- Days left

Got a personal finance question? Ask our experts

The recession may be over, but many families are still feeling the effects. Unemployment is at a record 10.2% and wages are flat. The cost of gas is taking a bigger bite out of paychecks, and home foreclosures were one fifth of home sales in September.

To help, WalletPop is launching an occasional series in which your personal financial questions will get answered by our experts. Leave your questions in the comments section below.

Question: As a single, self-employed mother of two, I need to buy life insurance. How much should I buy?
--Laurie W., 51, psychologist

Answer from Dr. Scott Testa, professor of business administration
Cabrini College, Philadelphia, PA

"You must first determine what your family needs are, should you die. That means coming up with a realistic figure that will pay off all your debts, your funeral expenses, and big-ticket items like college for your two children. It is always better to overestimate rather than underestimate. Then I would recommend shopping for term life rather than whole life, because it is generally easier to comparison shop and, for most people, is the best option.

"Look for reputable companies with good ratings from rating companies like A.M. Best, Moody's, Standard & Poor's or Fitch. You should look for the highest ratings by these organizations. Good websites for comparision shopping include insweb.com and Quotesmith.com.

"But before you schedule that meeting, make sure you're putting your best foot forward. That means getting in shape, quitting smoking, and doing what you must to be an ideal candidate. Life insurance companies will ask for your medical history and give you a physical. They will view you as less of a risk if you are healthy, because, invariably, you are less of a risk to die."


Question: My husband and I have two young children. We would like to set up their college funds. Is there any formula to use to determine how much to put in a 529 plan each year per dependent?
--Andrea Zaretsky, 37

Answer from: Jason Whitby, senior financial advisor
Investor Solutions, Inc., Coral Gables, FL

"There is a formula, but even better, there are online college savings calculators! Online calculators like Savingforcollege.com can provide you with all the required estimates and walk you through the process to attain costs as well as a monthly savings rate that is tailored to your specific situation. But before you actually open up the 529 plan, I'd strongly recommend that you figure out how much you can afford to save for college after you have everything else covered first. Meaning, you should have no consumer debt, have an emergency cash reserve and are already saving each month for your retirement. If all that is covered and cash flow still isn't a problem, I'd recommend you look at maximizing the state income tax deduction for funding a 529 plan. New York provides an above-the-line exclusion from income of $5,000 single and $10,000 joint. If cash flow starts getting tight, I'd recommend you go ahead and open a 529 plan for each and look to save at least $25 a month. I would recommend $25 per month to keep the hurdle low. Once you get the account set up and get used to contributing $25 a month, you can increase the monthly.

Question: I am expecting my first child next year. How can I, having paid the Alternative Minimum Tax for the past two years, reduce my AMT burden?
--Matt Carola, 35, an IT professional

Answer from Jay Brennan, CPA, CFP
Brennan Financial Group LLC, Princeton, NJ

"When confronted with the AMT, there is no one-size-fits-all approach to try to minimize its effect. You need to sit down and look at how the AMT would affect your taxes over a 2- to 3-year period. Things that will put you into the AMT are what we call adjustments, such as living in a high tax state like New York, and the number of personal exemptions or miscellaneous itemized deductions. For example, is there some flexibility to when you get paid? You may elect the income to come in this year because you already know you will pay higher taxes. Potentially next year, you will have a lower income, so you may not be in the AMT bracket. Of if you were to prepay some taxes or defer some taxes, is there a benefit? You may consider postponing or accelerating paying certain addback itemized deductions, such as nonqualified mortgage interest. Under the regular tax and AMT, you can deduct the interest on a mortgage up to $100,000 if it is used to buy, build or improve on your home. If you drew on it to pay for things like bills, cars or college, you can claim it on your regular taxes but not on the AMT.

"Another adjustment is for miscellaneous itemized deductions such as unreimbursed business expenses. When you calculate them, there is usually a nice benefit under regular taxes. With the AMT, there is no benefit. But if you don't make those deductions, your regular taxes will be higher while your AMT will be the same. So if you feel comfortable asking, you should ask your employer if he will pay for the expenses if you reduce your income by X amount."

Got questions for WalletPop experts? Leave them in the comments space below.


Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

TurboTax Articles

Tax Tips for the Blind

Anyone whose field of vision falls at or below 20 degrees, who wears corrective glasses but whose vision is 20/200 or less in his best eye, or who has no eyesight at all, meets the legal definition of being blind and is eligible for certain tax deductions.

What is Form 4255: Recapture of Investment Credit?

When is a tax credit not a tax credit? When the IRS takes it back. If you're in the situation where you have to file IRS Form 4255, you might have to pay back a tax credit you've earned in prior years. This process, known as recapture, occurs if you claim a credit -- in this case, a credit for a specific type of business investment -- and then no longer qualify for that credit.

The Most Important Tax Forms for ALEs (Applicable Large Employers)

In 2015, some parts of the Affordable Care Act specifically apply to businesses, in particular, large employers. The Employer Shared Responsibility provisions affect companies with 50 or more full-time employees or an equivalent of part-time or seasonal workers. These companies are called Applicable Large Employers, or ALEs. 2015 is considered a transition year as everyone gets used to the new normal for workplace health plans.

Employer Sponsored Health Coverage Explained

The Affordable Care Act, also known as Obamacare, is simpler than some people may give it credit for. The basic rule to remember is that everyone must carry Minimum Essential Coverage (MEC) or pay a penalty. Employers with 50 full-time employees or more are obligated to sponsor plans for their workers to help them meet this requirement.

How to Report RSUs or Stock Grants on Your Tax Return

Restricted stock units (RSUs) and stock grants are often used by companies to reward their employees with an investment in the company rather than with cash. As the name implies, RSUs have rules as to when they can be sold. Stock grants often carry restrictions as well. How your stock grant is delivered to you, and whether or not it is vested, are the key factors when determining tax treatment.

Add a Comment

*0 / 3000 Character Maximum

2 Comments

Filter by:
Jason

Please help me with my finances! I can't even afford a personal finance professional. This credit card debt is weighing heavily on me. Also I have a new girlfriend, want to get my divorce finalized (which will cost around $1000), then move on with my life and possibly have another child with said girlfriend who is well off, but I don't want to bring with me a burden.

My situation:
*Separated for 1 year, 2 young kids which cost me about $1300 month in care
*Rent is $1050/mo in Santa Barbara where mom and kids live, but I have my own studio in good location - I'm as frugal as I can be but cc debt is getting higher and higher.
*I earn paychecks 2x month for total of around $3000/mo & few side jobs for an extra $250/mo income

*BOFA CC: $9,814.10 - 0% interest until 2014 - min payments around $100 - credit limit $10,000
*Capital One CC: $3,414.80 - 11.9% interest - min payment $68.00 credit limit $20,500
*Chase CC: $12,993.55 - 13.49% interest - min payment $282.00 - credit limit $27,500
*Sears CC: $800 - 21.24 % - min payment $25.00 - credit limit $5,000
*Citibank CC: $8,319.61 - min payment $124.00 - 0% interest until 2014 - credit limit $25,000.00

Total CC debt: $35,342.06

Other living expenses gas/food/insurance = $400

Total expenses per month are around $3400

Cash in bank $900.00

My last job's Prudential Retirement account (current - no loans) $48,341.36 - has earned only 2.79% since 10 year inception

My current job's 401k has about $5000

Car is a 97 bmw good condition value is $4000

No other significant loans, just a lot of cc debt. The card payments are really starting to hurt but I have always stayed current with my payments and have good credit. But not excellent credit for the next 4 years because we had to short-sell our condo during market drop. I've only had 4 non-payments on the old mortgage that are the only dings.

Should I declare bankruptcy? Should I cash out my 401k and pay a big penalty? Should I do a credit consolidation and take a credit hit? Should I continue to do 0% interest debt shuffle between cards? I'm feeling pressured because taxes are coming up and really I'm just tired of the credit burden. With the divorce the x will assume I'm guessing half of 20k in CC debt which will absolve me of around $10k in CC debt leaving me with 25k. I don't have much in the way of personal items to sell/pawn maybe $1000.00. I need real answers, money has been hemorrhaging out as gotchas come up. I have no cash emergency fund and am tired of living paycheck to paycheck.

Thank you so much for all help!

January 29 2013 at 1:06 AM Report abuse rate up rate down Reply
worried

How do I wisely use a home equity loan?
I bought a house in July 2006 for $ 158,000 and the mortgage today January 2012 is $815 ($ 1041 total per month) with 6.75% 30 year fixed rate. :( I have $87,800 equity loan with 3.75% rate from house . I have $65,000 in the bank and I am thinking of paying off my mortgage. I also own another $65,000 house. + the fixed 3.75% equity loan expires in 2/1/2015 +house I bough costs $ 158,000 with 20% down and the mortgage was $ 125,000. January 1st mortgage balance is $ 117,292 +I'm with Bank of America :(

January 03 2012 at 1:26 PM Report abuse rate up rate down Reply