into your other retirement savings accounts without a penalty.

Do the math to see if fully retiring now is an option. If it isn’t, then you can expand your analysis. For instance, you could see if a part-time or freelance job could give you enough to make ends meet.

Another unconventional choice for homeowners could be renting out their house. If you could bring in more than your monthly mortgage payment (including insurance and property taxes) and could move into a rental in your area that costs less than your current mortgage, it’s worth considering. You could come out financially ahead, potentially making retirement more viable.

Alternatively, you could get a roommate, giving you an extra person to help cover household expenses. If you’re in a tourist area, you could also explore turning a room in your home into a short-term rental. Often, the latter option works best if there is a bedroom with its own bathroom near a semi-private entrance into your home.

However, you could turn your entire house into a short-term rental if that has more earning potential than a long-term arrangement. While you’d still end up moving out, it could mean generating more cash and avoiding the constraints of a traditional landlord-tenant agreement.

2. Cut Expenses Ruthlessly

If retiring now is genuinely a priority, you may need to be ruthless about cutting expenses. While small changes like ditching cable and limiting dining out can help, you may have to think bigger if your available retirement income wouldn’t make your current lifestyle possible.

Look at every possible opportunity to cut back. For instance, you may want to consider downsizing your home. Along with reducing your monthly mortgage or rental payment, you may be able to bring down the cost of some utilities that way. Additionally, if you’re a homeowner, you may be able to sell, giving yourself a small nest egg to support your semi-spontaneous retirement.

When it comes to food spending, consider how you could use your time during retirement to limit that cost. For instance, you could commit to cooking fully from scratch, such as making your own bread and pasta. You could also start a vegetable and herb garden and learn to preserve or can.

3. Adjust Your Portfolio

Traditional advice is to reduce the risk in your portfolio as you age, ensuring you don’t run the risk of losing value during retirement. However, if you want to retire faster than you originally planned, being a bit more aggressive could be a necessity.

With a more aggressive approach, you boost your earnings potential in exchange for more risk. It’s important to note that losses may be more likely, but like earnings, they aren’t guaranteed either. Exactly how this unfolds depends on where you position those investments. As a result, you may want to speak with a financial advisor about your goals and get insights about potential changes to your current allocations, ensuring you can balance risk with reward potential.

4. Consider Moving to a New City or State

While moving can cost a bit, heading to a new city or state may make an immediate retirement more viable. The cost of living varies by location. If you’re in a high-cost area, going to one that’s more affordable can make retiring sooner rather than later a genuine option.

Similarly, not all states tax retirement income the same way. If you choose a state without an income tax or one that doesn’t tax Social Security or other kinds of retirement income (or has a generous exemption that covers most or all of your income), you might find that retiring now doesn’t mean you can’t be comfortable.

5. Become an Expat

Not wholly unlike the option above, becoming an expatriate (expat) and moving to a different country could allow you to retire now without any financial issues. There are plenty of countries with significantly lower costs of living. While a dramatic lifestyle change may also come with the territory, it’s worth considering if retiring immediately is legitimately a priority.

Before you go this route, you’ll need to do a significant amount of research. Along with focusing on budget-friendly countries, taking safety into consideration is also essential.

You’ll have to review laws and rules regarding moving to the country as a non-immigrant, too, as they can vary. See what kind of visa may be required, whether there are limits on property ownership, if you’ll need to take steps to access healthcare locally, and more. That way, you can get a comprehensive picture of what you’ll need to do to transition successfully while remaining on the right side of the law.

Did you spontaneously retire ahead of your original schedule? If so, do you want to let others know how you got financially prepared for retirement? Do you have any other tips that can help someone retire as soon as possible? Share your thoughts in the comments below.

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When Should You Use Your Emergency Fund?

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emergency fund

Many people spend a lot of time setting money aside to build a healthy emergency fund. In some cases, this might cause them to hesitate to use the cash even if the situation seems to justify doing so. In others, they might be tempted to use some of the money to treat themselves on occasion. Even if they aren’t facing an actual financial emergency. By understanding when it is and isn’t wise to use that cash. You can make smarter choices about your finances. If you’re wondering when you should use your emergency fund. Here are some times when tapping into that cash reserve is warranted.

Living Expenses After a Job Loss

One of the main reasons to have an emergency fund is to pay for living expenses if you unexpectedly lose your job. In this case, the cash is a functional safety net, allowing you to continue paying required costs while you plan your next career move.

Similarly, using an emergency fund to pay for living expenses after a reduction in hours or another situation that results in a pay cut is fine. It allows you to stay afloat while you either wait for your hours to go back up or find something new that provides you with a better income.

Just make sure you focus on genuine necessities if you’re using your emergency fund for this reason. For example, shop grocery sales or use coupons to limit food-related spending. Avoid unnecessary car trips to save fuel. Forgo dining out and cut back on other kinds of optional entertainment. That way, your money will last as long as possible, giving you more time to determine what comes next.

Additionally, access any other resources that you may have available. For instance, you may qualify for unemployment if you’ve been let go, laid off, or had your hours cut. Make sure you apply for unemployment even if you aren’t sure your situation qualifies. If it turns out it does, you’ll get a bit of an income boost, allowing you to use less of your emergency fund.

Vehicle Repairs After a Breakdown

While you should plan for routine vehicle maintenance in your budget, unexpected issues may warrant using your emergency fund. Even if you are diligent about maintaining your car, that doesn’t mean you’re guaranteed to avoid breakdowns, flat tires, or similar problems.

If something unexpected happens that puts your vehicle out of commission and having a car is essential to your day-to-day, using your emergency fund to get it back up and running is reasonable. Just make sure you get a competitive price on the work by shopping around and getting several quotes from reputable repair shops, ensuring you don’t have to spend more than is necessary.

Home or Auto Insurance Deductibles

In a similar vein to the point above, using your emergency fund to pay a home or auto insurance deductible is typically appropriate. Usually, you’ll only owe a deductible after an unexpected covered event, like a vehicle accident or fire at your house.

Since paying your deductible allows you to get the required repairs, using your emergency fund to handle it isn’t a bad idea. Just make sure you get quotes for the work and that your insurer pays its share, ensuring you don’t have to come further out of pocket than necessary.

Emergency, Must-Have Medical Treatments

Even if you have insurance, the cost of emergency medical treatments can be incredibly high. Since accidents or sudden illnesses aren’t something you can typically predict, using your emergency fund to handle any of the resulting costs isn’t out of line.

However, you may not want to default to this option if it isn’t necessary. For example, if the bill is large, many hospitals offer no-interest payment plans. In that case, you may be better off using that arrangement, allowing your emergency fund to earn interest while you pay down the debt over time.

Travel Costs Associated with Family Emergencies

During certain kinds of family emergencies – like a sudden, serious illness or death – you might need to head to another city or state without notice. If that’s the case, don’t hesitate to use your emergency fund to cover the cost if you can’t manage it otherwise. That way, you can get where you need to go fast.

Just remember that recreational travel doesn’t fall in this category, even if you’re planning to see family along the way. With that, you’re better off saving up the money you’ll need separately, ensuring your emergency fund is intact in case you end up needing it.

Emergency Home Repairs

While regular, expected home maintenance costs shouldn’t come out of your emergency fund, you might need to tap that cash if an unexpected issue arises. For example, a pipe bursting, refrigerator breaking down, or a similar problem needs to be addressed quickly, so using your emergency fund can make sense.

As with other repair or replacement-oriented emergencies. You may want to shop around to ensure you’re getting a great price. That way, you can use as little of your emergency fund as possible. Just make sure that you don’t sacrifice when it comes to quality. As it’s better to get a solid repair or replacement than go with a cheap solution that’ll just result in an issue in the near future.

Critical Technology Replacement

While some technology you own may be primarily for entertainment purposes. Other kinds of tech might be essential. For instance, you might need a capable smartphone or laptop for work, or your children may need a computer to handle their homework.

If a genuinely essential piece of technology breaks down or it has catastrophic damage. Consider using your emergency fund to replace it. However, only do so if it’s legitimately a must-have for a purpose other than entertainment. If it’s solely for amusement. Then you’re better off setting money aside out of your budget and using that to cover the cost once you’ve got the money gathered up.

Emergency Care for Pets

Like people, pets can experience unexpected health issues, including acute illnesses, injuries, and more. While you shouldn’t use your emergency fund for routine pet appointments.  Using the money to handle an unexpected, urgent pet health matter is fine. It ensures you can get your pet the help they need right away. Thus, increasing the odds that they’ll survive the incident and live a healthy, comfortable life afterward.

Have you ever tapped your emergency fund for any of the reasons above? Do you think there are other times when using your emergency fund is a good idea? Share your thoughts in the comments below.

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5 Places to File Your Taxes For Free

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file your taxes for free

Filing your taxes is always cumbersome. You have to gather up paperwork, complete a number of forms, and make sure the calculations are correct. Usually, you also have to dive into deductions and credits, ensuring you find every legitimate opportunity for savings. Once you’re done, you typically have to pay a pretty penny to wrap it all up, which isn’t fun. But is paying to file a necessity? Not necessarily. If you qualify for certain programs, you may be able to handle the filing without spending a dime. Here’s a look at five places where you can file your taxes for free.

1. IRS Free File

If you’re looking for a straightforward option that lets you file your taxes for free, the IRS Free File program is an excellent option. You can complete your forms online and get clear guidance along the way. Plus, it’ll handle all of the calculations, so you don’t’ have to worry about the math.

Technically, this program is a partnership with many leading tax software providers. You can choose the service that best meets your needs, all without having to pay a traditional price tag.

Qualifying for the program is relatively straightforward. The biggest part is having an adjusted gross income (AGI) below $73,000. You’ll also have to answer some basic questions to show that you have a simple return and cover a few other must-haves. If you’re eligible, you can then choose a service provider from the list of options.

2. TCE or VITA

If you want in-person support, the Tax Counseling for the Elderly (TCE) or Volunteer Income Tax Assistance (VITA) programs may work well for qualifying individuals. The programs are sponsored by the IRS and help disadvantaged households get the support they need.

Qualifying for TCE usually involves being at least 60 years old. For VITA, the income limit is generally near $58,000. However, those with disabilities or limited English proficiency may qualify even if their income is higher, so it’s worth reaching out if either of those circumstances apply to you.

The preparers typically set up shop in widely accessible places, like public libraries, community centers, or local colleges and universities. You can find out exactly where you’ll need to go by using the IRS search tool.

Due to COVID-related restrictions, appointments may be necessary. Additionally, you might need to follow certain protocols – such as wearing a mask and not attending with guests – depending on where you live.

3. TurboTax

Another option that lets you file your taxes for free is the TurboTax Free Edition. As long as you have a simple return, you are potentially eligible for no-cost federal and state tax filings.

Along with using the online service to complete your own tax return, you have other choices. You can use a mostly DIY approach, reaching out to an expert only if you have a question. This approach is ideal if you are generally comfortable with using a classic fill-in-the-blank method to provide the needed information but might have questions about certain deductions, credits, forms, or fields.

However, you also have the option of having a tax professional take care of all of the work, all without owing a single cent when you’re done. This part of the program is only available until February 15, so act fast if you want to go in this direction.

Even if you don’t use a professional, everyone can get help for free if there is a technical issue. Additionally, if you’re having trouble accessing your account, you can reach out then, as well.

4. H&R Block

Like TurboTax, H&R Block has a Free Online program for simple returns that covers both federal and state tax filings. It’s simple and intuitive to use. Plus, you’ll get access to helpful information about potential deductions and credits, allowing you to reduce your tax obligation based on the options you’re eligible to use.

Do keep in mind that reaching out to a tax professional using this option isn’t necessarily free. However, there are a decent number of no-cost resources available, which may be enough if you aren’t wholly unfamiliar with tax filings. Additionally, you can get free help if you experience a technical issue, such as trouble accessing your account, so you aren’t entirely on your own as you work through the process.

5. TaxAct

TaxAct is another company with a free online filing option for federal returns. You’ll need to have a simple return to qualify, though you are eligible if you have education-related deductions, unemployment income, or a few other common – but not universal – tax situations you’ll need to navigate.

State filings do cost extra with TaxAct, so it may not be an ideal fit if you have to file in your state, too. Otherwise, you’ll get plenty of guidance through easy-to-use document libraries and similar resources to help you complete the forms and file electronically. However, assistance from a professional isn’t included for tax-related questions, only account issues like login trouble or similar technical difficulties.

Are you aware of any other places that let you file your taxes for free? Have you tried one of the free tax filing options above and want to let others know about your experience with that approach? Share your thoughts in the comments below.

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Pay Attention to These 8 Tax Pitfalls

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tax pitfalls

Filing your taxes each year isn’t usually easy. For one, tax laws are incredibly complex. For another, there is a slew of credits and deductions out there, making it hard for most people to ensure that they’re tapping everything they’re eligible to use. Thankfully, by learning about tax pitfalls, it’s possible to handle your taxes correctly. Here are eight tax pitfalls that all filers need to pay attention to this year.

1. Not Researching Tax Breaks

As mentioned above, there are numerous credits and deductions available to tax filers. The thing is, if you don’t find the ones you can use on your own (or by using an appropriate tax service or professional), the IRS isn’t going to tell you that you missed one.

Generally, the IRS worries about you underpaying, not overpaying. If you miss a credit or deduction, that’ll essentially be on you.

If you’re worried that you’re overlooking an opportunity, then turn to a tax professional or use reputable tax software. With the former, they’ll have the expertise to ensure you check every potential option. With the latter, the software knows about every deduction and credit that’s out there and can help determine if you’re eligible with a few clicks.

2. Mixing Up the Deadlines

While it would be easier if all of the tax-related deadlines were the same, that isn’t how they’re set up. Certain things wrap up on December 31 of the tax year, while others extend into the new year. For example, mortgage interest and 401(k) contributions are calculated from January 1 through December 31 during the tax year.

However, you can make a qualifying contribution into an IRA until the tax filing deadline the year after. For instance, if you wanted to boost your tax deduction when you file your 2021 taxes in 2022, you could contribute to a qualifying IRA up until April 15, 2022, and apply that amount to your 2021 taxes. The same option is available for health savings accounts.

By knowing the various deadlines, you have the ability to maximize certain deductions within a given tax year. As a result, you may be able to reduce what you owe significantly.

3. Overlooking Non-Traditional Income

When you file your taxes, you need to include all of your income from every source. While this is simple with traditional jobs that provide W-2s, those aren’t the only kinds of earnings that you’ll need to report.

For instance, anything reported on a 1099 typically needs to be reported. This includes self-employment income from specific sources, as well as investment earnings, gambling winnings, sweepstakes prizes, lottery winnings, savings account interest, and more.

Additionally, you have to report income that doesn’t show on any forms. Usually, a 1099 is only required if the dollar amount in question crosses a specific line, such as $600. However, if you earned $200 doing online surveys, you still have to report that money, even if you don’t get a 1099. Otherwise, you may underreport and could face a penalty.

4. Making Math Mistakes

Even a small math error can have big consequences if it causes you to underpay. Plus, errors might increase your odds of getting audited, which isn’t any fun.

Usually, math issues are most likely for those doing their taxes by hand. With software systems – including those traditionally used by tax professionals – the calculations are built into the program, reducing the likelihood of a mistake. As a result, using a solution could be your best bet.

5. Incorrect Names or Social Security Numbers

While you might think that a small typo in a filer’s or dependent’s name or Social Security number isn’t a big deal, the IRS doesn’t agree. Missing or incorrect Social Security numbers will get noticed and trigger ramifications, the nature of which may vary depending on the rest of your situation.

The same goes for misspelled names. If the name doesn’t match what’s on file with Social Security, you could face filing difficulties.

6. Choosing the Wrong Filing Status (or Incorrectly Claiming Dependents)

When you file your taxes, you have to select a filing status. If you pick the wrong one, you could end up paying more than you should or less than you’re required. With the former, that means sending money to the IRS that you didn’t owe, which isn’t ideal. With the latter, you’ll face penalties when your mistake is caught.

Incorrectly claiming dependents comes with the same risks. You could end up over or underpaying, neither of which is good.

If you need more information about filing status and dependent options, the IRS has an online tool that can help. Plus, most tax software solutions and professionals can help you determine the right classification for your situation.

7. Not Filing for an Extension If You’re Struggling Last Minute

If you’re trying to wrap up your taxes and filing day is just a couple of days away, be realistic about whether you can pull it off. If your situation is too complex to finish on your own in that time, file for an extension immediately.

When you file for an extension, you’re letting the IRS know that you are having trouble getting everything handled before the deadline, keeping the agency in the loop. Usually, the IRS is reasonably forgiving if you file an extension and will typically grant you the needed time in this situation. Just remember that you need to pay what you owe by the filing deadline. Otherwise, you may face financial penalties.

8. Paying Too Much to File

Many people don’t realize that those with simple tax situations and who have household incomes below a specific threshold can usually file their taxes online for free. For example, if your adjusted gross income (AGI) is no more than $73,000, you can use the IRS Free File program, which includes online forms, automatic calculations, and e-file capabilities.

However, there are other free services available. Many of the major tax software providers have a free version for simple tax situations, such as those who only have W-2 income to report, are claiming the standard deduction, and are only using basic tax credits.

Before you pay for any service, see if a free filing option is available to you. That way, you can get the job done without spending any money unnecessarily.

Can you think of any other tax pitfalls people should watch out for when they file? Have you had to deal with any of the pitfalls above and want to tell others about your experience? Share your thoughts in the comments below.

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Here’s What Homes Cost in 5 States Around The Country in 2022

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cost of homes

In the United States, the median home value comes in at $320,662. While most wouldn’t consider that cheap, it isn’t anywhere near what you may have to pay in some parts of the country. However, that doesn’t mean there aren’t areas where paying that amount would only happen with a luxury-style home, as the average for the state is actually far lower. In the end, where you buy a home makes a big difference when it comes to pricing. If you’re wondering how much, here’s a look at what homes cost in five states around the country.

1. Iowa

When it comes to lower-cost housing, Iowa is one of the least expensive places to buy a home. Even though home values have risen by 12.2 percent within the past year, the cost of a house is much lower than many would expect. In Iowa, the average home value comes in at $178,608, putting it more than $142,000 below the national average.

2. Texas

Texas has also seen home values rise quickly in the past year. Overall, the year-over-year change is a startling 21.6 percent, leading many to assume that prices in the area would be hard to manage.

In reality, the average home value in Texas is $276,048. That’s still more than $44,000 under the national average, making the properties seem downright affordable by comparison.

3. New York

While real estate in New York City is notoriously expensive, that doesn’t mean home values are out of control in the rest of the state. In fact, even with home values rising 13.7 percent over the past year, New York isn’t as high cost as you might expect.

The average home value in New York sits at $374,717. While that’s still about $54,000 above the national average, it’s likely isn’t as high as you’d expect.

4. California

In the land of higher-cost real estate, California firmly has a position near the top. Typically, the state is sitting just one place behind the highest cost state (if you don’t count the District of Columbia).

Certain cities are notoriously pricy, such as San Francisco, which comes in with an average home value above $1.5 million. However, not all areas have those kinds of price tags, so the state average is fortunately far below that amount.

Still, California home values have risen by 20.1 percent in the past year, causing the average home value to come in at $734,612. That’s $413,950 above the national average.

5. Hawaii

If you’re wondering which state has the highest housing prices, look no further than Hawaii. It usually tops the charts when it comes to real estate purchase costs, outpacing every other state in the nation.

The average home value in Hawaii is a shocking $821,263. That’s more than half a million above the national average. In fact, you could have four average-value Iowa homes or two average-value New York homes for that amount with a notable amount of room to spare.

Are you surprised by how different the cost of homes is in each of the states above? Have housing prices encouraged you to relocate to another state to make homeownership more affordable? Share your thoughts in the comments below.

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How Inflation is Changing Our Lives and Not for the Better

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inflation is changing our lives

In 2021, inflation hit its highest point in 40 years, with prices rising by about 7 percent in December when compared to the previous year. Experts project that inflation will ease in 2022, but that doesn’t mean the impact won’t remain well beyond when the rates recede. Instead, they’ll affect the lives of many, mainly for the worst. If you’re wondering how inflation is changing lives, and not for the better, here’s what you need to know.

How Inflation is Changing Lives

Inflation typically pushes prices up, including on everyday goods and household staples. While some inflation over time usually isn’t avoidable, extreme increases create substantial financial hardships for many people, particularly lower-income households. Inflation to this degree dramatically reduces buying power and, if you’re already struggling with a tight budget, it may seem like your ability to make ends meets evaporates overnight.

Even middle-income households can feel the pinch. Often, rapid inflation isn’t coupled with corresponding wage growth. As purchasing power falls, households that were once reasonably comfortable can end up on the brink.

Retirees Are Burdened As Well

Retirees are similarly burdened. Since many older Americans live on fixed incomes, falling buying power can be catastrophic, especially if it happens quickly.

In all of those cases, quality of life diminishes. Households have to make tough choices. For example, they may have to decide between buying gas to get to work or getting a critical prescription medication. They might end up debating between buying food and covering an electric bill.

While those examples may seem extreme, they can reflect reality for a surprising number of Americans. Additionally, even if inflation rates fall, prices will remain high if inflation is part of the equation at all. While there may be some balancing, some product may keep their bigger price tags for a while, particularly if companies are trying to recoup lost profits that they experienced due to inflation.

Other Sectors That Are Impacted

There are other sectors that also see the impact of inflation. With rapidly rising home prices, first-time buyers may have a difficult time competing in the market. They may be forced to delay homeownership or might take on loans that stretch their budget too thin.

If borrowers have variable rates on loans or credit cards, the interest they pay may be heading upward. When inflation is running rampant, variable rates usually increase, resulting in larger financing charges.

Ultimately, inflation has a significant impact on most people. And, in most cases, it isn’t for the better.

Should You Worry About Inflation?

Generally speaking, worrying about inflation isn’t going to reap any dividends. However, being aware of its presence and potential impact is wise. By knowing when inflation is having an effect, you can make decisions before your budget is stretched too thin. Thus, giving you the ability to better weather the storm. Additionally, you can look for income-boosting opportunities. This could include a side gig or part-time job, allowing you to increase your earnings to compensate for lower buying power.

Ultimately, inflation won’t remain this high forever. As supply chain issues resolve, wages shift, and other changes occur, the situation usually calms notably, even if it doesn’t go away completely. Ideally, you simply want to adapt as much as possible, ensuring you can preserve your buying power until inflation becomes less of an issue.

Have you or your household been personally impacted by inflation? How did it affect your budget and financial wellbeing? Have you found a way to limit its effect on your finances that you’d like to share? Share your thoughts in the comments below.

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5 Ways to Get Financial Freedom in 2022

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Financial Freedom in 2022

Getting on the path toward financial freedom is something anyone can do. While it does take time, attention, and diligence, getting a grip on your finances and making wiser choices can help you get past a paycheck-to-paycheck existence, ensuring you can achieve financial freedom. If you aren’t sure how to begin, here are five ways to launch the journey and make real progress and have financial freedom in 2022.

1. Aggressive Budgeting

If getting financial freedom is your goal, you need to budget aggressively. This goes beyond allocating funds to handle your minimum debt payments and other expenses. It involves being a ruthless cost-cutter who prioritizes their spending based on their values and goals and puts every extra cent captured toward debt repayment or savings.

However, you don’t have to make yourself miserable to go this route. Instead, you simply want to avoid all expenses that don’t bring you legitimate value, allowing you to focus more money on debt repayment and saving.

2. Boost Your Income

Increasing your income is a straightforward way to put yourself on the path toward financial freedom. When your income rises, you can direct more money toward debt repayment, saving, and investing, allowing you to reach your target sooner.

Exactly how you pursue this could depend on your current education level and skill set. In some cases, returning to college to get on a different career path could be worth considering. In others, actively pursuing new responsibilities at work and striving to exceed expectations at every step could let you secure a promotion.

One of the biggest must-dos in this situation is avoiding lifestyle inflation. When you earn more money, it’s easy to assume that increases in your spending don’t matter as much. In reality, by keeping your lifestyle in check, you’ll make progress faster, making it easier to achieve your financial goals.

3. Invest More Than the Minimum

When it comes to investing, many people set aside 10 percent for their retirement and assume that’s enough. However, if financial freedom is your goal, then you need to take it further.

Along with maximizing your retirement savings, open a brokerage account and invest more there. Brokerage accounts don’t have the same limitations as retirement-oriented accounts, allowing you to set aside far more.

While there isn’t a specific target you need to hit, aiming for around 20 percent of your income isn’t a bad idea. If you have more money that you can direct toward investing after that, feel free to do so. As long as you’re investing wisely, any extra cash you commit will simply help you achieve financial freedom faster.

4. Focus on Your Health

While focusing on your health might not seem like a path toward financial freedom, it can play a surprisingly big role. When you keep your physical and mental health in peak condition, you may have fewer medical needs, allowing you to spend less on healthcare.

Plus, happy, healthy individuals are more productive and better equipped to handle stress. That can help you succeed professionally, making it easier to secure promotions and increase your earnings.

5. Don’t Overlook Financial Protection

For many people, a single financial emergency can significantly derail their plans. Make sure you have the right protections in place whenever possible. Along with medical insurance, you may want to explore healthcare supplements, long-term disability, and similar kinds of optional coverage. That way, if the unexpected happens, you’ll have a financial safety net.

Precisely what you’ll need and the coverage amount you’ll require depends on your situation. If you have a family and a limited amount in savings, you may need more coverage, particularly if you’re the primary earner. If you’re single and have ample amounts of savings in an emergency fund, you may be able to scale back a bit.

Consider how losing your income source, high medical costs, or similar issues might impact you. Then, look into plans and policies that offer you some level of protection. That way, a single incident won’t keep you from heading down the path toward financial freedom.

Can you think of any other ways someone can get financial freedom in 2022? Have you tried any of the approaches above and want to tell others about your experience? Share your thoughts in the comments below.

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10 Questions You Need to Ask Your Parents About Their Finances Now

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Questions You Need to Ask Your Parents About Their Finances

If you’re the adult child of aging parents, having open, honest conversations about finances could be essential. By learning more about your parents’ situation, you can make sure that their future is bright. You’ll have a chance to intervene if necessary and prepare for emergencies. Plus, you’ll be better equipped to navigate their passing if you’re the executor of their estate. Thankfully, by asking the right questions, you can head down the right path. Here are ten questions you need to ask your parents about their finances now.

  1. What Does Your Financial Plan Look Like?

First, you want to ask your parents for an overview of their financial plan. Along with insights into their income and expenses, it’s wise to discuss savings and retirement account balances. That way, you can determine how long those funds will last.

Additionally, you may want to touch on other aspects of their financial lives. For example, since home equity can be tapped, knowing how much is available may be wise. Asking about their medical insurance – particularly their long-term care coverage – is similarly intelligent, ensuring you know how much funding is available if they need prolonged care.

  1. Are You Worried About Running Out of Savings?

This question is less about learning the nuances of their financial situation and more about discovering their mindset. It lets you know if their savings account balances are a source of stress, giving you an opportunity to find out more about their concerns. Then, you can work together to address them.

Additionally, it can let you know if there are mental health issues forming, such as depression or anxiety. In some cases, it may even allow you to discover signs of cognitive decline, depending on how their answers compare to the reality of their situation. In any case, it’s a smart question to ask.

  1. Is There a List of All of Your Accounts Available?

Having a list of all of the financial accounts available is crucial for several reasons. Along with simplifying the management of their estate after their passing, it gives you an overview of what has to be covered if they’re suddenly incapacitated or experience an unexpected drop in income.

Ideally, the list should include specific details regarding the accounts. For debts and expenses, the company name, account number, due date, payment amount, and remaining balance are critical, as well as any logins or passwords. For savings, investment, life insurance, or similar accounts, the company name, account number, logins, passwords, account value, and beneficiary name are musts.

  1. Do You Have a Will (and Who Is the Executor)?

Knowing if your parents have plans for their estate helps you prepare for their passing. If they have a will, find out its location. Additionally, ask for the name of the executor, as they’ll need to be involved quickly after your parents’ passing. You should also find out if they used an attorney to draft the document and the lawyer’s contact information, giving you another resource should your parents’ copy become misplaced or damaged.

If they don’t have a will or estate plan, it’s wise to recommend they get one in place. You could help them find an attorney and offer the pay the cost, as well as accompany them if that makes them more comfortable.

  1. Do You Have a Life Insurance Policy?

Ideally, information about any life insurance policies should be on the list of accounts. However, if you don’t see a life insurance policy, ask about it directly. If your parents are still working and have a policy through an employer, they may have forgotten to include it in their list, so it’s wise to follow up.

  1. Do You Have a Financial Power of Attorney?

A financial power of attorney gives a person the ability to name someone who can make financial decisions for them if they are incapacitated. Finding out if they have a financial power of attorney in place and who is named on the document is helpful. Then, if there’s an emergency, you know who is able to handle certain activities and make various decisions.

  1. Have You Had Any Trouble Remembering to Pay Your Bills or Balancing Your Accounts Lately?

While anyone can make a mistake on occasion, if your parents are forgetting bills or struggling to balance their accounts regularly, that could be a sign of mental decline. Many older adults with memory issues have trouble tracking their obligations. Additionally, they may struggle to handle the calculations involved in balancing their accounts or may have difficulty keeping tabs on the date.

If they are having difficulties, it’s wise to create a plan to ensure their financial life remains on track. Also, speak with them about scheduling an appointment with their medical provider to determine if there is an underlying cause.

  1. Where Do You Keep Your Financial Paperwork?

If your parents pass or become incapacitated, you may have a need for different kinds of financial paperwork. For example, you might require deeds to certain property, account statements, or past tax returns. By asking where they keep that information, you’ll know where to look should the need arise.

  1. How Do You Typically File Your Taxes?

Knowing how your parents usually file their taxes is beneficial. Not only does it give you a source of records, but it also lets you know if they’re receiving help or handling the work on their own. Plus, it could make filing any final tax returns easier if you can turn to the same method, though this isn’t always the case.

  1. Do You Have a Safe Deposit Box?

Many people use safe deposit boxes to store valuable items. If your parents have one, find out which institution it’s at, the location of the key, and any other details that help you access it after their passing or as an approved financial representative.

Without the location information, tracking down a safe deposit box can be tricky. Similarly, if you don’t have a key, getting access requires extra steps. You may have to pay a fee to have it drilled. Additionally, if they don’t have the ability to drill the lock on-site, you might have to wait to access the contents, which may not be ideal.

Can you think of any other financial questions you need to ask your parents now? Share your thoughts in the comments below.

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