DailyFinance.comhttp://www.dailyfinance.comDailyFinance.comhttp://o.aolcdn.com/os/df/2013/img/2-dailyfinance_logo_m.pngDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/How I Squandered My Inheritance at Age 18http://www.dailyfinance.com/2013/05/17/squandered-inheritance-personal-finance-mistakes/http://www.dailyfinance.com/2013/05/17/squandered-inheritance-personal-finance-mistakes/http://www.dailyfinance.com/2013/05/17/squandered-inheritance-personal-finance-mistakes/#commentsFiled under: , ,

Lyn Roman
Courtesy Lyn Roman / LearnVest
By Lyn Roman, as told to Elyse Moody

My father died in a car accident when I was eight years old.

A decade later, when I graduated from high school, I found out he'd set up a trust fund for my education ... about $7,500.

I was really surprised because my family had never talked about paying for college. I'd had no idea the money was there. College was cheaper in 1991, so it should've been enough for two years of in-state tuition, as long as I lived at home.

And that's exactly what my father had intended. I was supposed to use the money to go to school near home at East Carolina University in Greenville, N.C.

What I didn't realize is that I wasn't ready for college. I had no idea what I wanted to study when I was 18. I'd never talked to either of my parents about what I wanted to do when I grew up -- that just wasn't how my family was.

I'd also never had a job. Heck, I'd never even had an allowance.

Then, I got the entire $7,500.

Trouble From the Start

I paid for my first two semesters of school and books, got an on-campus job that paid a little more than minimum wage and registered for core classes. Basically, I took the minimum load of classes required.

I didn't read the syllabus for my classes closely enough to understand that attendance was part of my grade, and the classes were boring, so I only showed up for the tests. As a result, I flunked every single class because of my attendance (or lack thereof), even though I got A's and B's on all the tests. I was really disappointed. Second semester wasn't much better: This time, I showed up, but I didn't take the homework very seriously. All I can say in my defense is that I was 18 and didn't understand the importance of a college degree at all.

Meanwhile, I burned through the money I'd been given. After I paid my first tuition bill, I kept spending my inheritance. I put my meager paychecks into my checking account and then spent them immediately. I got a credit card, I shopped, I joined a sorority, and I went on spring break to Mexico. I didn't keep track of how much I was spending or what I was spending it on.

At one point, my uncle, who was the guardian of my trust, told me he'd noticed my spending habits. He cautioned me to be more careful. I was embarrassed because I felt like I'd disappointed him. So I started to be more careful with my money, but by then I had already spent so much that there wasn't enough left to pay for a second year of college.

And it didn't actually matter: My grades were so bad the university kicked me out.

Life as a College Dropout

I found out that I wouldn't be allowed to return for the fall semester or keep my on-campus job in the summer. I don't think I told my family about my bad grades -- I just told them I was out of money. I was upset, but I didn't know how I was going to pay for more classes, so I figured I just wouldn't go back to college. I applied at a temp agency and started doing secretarial work. But I quickly figured out I didn't want to keep doing that, because it didn't pay nearly enough!

After temping for July and August, I enrolled at a community college in Greenville. I still didn't know what I wanted to study, but the classes were much less expensive, and I could pay for them out of my salary. Thankfully, I didn't have to temp anymore. I landed a regular full-time job, as an office manager for a janitorial company. I went to class two to four nights a week, trying to figure out what I wanted to major in.

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During that time, I also got married. My then-husband and I decided I needed to finish college. He hadn't completed his bachelor's degree, and he was finding it tough to get jobs he wanted without one, even though he had the right experience. So I made arrangements with my company to job share and go to school full time. But after two semesters, my boss said I either had to come back full time or quit.

That wasn't a hard decision: I was too close to finishing college and didn't even want to consider taking only night classes again. I put in my two weeks' notice.

By then, I'd discovered that working with computers came as second nature to me. I enrolled in the computer programming associate degree program and made friends with the department chair. When I told her about quitting my job, she offered me a new one, working in the computer lab. I finished my associate's degree in computer programming in May 1996, but I stayed for another 18 months to complete a microcomputer associate's degree. While I finished my second degree, I worked in the computer lab and taught some classes.

What Working My Way Up Has Taught Me

If there's one thing that I've learned in all these years spent getting degrees, it's that it's not always what you know -- networking is huge. In the end, I've gotten almost every job I've ever had through someone I know. The department chair who gave me my job in the computer lab and my teaching stints later recommended me for a position at a local pharmaceutical company whose manager she knew -- the manager had gone through the same community-college program I had.

I landed that job. My new boss recommended I complete a bachelor's degree in management to help me advance in my career working with computers in the pharmaceutical industry. She told me about a 14-month program at Mount Olive College, which cost about $11,000 at the time. I enrolled and I was spending about $600 a month on tuition out of my paycheck without taking out any student loans. But I wasn't saving anything, and I was putting everything I wanted on my credit card. Only a few months from turning 26 and while working full time, I earned my bachelor's degree in May 1999.

That was the first graduation ceremony where I walked across the stage to get my diploma, and I was proud. My uncle was also there, and I think he was even more excited for me than I was.

In the end, I'd finally committed to college because I'd paid for it. Ironic, isn't it? I found I put so much more effort into the classes that I paid for myself than I ever put into the ones that were paid for. When my tuition was coming out of my pocket, I went to school every day, did my homework and graduated with a 4.0 GPA.

Today, college is a huge expense, and many parents wrestle with how much to give their kids to get there. Is my story a cautionary tale? I'm not sure. But it is amazing to me how much you focus when you pay for something yourself. Maybe that's not true for everyone, but for me, it was a big motivator.

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]]>collegecollege planningeconomyeducationestate planningfinancial literacyinheritancepower of planningpowerofplanningstudent debtStudent LoansLearnVestFri, 17 May 2013 16:35:00 ESTHow the American Dream Is Keeping Us Brokehttp://www.dailyfinance.com/2013/04/29/how-the-american-dream-is-keeping-us-broke/http://www.dailyfinance.com/2013/04/29/how-the-american-dream-is-keeping-us-broke/http://www.dailyfinance.com/2013/04/29/how-the-american-dream-is-keeping-us-broke/#commentsFiled under: , , ,

American Dream window shopping
Alamy
By ASHLEY STETTS

Our grandparents grew up in a time when you had to learn to be resourceful.

Things were fixed and not replaced, women made their own clothes, and neighbors shared one phone. Things were purchased because they were necessary, not because they were simply wanted -- and guess what? No one would ever have dared to refer to your Nana as a cheap-ass.

So where did we go wrong? Research from Ohio State University found that people in their late 20s and early 30s carry significantly higher credit card debt than older generations and pay it off much more slowly. Much of this can be attributed to the rising costs of education, but the bigger problem, in my opinion, is our generation's fear of looking cheap.

Looking Rich Doesn't Make You Rich

Success is naturally equated to wealth, and no one idolizes someone who isn't successful. The younger generation adores ultra-rich celebrities, and this has only helped to morph the American Dream into a whole new level of status and luxury we all think we can achieve.

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In pop culture today, having the appearance of wealth trumps actually having any money. We see rappers in chinchilla jackets popping Ace of Spades champagne in their videos, not driving a Toyota and having game night in with their friends. Kanye said it best: "What you think I rap for, to push a fu@#ing Rav4?" What needs to be understood, though, is that people who are really wealthy actually attribute their frugal habits to getting and staying there.

The number one quality of successful people is living below their means: For example, there are 1,138,070 millionaire households living in homes valued under $300,000, yet at the same time, 86 percent of people driving the most expensive "status" cars are non-millionaires.

Most people who actually have money are not scared of seeming cheap -- that's how poor people think, and it keeps them poor.

Why 'Cheap' Isn't an Insult

Pictured: Ashley Stetts
Pictured: Ashley Stetts
I've lived in New York City -- a not particularly inexpensive city -- for nine years, and I saved almost a half a million dollars before I was 30. I didn't create some stupid app that I sold for a bunch of money -- I was a waitress and a model. I wasn't even a big model. Not even close, actually ... I mean, I'm not ugly or anything, but you get the point.

I lived in an affordable apartment, I never took taxis, and I never feared being labeled as cheap. Did people call me that because I always looked for better deals and watched my spending? Sure, but while they racked up debt in an attempt to show everyone how well they were doing, I was putting myself in the position to have the money to invest in my future.

Who knows -- maybe this is what the future will be: Those who know to sacrifice will be the ones who ultimately live in comfort, and those who feared looking cheap while rocking Louboutins and Gucci loafers will be forever unable to move out of their parents' house.

Where will you be?

------------------------------

Gallery: Old-School Money Tricks That Still Work

Re-crown cashToss your spare change in a mason jarJoin the clubSay hi to your neighborhood tellerBank local


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]]>frugalitylifestyleliving below your meansliving beyond your meanssavingsaving moneyLearnVestMon, 29 Apr 2013 05:00:00 ESTMy Abusive Marriage Destroyed Me -- and My Financeshttp://www.dailyfinance.com/2013/04/26/domestic-violence-abusive-marriage-finances/http://www.dailyfinance.com/2013/04/26/domestic-violence-abusive-marriage-finances/http://www.dailyfinance.com/2013/04/26/domestic-violence-abusive-marriage-finances/#commentsFiled under: , , ,

Leslie Morgan Steiner
Leslie Morgan Steiner
By Leslie Morgan Steiner, as told to Cheryl Lock

In 1987, I had just graduated from college and moved to Manhattan for my dream job.

I hadn't dated a lot in college, but New York was different. Suddenly, I was meeting guys everywhere -- and going on a lot of dates.

I met Conor on the subway. Although there were no fireworks at the time, he seemed like a nice guy. When he tracked me down a month later, I was flattered, so we started dating.

If you told me then that, within two years, Conor would beat me for the first time, or that in four years I would be filing for divorce, I would have thought you were crazy.

But that's what happened.

Everyone talks about the physical aspect of domestic abuse -- which is, of course, no small thing -- but there's more to it. Conor left me not only physically battered, but nearly bankrupt.

Leslie Morgan Steiner / YouTube.com
Leslie Morgan Steiner / YouTube.com
How I Fell in Love With an Abuser

The truth is that I was unimpressed on our first date. In fact, I found Conor, who was 17 years my senior, completely goofy. But he was a smart guy -- like me, he'd graduated from an Ivy League school -- and as we got to know each other, I fell in love with him.

About three months after we started dating, he confessed that, as a child, he'd been physically abused. At the time, I didn't know such an admission could be a red flag that was characteristic of abusers. I felt sorry for him, and I was determined to show him what love was really all about.

While the physical violence didn't start until we were together for two years, Conor set the financial trap early. Eight months into our relationship, he quit his Wall Street job for a lower paying one in a tiny, New England town without ever discussing it with me. He then convinced me to also leave my job and move with him -- where we'd be far away from friends and my family. I don't know for sure that he was deliberately trying to isolate me -- at the time, he genuinely seemed to be seeking some kind of inner peace and happiness. But, now that I look back, his actions clearly fall into a classic seduce-isolate-abuse-repeat pattern.

We used the small amount of money my father had put into a custodial savings account for me to buy a house once we moved. We owned one car, which Conor drove to work every day. My new job paid about 75 percent less than the one I held in New York, so I also had to freelance, which was lucrative but sporadic. Meanwhile, Conor was horrible with money, and splurged on extravagant things -- like a Montblanc pen that cost twice as much as our monthly mortgage payment. Pens aside, between the house and the car, we racked up $100,000 of debt.

"I thought the court would side with me -- the victim. Unfortunately, the system doesn't work in this way. They're only concerned with dividing the assets."

At this point, we'd totally merged our finances, and since Conor had the steady paycheck and his job covered health insurance for both of us, I felt dependent on him. I had spent my own savings supporting us, so I didn't have any money left, nor did I have the courage to approach my parents or friends for financial help.

This was also compounded by the ongoing physical abuse. Conor first hit me five days before our wedding. I was working at home that day, and I yelled out in frustration because I was having trouble with the computer. He grabbed me by the throat, told me never to yell like that again because it reminded him of his mother (whom he both loved and detested for marrying his abusive stepfather) -- and then threw me to the floor.

I figured it was a one-time thing -- an accident -- until it started happening once a week, twice a week ... and then several times a month for the next two years. I should have left him then and there, but I had lost my sense of reality -- I didn't want anyone in my life to know what was happening.

The Day I Finally Decided to Leave

Two years into our marriage, Conor suggested that we go to business school together. Since he had terrible credit, he wouldn't have been able to get a loan, so it fell to me to pay for both of us. Ultimately, he wanted an MBA to prove his self-worth, and I was too willing to oblige. I was freelancing at the time, so I had to borrow another $30,000 from my father and take out $35,000 in government loans to cover Conor's tuition and our living expenses for the two years that we were in school.

Despite the loans, going to business school was actually the best thing that could have happened to me because it broke my isolation. We left New England -- renting out our house because we couldn't sell it for a good price -- to attend business school in a thriving city. I loved my classmates and teachers, and I felt like I had worth outside of our marriage for the first time in a long time.

By the second year of school, I got the courage to tell Conor that if he hit me again, I would leave. He didn't strike me for six months after that, and I began to think that we were going to make it.

I was wrong, of course.

One night, Conor beat me so badly that our neighbors called the cops. I filed a restraining order -- and finally told my friends and family what had been happening. It took over a year to get divorced, and it was financially draining.

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At first, I didn't want to give Conor anything. His lawyer had asked for alimony, since I was working and he wasn't, but I thought the court would side with me -- the victim. Unfortunately, the system doesn't work in this way. They're only concerned with dividing the assets, and my lawyer told me that the best way to be done with the whole thing was to pay Conor a lump sum of money to get him to sign the papers and go away. Fighting in court could take five years, he said, and it might end up costing five to ten times as much money in legal fees. At the time, we were almost done with business school, and I didn't want to drag it out any longer. It was time to move on with my life.

In the end, I gave Conor $10,000 -- and that was on top of the approximately $100,000 in business school loans that I owed. All of the debt that we had was in my name, thanks to the fact that his terrible credit barred him from getting approved for loans. As for the house that I had purchased for the both of us using savings from my dad, well, I had to sell that at a $30,000 loss.

While it killed me to give my abuser money, it was actually the right decision for me because I haven't heard from him since.

How I Recovered, Financially and Emotionally

When I talk about it now, I wonder how I could have been so blind. In reality, I wasn't as alone as I'd felt: One in four women will experience domestic violence, and 74 percent of Americans know someone who is or has been abused. But while I was living it, my heart went out to Conor because of what he'd suffered through. And I believed that our relationship would get better.

I just couldn't see that it was crazy love.

It took six years of extremely frugal living to pay off all of that debt -- house, car, business school, lawyer -- not to mention a therapist!

Leslie Morgan Steiner
Steiner today with her family (Courtesy Leslie Morgan Steiner)
I've been married for almost 20 years to a man who is everything my ex-husband wasn't. I work as a writer and a public speaker, and we have three great kids. But despite the stability of my relationship, one thing that I took with me from my marriage with Conor is my financial independence. It took years for me to agree to have a joint checking account with my current husband, and I still have my own checking and savings accounts, as well as credit cards in my own name.

Without financial independence, I would feel submissive. If I'd had it in my relationship with Conor, I could have afforded to leave him on my own.

Every once in a while, my husband will ask, "Why do you need that account?" I just look at him because he'll never understand. I need my financial freedom. Every woman does ... I just happened to learn the hard way.



----------------------------

Gallery: Riches to Rags: 5 Tales of Woe From Those Who Had It All and Lost It

The AthleteThe HeiressThe SoldierThe Business OwnerThe Actor


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]]>borrowingcollegedebtdivorcedomestic violencemarriagespouseLearnVestFri, 26 Apr 2013 05:00:00 EST'Dear Mom, I Wish You'd Had Life Insurance'http://www.dailyfinance.com/2013/04/24/life-insurance-essay-contest-brittney-lacombe/http://www.dailyfinance.com/2013/04/24/life-insurance-essay-contest-brittney-lacombe/http://www.dailyfinance.com/2013/04/24/life-insurance-essay-contest-brittney-lacombe/#commentsFiled under: , ,

Brittney Lacombe / LIFE
Brittney Lacombe / LIFE
By BRITTNEY LACOMBE

I live in St. Petersburg, Florida. On May 8th, 2011, my mother, two younger sisters and I drove to a local campsite for our annual Mother's Day camping trip. When we arrived, my mother said that her foot was bothering her. We thought maybe she had hit it on something, so we didn't think much of it. But that night, the pain got so bad she couldn't stand it. She called 911 and an ambulance took her to a hospital.

The doctors thought she had cellulitis, a blood infection, and wanted to keep her overnight to make sure the infection didn't spread. We brought her presents and balloons to the hospital, to celebrate Mother's Day. At 9 p.m., visiting hours were over. We said goodbye and went home, planning to come back when visiting hours started again at 7 a.m.
Brittney Lacombe
Brittney Lacombe


When Life Fell Apart

At 6:30 the next morning I got a call from the hospital. When they had gone to check on her that morning, she was blue. They tried to resuscitate her for 45 minutes, but it was too late. She had died from a pulmonary embolism -- a catastrophe that left me without a mom.

Suddenly, at 20 years old, I was the head of the family, and I had to take care of my sisters, who were 15 and 16, on my own.

My aunt came over the next day to help me deal with funeral arrangements. I wanted to bury my mother, like she wished. But when we finished looking through all of her bank accounts and papers, we realized she only had $300 in the bank.

She was completely behind on her bills and had no life insurance.

I knew that our finances weren't great, but I didn't think we could be that bad off. A proper funeral, which costs thousands, was out of the question. I hated the idea of cremation, but that's the only thing the state would pay for. We couldn't even afford to hold a reception, and all of my mother's family members never got the opportunity to gather and grieve together.

I felt devastated. I didn't know where to go or what to do. Within a week of her passing, shut-off notices came for the electricity and water. The bank called every day looking for a payment on the mortgage. Since I was only working part time, paying these debts was out of the question. Even though I explained my situation to the bank, I was told I only had weeks before the house would be foreclosed on and our electricity and water would be cut off.

My aunt and I started looking for resources to get us through the month. At work, where I did customer service for a local newspaper, I asked to have more hours. I tried to get help from the community to help us get through that month and to save the house we had lived in since 2004, but it was a lost cause.
Brittney Lacombe
Brittney Lacombe


How Did We Get Here?

I grew up in a middle class family, where both of my parents always worked very hard to provide. My parents got divorced in 2006, and my father was no longer in our lives.

In 2010, when I was in high school, my mother got laid off from her company in a major downsizing. It was stressful, because I knew we had always lived paycheck to paycheck, and I didn't know if everything was going to turn out OK.

She was collecting unemployment, but by the time we went on our Mother's Day camping trip, it was about to run out and she was looking for another job. Meanwhile, I was working and taking classes toward a degree in education.

Picking Up the Pieces

On June 1st, through assistance from Catholic Charities and the HUD program, we were able to move into a small two-bedroom apartment 15 minutes away from where we used to live, near my sisters' school.

I had to pack up our entire family home. Since we were moving from a three-bedroom house to a two-bedroom apartment, I had to decide what meant the most to us as a family, and what to let go. I moved through the process slowly, taking box by box to our new apartment. But I didn't move fast enough. The bank came and foreclosed on the house, and they were able to keep what they wanted. We lost a lot.

We also had to give our pets away. Our two dogs went to family members until we could afford to get them back. Our cats went to the shelter.

During that time, a counselor from a local program came to our house twice a week to help us through the grief processing. I decided to change my major to social work, so I could help other young adults who were going through what I went through.

Currently, I work 40 or more hours a week at the newspaper, then attend school full time after that at the University of South Florida. My sisters are in 11th and 9th grade, and I don't want them to work while they're in school. They have enough on their plates.

How We're Getting By

We still live paycheck to paycheck and struggle. I receive no rent or food assistance. Thankfully, if I run out of grocery money, I am able to borrow from friends and extended family. We never really go out, to movies or anything else. If I have to do without in order for my sisters to have, this is what I am committed to doing.

I do not qualify for Social Security survivor's benefits because I was over the age of 18 at the time of my mother's death. Since my sisters are both minors, they qualify. I put the funds into each of their savings accounts so they can attend college after high school graduation.

Up until last year, I had only a grant from the government that paid for 25% of my school tuition. I also took out student loans, but I was limited to two or three classes every semester, and would go to the library to check out textbooks to use. Still, I managed to get honors every semester.

Last year I submitted my essay to the LIFE Foundation, and won a scholarship which allowed me to take the rest of the classes I need to get my bachelors of science in social work. I'll graduate on May 5th of this year, summa cum laude. That will make me the first one in my family to graduate college. I've applied to graduate school, but I have to take off a year, because you have to get experience before you get your master's. Hopefully, I'll be able to attend school in the fall of 2014.

It Could Have Been Different

People get grief wrong: You don't move on, you move through it. One day you realize that it is reality. It's almost been two years, and I wouldn't say we've "dealt" with my mother's death yet. Some days it's just not real.

Death is something we tend not to think about and not to prepare for. My mom had a small life insurance policy with her job, but lost it when she was laid off. Because she was only 49, I don't think she ever thought that it was something she needed.

If my mom had had life insurance and made preparations for her death, my life would be completely different. We would have been able to bury her according to her wishes instead of settling for cremation paid for by the state. We would still be living in our family home with our pets and in our same neighborhood we grew up in. I would not have to struggle to provide my sisters with the basic daily needs others don't think twice about.

I am determined to make my mom proud and be the first in our family to graduate college. It is now my responsibility to see that my sisters have as close to a normal life as possible. I am their role model. We are the survivors of the unthinkable, and we are going to make it.

With additional writing by Alden Wicker

More From Learnvest:
Retirement, Savings or Debt? How to Prioritize Financial Goals
How the American Dream is Keeping Us Broke
My Abusive Marriage Destroyed Me and My Finances

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]]>collegedeathfinancial planningLIFE FoundationLife InsuranceLearnVestWed, 24 Apr 2013 05:00:00 EST6 Strange New Taxes That May Be Headed Your Wayhttp://www.dailyfinance.com/2013/03/08/6-strange-new-taxes-that-may-be-headed-your-way/http://www.dailyfinance.com/2013/03/08/6-strange-new-taxes-that-may-be-headed-your-way/http://www.dailyfinance.com/2013/03/08/6-strange-new-taxes-that-may-be-headed-your-way/#commentsFiled under: , ,

sugar-sweetened beverage soda drink taxBy CHERYL LOCK

It's tax time!

And while you're busy scrambling to get together your return for this year, a new Time article points out six new (incredibly strange) taxes that may be coming your way in the very near future.

A few have even already passed.

Take a look at some of the ideas:

Gallery: 6 Strange New Taxes That May Be Headed Your Way

Entertainment TaxesSoft DrinksBicycles and The Miles You DriveLumber



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Is Obamacare Negatively Impacting Your Tax Bill?
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Photo Credit: Getty Images

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]]>bike taxControlled Substances Actelectric car taxEntertainment TaxesFinanceGetty Images IncLearnVestLocalLumber taxMarijuana Taxmilage taxOhiopot taxsoft drink taxtax changestax deductionstaxestaxes 2013U.S.VermontWashingtonwood taxesLearnVestFri, 08 Mar 2013 05:00:00 ESTThe 10 Biggest Tax Mistakes I See: A CPA Tells Allhttp://www.dailyfinance.com/2013/02/27/biggest-tax-mistakes-audit-filing-irs/http://www.dailyfinance.com/2013/02/27/biggest-tax-mistakes-audit-filing-irs/http://www.dailyfinance.com/2013/02/27/biggest-tax-mistakes-audit-filing-irs/#commentsFiled under: , , , , ,

CPA tax secretsBy Laura Shin

1040, 1040A, 1040EZ, Schedule C, Schedule B, 4868, 1099, W-2 ... doing your taxes can feel like trying to speak a foreign language that you've never taken a course in.

Given how complicated the tax code is, it's not surprising that people mess up when filing their returns -- and those mistakes can cost people thousands of dollars. (Learn how to avoid the top tax filing mistakes.)

As a Certified Public Accountant with his own boutique firm, Gary Craig has seen it all. He shared some of the most common tax blunders he witnesses to help you avoid them, and improve the odds that your own filing goes smoothly.

Gallery: A CPA Spills: The 10 Biggest Tax Mistakes That I See

1. Shopping for the Biggest Refund2. Not Making Sure That Your Tax Preparer Signs the Return3. Being Too Aggressive With Unreimbursed Business Expenses4. Taking Inappropriate Real Estate Deductions5. Inflating the Value of a Car That You Donate


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]]>biggest tax mistakesBiggest tax refundCertified Public Accountantcpadonated carEmotional Freedom TechniqueFacebookFinanceHome Office DeductionIRS tax formsKelley Blue BookmistakesReal EstateReal Estate Deductionsreal estate lossesreimbursement policysigning your returnStock Transactional Wash Sale Ruletax breaktax filingtax filing tipstax mistakestax preparerTaxesToyota CorollaTraditional IRA DeductionsUnreimbursed Business ExpensesLearnVestWed, 27 Feb 2013 05:00:00 ESTHow to Do Your Taxes if You're a Homeownerhttp://www.dailyfinance.com/2013/02/22/tax-advice-homeowners-deductions-irs-forms/http://www.dailyfinance.com/2013/02/22/tax-advice-homeowners-deductions-irs-forms/http://www.dailyfinance.com/2013/02/22/tax-advice-homeowners-deductions-irs-forms/#commentsFiled under: , , , ,

HomeownerBy Alden Wicker

Hey there, homeowner! We're happy you've got a slice of the American dream, and you'll get the tax breaks that go along with it. In fact, some of these tax incentives apply to even a second home. Ooh la la!

Whether you bought, sold or just happily lived in your home this year, we'll walk you through all the tax stuff you need to know.

Just skim the "If you ..." headers to find the sections that affect you.

The Nuts and Bolts

If You Paid Interest on Your Mortgage. You should have received a form 1098 from your lender, which will tell you how much mortgage interest you paid. You can deduct 100% of your mortgage interest and property taxes, as long as your loan is less than $1 million, ($500,000 if you are married and filing separately). If it's over that, the IRS will limit your deduction. But here's the catch: You have to itemize in order to claim the deduction. This is a choice that takes a little math and thought. But basically, you calculate your total itemized deduction, compare it against the standard deduction and then take the higher deduction.

You can also deduct late payment charges (please don't consider this an incentive to pay late) and pre-payment penalties.

If You Paid Property Tax. (Hint: You Did) The property tax you pay each year is deductible. Usually these property taxes are paid as part of your monthly loan payments, so you can find that information on the annual statement from your lender. Real estate taxes can be deducted on federal returns even though they may not be deductible in the state where the property is situated.

If You Had a Loan Forgiven. Depending on the time of debt, if a lender canceled it, you could be taxed as though that canceled debt were income. For example, if you had a mortgage of $10,000, paid $2,000 and the bank canceled the rest, you would be taxed as though you had $8,000 of income.

However, thanks to the Mortgage Debt Forgiveness Relief Act of 2007, the IRS will not charge income tax on a canceled debt. That means if you got a loan modification, short sale or foreclosure on your primary residence, you won't be hit with a tax bill for it. This applies to up to $2 million in debt ($1 million if you are married, filing separately), that you took on to:
  • Buy your primary home
  • Improve your primary home
  • Refinance the loan for your primary home
This was only in effect through tax year 2012.

If You Made Energy-Efficient Improvements to Your Home. The Nonbusiness Energy Property Credit is for homeowners who made energy-efficient improvements such as installing insulation, new windows or furnaces. For 2012, you can get a credit worth 10% of the cost of the qualified efficiency improvements you made. You can claim up to $500 over your lifetime.

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What if your electricity comes from your own green sources? You should check out the Residential Energy Efficient Property Credit. This credit gives homeowners 30% of what they spend on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines and fuel cell property. No cap exists on the amount of credit, except for fuel cell property.

If in this coming year you decide you want to go green for your home, the IRS suggests that you check for a certification statement that the item is eligible for a tax credit before you purchase. This can normally be found on the packaging or the company's website. Full details are available on Form 5695.

If Your Home Was Damaged in a Disaster. If your home was damaged by a disaster like a tornado or fire, you might be able deduct the amount that wasn't reimbursed by insurance. To do so, you need to start with your Adjusted Gross Income (AGI). Then multiply that by 10%, and subtract that plus $100 more from the amount of damage not reimbursed.

Example: Let's say your home sustained $20,000 in hurricane damage, but you were only reimbursed $10,000 by your insurance company. $20,000-$10,000 = $10,000 in unreimbursed damage. If your AGI was $70,000, the calculation is: $70,000 x 10% = $7,000. $10,000 - $7,100 = $2,900 in deductible damage.

Special Note: Should You Take the Home Office Deduction? Provided you are actually eligible for the home office deduction (learn more so you don't get audited), deducting the expense could either be a smart decision or a poor one. That's because once you claim that home office, it doesn't count as part of your private residence anymore. When you sell your house sometime down the line, you'll either make a profit or a loss. If you make a profit, the value of your home office will be taxed as a capital gain, at a maximum rate of 25%, costing you money. If you take a loss selling your home, you can deduct the value of the home office as a loss, making you money.

How the math works out for your depends on your situation, so it's smart to talk to your tax preparer before you deduct your home office.

If You Took Out a Loan ...

If You Paid Property Taxes. (Hint: You Probably Did) Usually your property taxes are paid to your lender as part of your loan. But if you bought your house this year, you probably paid your fair share of the property taxes upfront. You can find out how much you paid on your settlement documents, and deduct it.

If You Paid Mortgage Discount Points. When you pay a "point" toward your mortgage, that means you paid the equivalent of 1 percentage point of your loan upfront at closing in order to get a lower interest rate. This doesn't go to pay off your loan, but it can save you money in the long run, which is why people do it. If you paid mortgage points, you can deduct them if:
  • The loan is secured by your primary residence
  • The loan was used to buy, improve or build the home
  • Paying points is a common practice in the area of your new home and not more than normally charged
  • The points are calculated as a percentage of the loan principal
  • The points are clearly outlined on the buyer's settlement statement, and
  • The amount of cash you put into the purchase of your home (including down payment, closing costs, etc.) is at least equal to the amount you were charged for the points you paid on the loan
If you paid points to refinance your home instead of buying or improving your home, you deduct a portion of what you paid each year, spread out over the life of the loan. For example, if you paid 1,000 in points to refinance a 10-year loan, then you could deduct $100 each year.

If You Took Out a Personal Home Equity Loan. What if you took out a home equity loan to pay for something other than your home, like tuition or home improvements? Well, it depends. Part or all of the interest you pay on that loan could be deductible for up to $100,000, or $50,000 if you are married filing separately. Here's how the math works when it comes to tuition:

Let's say your home is worth $200,000. You currently have a mortgage worth $150,000. So your home is worth $50,000 more than the mortgage. If you take out a home equity loan to pay for tuition, then you can only deduct the interest on $50,000 of that loan. That number would be the same whether you took a loan out for $60,000 or $200,000-you can only deduct interest on $50,000 of that loan.

If you find yourself getting hit with the alternative minimum tax, then you cannot deduct any portion of the interest on a home equity loan when calculating AMT.

However, if you used that $60,000 loan to build a shed and install a pool, you can deduct all of the interest whether or not you fall under the AMT. That's because you used the loan to improve your property.

If You Sold a Home ...

If You Made a Profit on Your Home. If you sold your house for more than you paid, you technically made what is called a "capital gain." Usually capital gains are taxed, but the gain you made on your home-up to $250,000 ($500,00 for married couples filing jointly)-is exempt from income taxes. You just need to have:
  • Owned the property for two years, and
  • Lived in it for two out of the last five years before you sold it
If you don't meet these requirements, all is not lost. If you had to sell your home because of:
  • Death
  • Divorce or legal separation
  • Job loss that qualifies for unemployment compensation
  • Employment changes that made it difficult for you to meet mortgage and basic living expenses
  • Multiple births from the same pregnancy
  • Damage from a natural or man-made disaster
  • "Involuntary conversion" by a local government under eminent domain law, for example ...
Then the IRS will cut you some slack and only tax your gain partially. Learn more at the IRS website.

Also, if the gain you made is more than $250,000 (or $500,000 if you're married filing jointly), dig around and see if you can find the receipts for any home improvements you made. That will establish the cost basis for the home as higher. For example, if you bought your home for $300,000 and made $50,000 in improvements, then sold it for $600,000, you can deduct that entire amount ($600,000-$350,000 = $250,000). If you hadn't included those improvements, you would have been taxed on that extra $50,000 that exceeded the limit.

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]]>Alternative Minimum TaxAMTenergy efficiencyenergy-efficient improvementsFinanceForm 5695Home Equity Loanhome improvementshome office deductionhomeownerIRS tax questionsIRS tax returnLearnVestMortgageNonbusiness Energy Property Creditproperty taxproperty taxesResidential Energy Efficient Property Credittax breakstax deductionstax deductions for homeownersLearnVestFri, 22 Feb 2013 11:30:00 ESTFiling Taxes: Will Itemizing Your Deductions Save You Money?http://www.dailyfinance.com/2013/02/21/filing-taxes-itemizing-deductions-save-money/http://www.dailyfinance.com/2013/02/21/filing-taxes-itemizing-deductions-save-money/http://www.dailyfinance.com/2013/02/21/filing-taxes-itemizing-deductions-save-money/#commentsFiled under: , , , ,

ItemizedThough we all groan about having to pay taxes, the government is nice enough not to tax us on everything we earn.

There are two big buckets of deductions the government gives us: The first are called "above the line," and the second are called "below the line," which we'll cover here. (The "line" these deductions refer to is a literal line on your 1040 form for the Adjusted Gross Income.)

Below the Line Deductions

You can take your below the line deductions in one of two ways: Either you can claim the standard deduction, or you can claim itemized deductions.

o. The Standard Deduction. The standard deduction is an amount of income that the government will not tax any taxpayer on. The Tax Policy Center estimates that about 70 percent of taxpayers take the standard deduction on their returns, which is worth anywhere from $5,950 to $11,900, and opt out of the whole process of itemizing. It's as simple as saying, "I'm a single person (or married filing singly, or married filing jointly), and yes, I would like the standard deduction." For some, this is just fine. After all, that's a lot of money, and taking just the standard deduction makes your taxes simpler and faster. What's not to like? (Check out the chart below to find out what the standard deduction is for your filing status.)



*Do not use this chart if you were born before January 2, 1948, or are blind, or if someone else can claim you (or your spouse if filing jointly) as a dependent. Use Table 7 or 8 on this IRS page instead.

Itemized Deductions. Itemizing your deductions means listing each deduction you qualify for. People do this when the sum of all their deductions is greater than the standard amount. Some things people might itemize include medical expenses, charitable donations and mortgage interest payments.

But How Do You Know Which One Is Right for You?

At stake in this decision are savings in terms of money and time. For some people, taking the time to itemize could save them hundreds or thousands of dollars in taxes.
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The most recent study by the General Accounting Office estimated that in 1998, 2.2 million people overpaid their taxes because they chose not to itemize. It seems many of us take the standard deduction because it's easier, because we forgot to keep records during the year, or because we assume we don't have enough deductions to make it worthwhile.

Then again, there are the people who decide to itemize even though it's not worth it. They just made their lives needlessly more complicated (and expensive, if they relied on an accountant to do this for them) for no financial benefit.

Should You Itemize?

Here are some instances in when you should consider itemizing. Did you:
  • Have large uninsured medical and dental expenses?
  • Pay a significant amount of interest or taxes on your home?
  • Have large unreimbursed employee business expenses?
  • Have large uninsured casualty or theft losses?
  • Make large charitable contributions?
And sometimes, you have no choice but to itemize, like when:
  • You are married and filing a separate return, and your spouse itemizes deductions
  • You are a nonresident alien or a dual-status alien
If you're still not sure, take this quiz to find out if itemizing makes sense for you.

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]]>charitable donationsdeductionsFinanceGovernment Accountability OfficeIRS tax questionsitemized deductionsLearnVestmedical expensesmortgage interest deductionstandard deductiontax deductionstax filingtax formsTax Policy CenterTax refundTax Returnstax tipstaxesLearnVestThu, 21 Feb 2013 11:00:00 ESTDoing Your Taxes: How to Decide Your Filing Statushttp://www.dailyfinance.com/2013/02/19/doing-your-taxes-how-to-decide-your-filing-status/http://www.dailyfinance.com/2013/02/19/doing-your-taxes-how-to-decide-your-filing-status/http://www.dailyfinance.com/2013/02/19/doing-your-taxes-how-to-decide-your-filing-status/#commentsFiled under:

Filing StatusBy Alden Wicker

If there is one thing to make sure you get right on your taxes, it's your filing status. It can determine how much you pay (or save) in taxes. Plus, it's one of the things that, if you get it wrong, will definitely land you in a dreaded audit.

(Find out what else will get you audited.)

Your filing status basically expresses how you wish to be treated by the IRS, and can determine which deductions and credits you are allowed to take, which forms you should fill out and more.

We don't want you to stay up at night fretting over this issue, so we've compiled everything you need to know into a handy flow chart. Once you find out your filing status, you can read more about it below.

Two notes before you get started:
  • In the interest of keeping the chart simple and easy-to-use, this does not account for people who are not United States citizens. (If you are a resident alien, you might find this useful.)
  • Also, the IRS does not recognize same-sex marriages, even if they are legal under state law, so if you are in a same-sex marriage, you should file as a single on your federal return.

IRS Filing Status flow chart

Married Filing Separately

Married filing separately is just like it sounds: You have a spouse, but each of you will file a separate return, and keep your finances separate: separate incomes, separate expenses, everything.

If you got this as your filing status, you must have a really good reason. The IRS discourages couples from filing under this status by preventing couples filing separately from taking many deductions and credits available to married couples filing jointly. Plus, it's twice the work for you and your spouse to file separately! However, there are some cases where it's in your interest to file separately.

Large Deductible Expenses. The first case is when you have a large expense that might be deductible. An expense must be over a certain percentage of your AGI (figure out your AGI) in order to qualify as deductible. So let's say you had a medical expense that cost you $5,000. If you file separately and your AGI is $50,000, that means the medical expense was 10% of your AGI. You can deduct a portion of it. But if you filed jointly with your spouse, who has an AGI of just $30,000, that means the medical expense was only 6.25% of your combined AGI, and you can no longer deduct it, which means you could be missing out on some tax savings. (Read our post on deductions to see which ones you might qualify for.)

You'll have to look at your entire financial picture to decide what works best for you (because you may miss out on other deductions by filing separately). We suggest either getting the help of an accountant, or working through the tax filing paperwork separately and then jointly to compare the tax bill on each.

Your Spouse Has a Business. Instead of being a math equation, this decision is based on how comfortable you feel with combining your interests with your spouses. If you file a joint return, you will be liable with your spouse for any audits, fines and interest on unpaid taxes, as this woman learned the hard way when she found out she owed $3 million to the IRS because of her late husband's creative accounting. She had no idea he was cheating on his taxes, but it cost her years and thousands in lawyer fees to prove her innocence. (This is how she did it.) So even if your spouse doesn't own a business, but you suspect he's not on the up-and-up with the IRS, we suggest not signing your name on the paperwork he files.

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Even well-meaning business owners can make mistakes. For example, this business owner just made an honest mistake that resulted in fines. If you've ever heard the words, "I can't figure out these freakin' taxes," or worse, "Taxes are stupid, and I don't believe in paying them," out of your spouse's mouth, file a separate return.

If, however, you are ever caught in a situation like this, don't panic; the IRS has two special publications just for you. The first is called Innocent Spouse Relief, and you can claim it when your spouse does something shady that you didn't know about. The second is called Injured Spouse, and it can be claimed by you when your spouse owes child support or money to the IRS, and you want your fair share of the refund.

Married Filing Jointly

This is the typical choice for married couples, and it should save you big in taxes. You are eligible for more deductions and credits, and it will simplify your tax filing significantly. Find out how combining your salaries will affect your taxes.

Head of Household

This is the IRS's way of recognizing the challenge of taking care of someone else financially. This could mean someone is living in your home and you're paying for their expenses like clothing and food. Or it could mean you're taking care of a parent. If you are paying for a parent who is in a retirement home, this counts as well. Find out more about what qualifies someone as a dependent.

Single

Your finances are pretty simple, and so is your filing status. You're considered "unmarried" if you have never been married, are divorced, are widowed without a dependent, or are married but legally separated by court decree (not just sleeping in separate bedrooms).

Widow(er) With Dependent Child

Losing a spouse is difficult, and can be more difficult when one is left to care alone for a child. This filing status is intended to lend a hand to those who have lost a spouse in the last two years and are still supporting a dependent. You cannot file as a widow(er) if you are not supporting anyone, your spouse passed away in 2010 or earlier, or you remarried this year.

If your spouse died in the last year and you did remarry before the end of the year, you can file a joint return with your new spouse. Your deceased spouse's filing status is married filing separately for that year.

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]]>dependentsfiling statusfiling taxesFinanceIRSIRS tax questionsLearnVestLocaltax advicetax deductionstax filing statustax formstax returnstax tipstaxesU.S.LearnVestTue, 19 Feb 2013 05:00:00 ESTFiling Taxes: What You Need to Know About Tax Exemptionshttp://www.dailyfinance.com/2013/02/14/filing-taxes-what-you-need-to-know-about-tax-exemptions/http://www.dailyfinance.com/2013/02/14/filing-taxes-what-you-need-to-know-about-tax-exemptions/http://www.dailyfinance.com/2013/02/14/filing-taxes-what-you-need-to-know-about-tax-exemptions/#commentsFiled under:

Tax exemptionsBy Alden Wicker

Exemptions are one of the most straightforward parts of the tax code.

OK, maybe that isn't saying much, but when it comes to navigating tax season, we take what we can get. And we also love exemptions because they put money back in our pocket.

Exemptions work in a similar way as deductions by reducing the amount of income you will be taxed on. For each exemption you take for 2012, you can deduct $3,800 from your gross income to arrive at your taxable income. So if you fall in the 10% tax bracket, that translates to $380 less in taxes.

You are allowed to take exemptions for:
  • Yourself ("personal" exemption)
  • Your spouse
  • Each dependent
So if you are married with three qualifying children, you can deduct $19,000 in exemptions ($3,800 x 5 = $19,000). Not bad, right? It's a pretty easy portion of your forms to fill out, but-of course-there are some exceptions. Read on to find out more about each exemption and when you can take it.

Personal Exemptions

This is the exemption you can take just for being a taxpayer. It's the government's way of saying, "Thanks for being a contributing member of society!" And good news for high earners-previously, once you made a certain amount (around $165,000 to $200,000) you wouldn't be able to take the full personal exemption, but that rule doesn't apply this year.

The Catch: You cannot get a personal exemption if anyone else is able to claim you as a dependent. The emphasis here is on the able. Even if they don't take the exemption, just the fact that they are able to means you cannot claim it. (And you might want to ask them why they are letting this pass them by!) We explain who can be claimed as a dependent below, so check out that description if you are unsure, but in general, if you are being supported by someone else, you cannot take this exemption.

Spousal Exemptions

While your spouse is never considered a "dependent," similar rules apply here. If you are filing a joint return, you can claim your spouse for an exemption.

The Catch: If you are married filing separately, you can only claim an exemption for your spouse if:
  • He/she had no gross income
  • He/she is not filing a return, and
  • No one else can claim him/her as a dependent
Dependent Exemptions

Children. If you have any children under 19 living with you, you most likely can take an exemption for each of them. If your child was permanently and totally disabled at anytime of the year, she can always be claimed as your dependent, regardless of age.

To meet this test, a child must be:
  • Your son, daughter, stepchild, foster child or a descendant (e.g. grandchild) of any of them, or
  • Your brother, sister, half brother/sister, stepbrother/sister or a descendent (e.g. niece or nephew) of any of them.
The Catch: The IRS wants to know that your kids are actually dependent on you. So you cannot claim your child as a dependent if:
  • You yourself are being claimed as a dependent by someone
  • Your child is married and filing a joint tax return (unless he/she is filing just to claim a refund of withheld tax and isn't taking a personal exemption)
  • Your child is not a resident of the U.S., Mexico or Canada
  • Your child is over 19 and not a full-time student
  • Your child is 24 or older at the end of the year
  • Your child provided more than half of her own support
  • Your child didn't live with you for half the year (except in cases of illness, education, business, vacation or military services, or the child was born or died during the year)
  • You are separated or divorced, and your child spends more time at your ex-spouse's home. (Learn more about this at the IRS website.)
Relatives. But your kids aren't the only types of dependents you can claim exemptions for. You can also take exemptions for "qualifying relatives." A relative does not have to live with you and there is no age requirement in order to qualify, you just need to be supporting them.

The Catch: In order to be a qualifying relative, the person must:
  • Have earned less than $3,800 in gross income or unemployment benefits for the year 2012
  • Have received more than half of their support from you, in the form of food, clothing, shelter, education, medical and dental care, recreation and transportation. To figure out whether the relative meets this test, add up all the support they got during the year (including support from the state like welfare and food stamps) and compare what you contributed to see if it is more than half.
  • Be a U.S. resident or citizen, or a resident of Mexico or Canada
  • Not be married filing jointly
In addition to the children mentioned above, qualifying relatives could be your:
  • parent
  • sibling
  • stepparent
  • stepsibling
  • half sibling
  • grandparent
  • grandchild
  • Any in-law: son-, daughter-, mother-, father-, brother- or sister-in-law
Cousins do not count. And aunts, uncles, nephews and nieces only count if they are related to you by blood. For example, your husband's sister's daughter does not count if you are married filing separately, but your sister's daughter does. However, the relationship need be present to only one of the two married persons who file a joint return. That means if you are married filing jointly, you can claim your husband's sister's daughter.

Member of Your Household. What if your best friend lived with you all last year? Or your best friend's little girl? You might be able to claim them as a dependent. They must have lived with you all year, and meet all the other requirements that apply to qualifying relatives, including:
  • Have earned less than $3,800 in gross income or unemployment benefits for the year 2012
  • Have received more than half of their support from you, in the form of food, clothing, shelter, education, medical and dental care, recreation and transportation
  • Be a U.S. resident or citizen, or a resident of Mexico or Canada
  • Not be married filing jointly

See more on LearnVest:

Don't Miss Any of These Money-Saving Tax Credits
Will You Get Hit With the Dreaded Alternative Minimum Tax?
10 Crazy Tax Laws You Need to Know

For additional tax articles, visit the DailyFinance Tax Center


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]]>dependent exemptionsdependentsExemptionsexemptions in taxesexemptionsintaxesFiling taxesfiling taxes 2013filingtaxes2013LearnVesttax deductionstax exemptiontax exemptionstax exemptions for childrentax formstax returntaxestaxexemptionstaxexemptionsforchildrenvietnam disabeled income tax exemptonvietnamdisabeledincometaxexemptonLearnVestThu, 14 Feb 2013 05:00:00 ESTTax Tips for Same-Sex Married Coupleshttp://www.dailyfinance.com/2013/02/09/gay-marriage-taxes-same-sex-married-couple/http://www.dailyfinance.com/2013/02/09/gay-marriage-taxes-same-sex-married-couple/http://www.dailyfinance.com/2013/02/09/gay-marriage-taxes-same-sex-married-couple/#commentsFiled under: ,

Gay MarriageBy Alden Wicker

It's been another banner year for gay rights, with Maine, Maryland and Washington saying "I do," to same-sex marriages. Plus, same-sex marriage legislation is currently moving through the Rhode Island legislature.

But there's still a shadow hanging over the celebrations of these victories: In the eyes of the federal government, couples in legal same-sex marriages are still single.

So regardless of what your state's law says, if you're part of such a couple, when you pay taxes to Washington, you're considered single. (And that's only the beginning. When it comes to Social Security survivor benefits, or getting insurance under the coverage of your federally employed partner, you're also still single.)

There are two things you should know: First, this makes your taxes more complicated, and hence might require you to hire an accountant and/or pay more in fees for them to wade through the situation. Second, according to an analysis by H&R Block, same-sex couples pay as much as $6,000 more in taxes than heterosexual couples.

That certainly shouldn't stop you from getting married. But you probably have questions about what else you need to know if you're a Mrs. and Mrs. or Mr. and Mr. at tax time. We'll walk you through how to do your taxes right:

Gallery: How to Do Your Taxes if You're a Same Sex Married Couple

Consider Hiring an AccountantCheck Your State LawsOne Couple, Four Tax ReturnsHow to Avoid LyingYou Might be Able to Claim Your Stay-at-Home Spouse


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]]>Financegay marriagegay marriage and taxesH&R BlockHealthIRSirs tax questionsLambda LegalLearnVestLocalMaineMarriageMarylandNevadaRhode Island General Assemblysame sex couplessame sex marriageSocial Securitytax attorneytax deductionstax lawstaxesU.S.LearnVestSat, 09 Feb 2013 06:00:00 ESTHow My Dad's Life Insurance Saved Our Familyhttp://www.dailyfinance.com/2012/12/10/how-my-dads-life-insurance-saved-our-family/http://www.dailyfinance.com/2012/12/10/how-my-dads-life-insurance-saved-our-family/http://www.dailyfinance.com/2012/12/10/how-my-dads-life-insurance-saved-our-family/#commentsFiled under: ,

By Alden Wicker

December 1989. My father gathered up his things in his New Jersey office and headed to the door, eager to get home to celebrate the holidays with our family. A co-worker stopped him to chat. "Walter, what do you want for Christmas?"

"Nothing at all. I have everything I've ever wanted. I've got my three girls." In other words, my mother, my 9-year-old sister and 3-year-old me.

Up In the Air

My father got his private pilot's license in 1970 right after the army. "He absolutely adored flying," my mom tells me. "He didn't want to do anything else in his free time, besides hanging out with you guys." He bought a small, used, two-engine Piper airplane in 1988 for commuting back and forth to his two offices in New Jersey and North Carolina. He was a careful pilot and took attentive-almost obsessive-care of his plane.

But just a few weeks before that Christmas, he had an annual inspection, and the mechanic said he was missing a small part for detecting fire in the engine, but he would probably be fine until that part arrived.

My dad climbed in, taxied out to the runway, pushed the throttle forward and lifted into the sky.

The Life We Had

Life was good for my family in 1989. My father was the well-paid president of a marketing company, and made extra income from his side consulting business. My mother stayed at home raising my sister and me. She hadn't worked since 1980, when my sister was born.

Mom and Dad had just moved us to a tiny town in North Carolina to be closer to family. They bought some land, started building their dream home and convinced my grandparents to build a little home nearby. After looking at the dismal public schools, my parents enrolled my sister in private school and planned to do the same for me.

In short, they had a lot of financial obligations that depended on my father's income. But they were solid financially, with an emergency fund of about two year's take-home pay.

My mother set the budget, handled the mortgage paperwork on our new home and paid the bills. Around the time I was born, she took a look at my dad's life insurance coverage through his job. Many basic policies from employers will pay only about $30,000-not enough to support a family our size for very long.

So she set about calculating how much we would need if something were to happen, taking into account things like our mortgage and living expenses. She took out an additional term life policy to cover him, and a whole life policy for herself that was also meant to finance my sister's and my college educations. (Here's the difference between term life and whole life policies.)

She didn't know at the time, but it would turn out to be the smartest financial decision she would ever make.

When Bad Things Happen to Happy Families

My grandmother clearly remembers that day. On a step ladder at my grandparents' house, my mother called to my grandfather, "Dad? Come quick. I feel like I'm going to faint." My grandfather got her off the ladder, and she laid down for a few minutes.

My grandmother sees this as proof of my mother and father's tight bond, because at almost that exact time in New Jersey, my father radioed the airport, saying his right engine was on fire. A few minutes later, he radioed again, saying the engine had broken off and he was in a downward spiral. Those were his last words. The official report listed the damage to the plane as "destroyed."

My grandmother got the call from a friend of my father's, when she was in our kitchen with me and my sister. She kept her cool (remarkable, since she considered my dad one of her best friends in the world), calling a relative to come and get me and my sister. Then she drove home to tell my mother.

I was barely 3 at the time, so I don't remember much about this time. The only utterly sad thing I do remember is a vision of my mother sometime during the weeks after, draped over the steering wheel of her pick-up truck, weeping.

The thing is, life went on, and I have many happy memories. I remember my mother asking me a few months later what color I wanted my new bedroom to be. ("Pink!") I remember Mrs. Stamp's private pre-school, where I learned about cocoons and how to spell "cat." I remember walking, my hand in my sister's, on the way to our grandparents' house for a delicious Southern dinner of chicken and dumplings. I also remember my mother tapping numbers into her desk calculator, and the "chit chit chit" of it printing the results on ticker tape. She never looked at the numbers on the tape with panic or worry.

None of this would have been possible without life insurance.

If We Didn't Have Life Insurance ...

My mother was faced with a long list of sudden expenses: the funeral, lawyer fees for executing my dad's estate, a mortgage, living expenses, private school and/or child care, and attempting to save for two college tuitions. If not for life insurance, she'd be doing all that with no income whatsoever, no job experience and savings that would only have lasted a few years.

It wouldn't have been easy for her to get a job after nine years out of the workforce, especially in our tiny town. "I had no career to fall back on," she says. "I would have had to go back to school." She would have disappeared into the workforce and night school, and my sister would have been yanked from her school right after we lost our father.

We also wouldn't have been able to finish the house, which would have meant an unsellable home with a giant mortgage. It would later take us three years to find a buyer for the finished home.

Life insurance answered all those questions. "It's wrenching, but it's a relatively simple process," my mother says of making the life insurance claim. "You call up the insurance company; you tell them what happened. You fill out a form and you send in a death certificate." Then they send you a check. (Today, most life insurance companies actually refuse to insure people with non-commercial pilot licenses, presumably because of a rash of accidents.)

In our case, the life insurance paid off the mortgage, and provided enough for my mother to continue to stay at home with us until I was in high school. It funded private school for my sister and me through 8th grade. Although we had only paid nine years of premiums, we received a giant influx of money that would sustain us until my mom reinvented herself as an interior designer when I was in high school and reentered the workforce on her own terms.

Of course, life wasn't the way it was before. The dinner parties went away, overseas vacations changed to a week at the beach once a year and dining out a trip to Bud's BBQ. But I was happy. I never noticed anything was "wrong" until I realized in third grade that, hey, everyone else has a dad and I didn't. But now, as a grown adult, I realize how incredibly lucky I've been to have the life and opportunities I did. Things could have been so much worse.

The Advice My Mom Gives Anyone Who Will Listen

My mother has this advice for parents: "You have, have, have to get life insurance. Figure out what you can cut so you can afford it. It's much more important to have life insurance than that extra dinner out." Depending on your age and your health-see more about how to get quotes on policies below-a 20-year term life insurance policy with $1 million in coverage can cost as little as $50 a month.

Read Life Insurance 101 to learn about the basics. Then, use this checklist to take out a policy yourself.

Hopefully, you'll never need it. But as my family learned, bad things do happen. Life insurance couldn't replace my dad, but it did replace the income we depended on, and kept my childhood relatively intact.

Love reading other people's financial tales? Check out more great LearnVest-exclusive personal stories.

See more on Learnvest:
5 Ways Life Insurance WIll Save Your Family
10 Financial Things Every Parent Should Do
Life Insurance Made Easy ... Well, as Easy as It Gets

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]]>emergency fundinsurancelearnvestLife insuranceLifestyleMoney Micterm life insuranceterm life policywhole life insurancewhole life policyLearnVestMon, 10 Dec 2012 15:00:00 ESTHow Normal Are Your Finances?http://www.dailyfinance.com/2012/11/15/how-normal-are-your-finances/http://www.dailyfinance.com/2012/11/15/how-normal-are-your-finances/http://www.dailyfinance.com/2012/11/15/how-normal-are-your-finances/#commentsFiled under: ,

Normal financesBy Libby Kane

When it comes to money, there's really no such thing as normal.

RELATED: How Real Women Got Out of Debt

There's only what's right for you. After all, we're the people who think buying bottles of water is a travesty and look forward to $0 days.

What we can tell you, though, is what other people are doing, so you can gauge "normal" for yourself. Through a nationwide survey conducted by LearnVest and Chase Blueprint, we surveyed over 1,300 respondents (men and women) to learn what the average person saves, spends and invests.

So go ahead and take a peek at the finances of your neighbors, and feel free to let us know: Are your finances normal -- you know, by comparison?




See more on LearnVest:
Get Your Finances Back to Normal With Our Free Bootcamp
Infographic: How Does Your Spending Stack Up?
Budgeting 101

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]]>Chase Blueprintcredit card debtdiscretionary spendingEmergingMarketsfinancesfinancial expertgoalsinfographicLearnVestLifestylemortgageRetirementPlanningsavingsLearnVestThu, 15 Nov 2012 07:00:00 ESTRetirement Savings by Age: How Do You Compare?http://www.dailyfinance.com/2012/11/14/retirement-savings-by-age-how-do-you-compare/http://www.dailyfinance.com/2012/11/14/retirement-savings-by-age-how-do-you-compare/http://www.dailyfinance.com/2012/11/14/retirement-savings-by-age-how-do-you-compare/#commentsFiled under: ,


Retirement Savings
By Laura Shin

You asked us how much people had saved in their retirement accounts by age, and now, thanks to a nationwide survey by LearnVest and Chase Blueprint, we have answers.

We asked survey respondents how much they had saved in traditional Individual Retirement Accounts (IRAs), Roth IRAs, 401(k)s and pensions. (Wondering which account is right for you? Check out this flow chart.) As you would expect, the older people get, the more they have saved. All the figures below apply only to women. (Find out why saving for retirement is more difficult for women.)

Ages 25-32

In this age group, savings was greatly clustered toward the lower ranges: 72% of all respondents 25-32 had $49,999 or less saved for retirement. The median amount saved in this age group was $12,000.

Retirement savings of $5,000 or less was the most common answer, with 26% of women in this age group in this bucket. Other than that, this age group was pretty evenly spread out in terms of savings up to $50,000:
  • 15% had $5,000 to $9,999 saved
  • another 15% had $10,000 to $24,999 saved
  • and 16% had $25,000 to $49,999 saved

But still, respectable fractions had even more saved, with 7% having retirement savings in the $50,000 to $99,999 range, and 8% in the $100,000 to $249,999 range. The remaining 12% did not know how much they had saved or preferred not to say.

RELATED: The Top 5 Financial Regrets and How to Avoid Them

Ages 33-44

This age group tended to have savings in the middle ranges, with 62% of respondents in this age group having savings of between $10,000 and $249,999. The median amount saved was $61,000.
  • The largest percentage of respondents in this age group (17%) had $50,000 to $99,999 saved, and the second-highest retirement savings range was $10,000 to $24,999, with 15% of this age group coming in there.
  • Respondents of this age range were unlikely to have low savings -- just 6% had less than $5,000 saved, and only 7% had $5,000 to $9,999 saved.
  • And a decent chunk -- 15% -- had between a quarter million and half a million saved, with 1% even having more than a million saved.
However, 17% did not know how much they had or preferred not to say.

RELATED: Retirement, Savings or Debt? How to Prioritize Your Financial Goals

Ages 45-54

Among 45- to 54-year-olds, the majority (56%) had savings of between $25,000 to $499,999. The median saved in this age range was $101,000.
  • A full fifth of respondents in this age group had $100,000 to $249,999 saved for retirement, making this the top answer for people of these ages.
  • But, unfortunately, a slightly smaller percentage had more than half a million saved than in the 33 to 44 age group: 6% in this age group have over half a million while 8% in the lower age group have that much.
  • Also, 15% still have savings of $24,999 or less, which indicates they need to focus heavily on saving until they retire.

Almost a quarter (23%) said they did not know or preferred to not reveal how much they have in retirement.

RELATED: What We Can Learn From Would-Be Retirees

Want to dissect the results for yourself? Check out our chart.


Amount Saved Ages 25-32 Ages 33-44 Ages 45-54
Less than $5,000 26% 6% 6%
$5,000 to $9,999 15% 7% 5%
$10,000 to $24,999 15% 15% 4%
$25,000 to $49,999 16% 9% 10%
$50,000 to $99,999 7% 17% 13%
$100,000 to $249,999 8% 13% 20%
$250,000 to $499,999 1% 8% 13%
$500,000 to $999,999 0% 7% 3%
More than $1,000,000 0% 1% 3%
Don't know/Prefer not to say 12% 17% 23%
Average $37,000 $157,000 $219,000
Median $12,000 $61,000 $101,000
More From LearnVest

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6 Secrets to Shedding Your Family's Money Baggage

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]]>401kChase BlueprintIndividual Retirement AccountsIRALearnVestpensionretirement savingsretirement savings by ageRoth IRAtraditional iraLearnVestWed, 14 Nov 2012 11:57:00 ESTThe Nobel in Economics: How It's Already Improved Our Liveshttp://www.dailyfinance.com/2012/10/23/the-nobel-in-economics-how-it-s-already-improved-our-lives/http://www.dailyfinance.com/2012/10/23/the-nobel-in-economics-how-it-s-already-improved-our-lives/http://www.dailyfinance.com/2012/10/23/the-nobel-in-economics-how-it-s-already-improved-our-lives/#commentsFiled under:

Lloyd S. Shapley Nobel Prize in EconomicsBy Libby Kane

Ever heard of "The theory of stable allocations and the practice of market design?" Yeah, us neither.

But besides being the work that earned the 2012 Nobel Prize in Economics for Americans Alvin E. Roth and Lloyd S. Shapley last week, it's also something that affects your daily life.

Roth's and Shapley's work, carried out over six decades, isn't only award-winning: It presents a more efficient solution for schools, for organ donation and even for marriage.

So how exactly could economic theory have helped improve-and even predict-some major turning points of your life such as education or choosing a life partner? Read on.

How Their Work Has Affected Daily Life

These two economists work on the abstract-sounding ideas of market design and matching theory, which have to do with making marketplaces (say, the market for organs) more efficient. Their particular focus is on matching in markets without prices-that is, how do you pair a person with a position, or an organ with a donor, or make any match satisfy everyone involved when there's no price tag to show they're of equal value?

For instance, kidney donations posed a tricky problem: Let's say a person wanted to donate to a friend in need, but they weren't matches. Across the country, another pair of friends were in the same position and the donor in the first couple was a match with the patient in the second couple, and vice versa. While the solution in this simple scenario is for the two donors to donate to the other's friend, in real life, the probability of the problem being so neatly solved is low. Most likely, a solution would involve many pairs of willing donors and patients in need.

Roth created a database for all willing donors and all patients that makes sure the maximum number of people in need receive kidneys using the minimum number of people.

Roth expanded Shapley's research to try to solve real-life issues, such as the following:

School districts. Districts in New York City, Boston, Chicago and Denver use a system based on their research to assign students to high schools. Before Roth helped design the New York City high school selection process, about 30,000 students a year ended up in schools they had not even ranked as a preferred school. In the first year his design was used, the 2004-2005 academic year, the number of students who went to a school they had not requested was just 3,000.

Medical Residencies. In the 1980s, Roth applied the research to create a system wherein medical students applying to hospital residencies were placed in more mutually beneficial positions. Before then, the system was designed in a way where students could be shut out of a residency completely. In order to prevent that, students were gaming the system by ranking less popular residencies high on their list, even if they did not want to go there. Roth's system allows medical students to rank their residencies honestly without fear that they will not get in anywhere.

And similar systems are being proposed and developed for the following:

Internet Traffic. Right now, the sheer volume of internet traffic can lead to congestion and delays (otherwise known as "Why won't this load?"). Researchers at MIT have proposed a revised algorithm to keep traffic moving as quickly as possible.

Landing Airplanes. Anyone who has flown before knows that when there's a storm, landings get tricky, which leads to all sorts of delays. A professor at the Kellogg School of Business is examining how to figure out which planes get landing priority in bad weather, using Roth and Shapley's work.

Could an Algorithm Predict Love?

And then there's a final way in which the work of these economists applies to our lives: love.

Shapley's original research in the 1950s was theoretical and based on marriage-in fact, he and David Gale created the Gale-Shapley algorithm, which addresses the Stable Marriage Problem, which asks how to create stable marriages among a group of people so that no two people in any couple would rather be with each other than with their current partner.

Their solution was to have everyone rank their choices of partner from first to last. All the men would propose to their top choice woman, and any woman with more than one proposal would make her top choice. Men who don't get their first choice would move on to their second choice and so on down the line until everyone is matched-not necessarily blissful, but happy enough to stick with it. (This cool site lets you test it out.)

Sponsored Links
It sounds appealing, doesn't it? The thought we could skip the dates in favor of an algorithm that could ensconce us in stable partnerships?

Well, actually, this algorithm is exactly what happens in real life. (Well, sort of. You don't get to skip the dating). Professor Dan Ariely (who researches dishonesty and told us how financial fibbing can help you) conducted research in online dating, and the results matched up with what was predicted by the algorithm.

"Over time people figure out who is above their league and below their league and what is the basic level they can aim... This algorithm is not just a good predictor of economic efficiency, it's a good predictor of what people do and when they have lots of experience and lots of time to figure out where they are in society."

Roth said at a press conference following the award that many of the milestones in people's lives-getting into the school or program of your choice, marriage-are about forming mutually beneficial matches, and understanding that process is his and Shapley's life's work.

So, next time you face a big life milestone that involves making a match, you can thank these Nobel Prize winners for coming up with the algorithm that explains how you did it.

See more articles on LearnVest:

How Raising the Minimum Wage Would Help the Economy

The Personal Finance Message In "Gangnam Style"

6 Ways to Combine Finances With Your Partner

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]]>2012 Nobel Prize2012 Nobel Prize in EconomicsAlvin E. RothDavid GaleGale-Shapley algorithmInternet Traffickidney donationsLanding AirplanesLloyd S. Shapleylovemarriagematching theoryorgan donationSchool districtsStable Marriage ProblemThe theory of stable allocations and the practice of market desiLearnVestTue, 23 Oct 2012 16:03:00 EST5 Surprising Things You Should Negotiatehttp://www.dailyfinance.com/2012/10/13/surprising-things-you-should-negotiate/http://www.dailyfinance.com/2012/10/13/surprising-things-you-should-negotiate/http://www.dailyfinance.com/2012/10/13/surprising-things-you-should-negotiate/#commentsFiled under: ,

NegotiateBy Emily Levy

When we talk about negotiation, we ask two central questions:
  1. How do we do it well?
  2. When is it appropriate?
We've got #1 covered with our start-to-finish negotiating 101 guide to asking for more at work, and 11 tips from experts and readers on bargaining at stores and on the phone.

That leaves us with #2: Most of us know we're supposed to negotiate when it comes to buying a house or a car, but how about at the dry cleaner? Or when we're on the phone with our cell phone provider?

Hesitate no longer.

Read on for five unexpected costs you should negotiate, and how.

Gallery: 5 Surprising Things You Should Negotiate

1. Cable and Cell Phone Bills2. Furniture and Mattresses3. Medical Bills4. Vacation Days5. Gym Memberships


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]]>cablecell phone billcellphoneCellphone billsFurnituregymGym MembershipsLearnVestMattressesMedical Billsnegotiationssaving moneySci/TechVacation DaysLearnVestSat, 13 Oct 2012 06:00:00 EST9 Ways to Make Money on the Sidehttp://www.dailyfinance.com/2012/10/12/how-to-make-money-on-the-side/http://www.dailyfinance.com/2012/10/12/how-to-make-money-on-the-side/http://www.dailyfinance.com/2012/10/12/how-to-make-money-on-the-side/#commentsFiled under:

Make some extra cashSo, you're looking to make a little extra cash?

As a parent, any additional income you bring in for your family will definitely be put to good use. (College fund. Rainy day savings. New shoes for your toddler who outgrows hers like she's getting paid to do so.)

Since we're probably a touch old for lemonade stands, we had to look elsewhere. And guess what? Nowadays, with ubiquitous smartphones and laptops, the easiest ways to earn extra cash are accessible to everyone at the click of a button.

More: 5 Great Jobs for Older Workers


To help, we hunted down apps, opportunities and projects, and chose "extracurriculars" that are particularly flexible in nature, so you can earn some cash while the kids are at school ... or maybe even bring them with you.

Gallery: 9 Ways to Make Money on the Side

Download AppsMultitask Your ErrandsUse Your CarTutorBabysit




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]]>earn cashextra cashmake money from homemake money from your homemake money onlineLearnVestFri, 12 Oct 2012 08:30:00 EST5 Things Your Kids Don't Need to Know About Your Financeshttp://www.dailyfinance.com/2012/09/04/5-things-your-kids-dont-need-to-know-about-your-finances/http://www.dailyfinance.com/2012/09/04/5-things-your-kids-dont-need-to-know-about-your-finances/http://www.dailyfinance.com/2012/09/04/5-things-your-kids-dont-need-to-know-about-your-finances/#commentsFiled under:

teenager and moneyBy Tamekia Reece

You already know why you should have ongoing discussions about money with your child.

It teaches kids to be responsible with spending and saving. They can learn from your mistakes. It sets them on the path for financial success.

On the flip side, your kid doesn't need to know everything you're thinking, at all times, when it comes to finance. "There is no question that bombarding your kids with facts, feelings and information about money all at once, or too early, can be overwhelming for children," says Jaclyn Weitzberg, CFP(R), President of Money MindEd, a financial education company for parents and teens.

So what should you keep to yourself? Below, experts comment on when to stay mum ... and when it's appropriate to share.

1. What You Earn

The first time your kid asks how much you earn, you may freeze. Should you tell her? "It's important to educate your kids about the different salary levels and career choices that can add to higher income, but I don't believe it's necessary for your kids to know exactly how much you're earning," says Weitzberg.

o. Why You Should Stay Mum: First, there's no benefit from it, says Weitzberg, plus, depending on your child's age, whatever number you name may make her think you're rich. "Prior to working, kids often have difficulty wrapping their heads around dollar amounts that are out of their reach," Weitzberg says. "One thousand dollars can seem like a fortune to them, so you can imagine what $35,000 or $100,000 might seem like," she says. And, when kids think their parents have money to blow, they tend to ask for more (and more expensive) stuff. Then you'll face the issue of saying no, which we talked about here.

o. What to Say Instead: Instead of saying, "I make [amount] each month," or, "That's not your business," Betsy Brown Braun, author of "Just Tell Me What to Say: Sensible Tips and Scripts for Perplexed Parents", suggests the following response: "I make enough money so that we can afford to pay all of our bills, pay for the car, and pay for ..." This provides your child enough information to know you are able to take care of him-and you won't have to worry about him spilling your financial business to his classmates. It's also a good opportunity to present your values as a family: Explain the things that matter to you most--like healthy, home-cooked food and enjoying dinner together--and how money helps pay for them.

o. When to Tell the Truth: There's no magical age to reveal your salary-it depends on your child's maturity level and his motivation for knowing, Weitzberg says. Before sharing, ask yourself, "Why does he want to know?" "Once you've answered this question, use your best judgment to decide whether a specific number, an income range or just stories of how you started out and got to where you are today are most appropriate," Weitzberg says.

2. How Much Debt You Have

"Discuss debt to the point where your kids have an understanding of what it is, but the amount that your family may be in debt is unnecessary to disclose," says Ken Damato, founder and CEO of DoughMain, a family financial education website. A dollar amount can be alarming for kids, especially at a young age, he says.

o. Why You Should Stay Mum: Even if you don't give an exact amount, if your child often hears you talking about how high your student loan debt is, how old you'll be when you finally pay off your mortgage or how close you are to losing your home/car/whatever, it could make her feel insecure. Children need to feel like they are safe, and that parents will take care of them.

o. What to Say Instead: Rather than talking about how much debt your family has, Damato says it's better to teach kids about debt in general, and ways to try to avoid or manage it. "First, explain exactly what debt is and how people find themselves in debt-like not paying off credit cards in full," he said. "Then, explain that if you do find yourself in debt, it's very important to work hard to pay it off immediately because the amount grows larger as interest is accrued."

o. When to Tell the Truth: There's never really a time when parents need to reveal their exact amount of debt to kids, says Damato, unless it's of critical importance to the child (as in an adult child will soon be taking care of the parents financially).

3. What Your Family Has vs. Others

Yes, your kid will notice if the neighbor has a pool and you don't, or that his cousins wear super expensive shoes that he doesn't have, but there's no reason for you to point out what your family has compared to others.

o. Why You Should Stay Mum: If your family is lucky enough to be able to afford lots of luxuries, your child may think your family is superior and start bragging. If your family has less, he may feel embarrassed, or may even get mad at you because you don't earn more. Regardless of whether your family has more or less than others, comparisons make a child feel it's important to keep up with (or beat) the Joneses. Kids who pick up this habit tend to have financial troubles as adults, Weitzberg says.

o. What to Say Instead: When your child starts asking why others have things that your family doesn't, you don't have to make excuses, or get offended. "What parents should say is, 'every family has its own way of doing things,'" says Brown Braun. Then, you can explain: "We, as a family, don't choose to spend our money that way. We'd rather save our money to go on a trip, or we'd rather use our money to buy special food for the family." Keeping the conversation about your own household helps your child focus more on what your family is doing, and less on what someone else's is.

o. When to Tell the Truth: There's never really a need to compare your family to others--just keep the conversation about being thankful for what your own family has.

4. What Investing Is

Parents of young children should put this area of discussion on hold. Understanding how investing works can be confusing to some adults, so for children, it can be especially difficult (or impossible) to grasp.

o. Why You Should Stay Mum: If you start talking about stocks, bonds and mutual funds, your child may become overwhelmed and think dealing with money is hard (and boring).

o. What to Say Instead: "When educating your kids about finances, it's important to build financial knowledge in steps," says Weitzberg. She suggests parents start by talking about what money is and how it's earned, then move to concepts like saving and budgeting, then credit and debt, and finally investing.

o. When to Tell the Truth: We have an age-by-age timeline for the money milestones you should teach your kids here, and we suggest an easy way to start introducing stock market concepts in the teen years, at around age 13.

5. Large Financial Losses

Although the reality is there will always be financial ups and downs, experts say too many (or large) losses shouldn't be shared with children.

o. Why You Should Stay Mum: Remember, security and stability are essential to a child's well-being, so if your child hears you just lost $5,000 in the stock market, or you make a comment like, "Well, there goes your college fund" after a loss, it can be worrisome for the child, Damato says.

o. What to Say Instead: When you need to tighten up the purse strings after a setback, there's no need to alarm your child by telling her how much was lost. A simple explanation should work: "We're trying to save a little more these days, so there will be less eating out and going to the movies."

o. When to Tell the Truth: The only time parents should alert a child to a large financial loss is when the child is of working age and it's of critical importance to him, Damato says. "For example, if the child will have to take out college loans because of the family's financial loss, it becomes more important to discuss the issue with him, and then talk about the next steps the family needs to take," he explained.

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]]>financial educationKids and MoneylearnvestLearnVestTue, 04 Sep 2012 10:00:00 ESTHow I Went Bankrupt at 23http://www.dailyfinance.com/2012/05/30/how-i-went-bankrupt-at-23/http://www.dailyfinance.com/2012/05/30/how-i-went-bankrupt-at-23/http://www.dailyfinance.com/2012/05/30/how-i-went-bankrupt-at-23/#commentsFiled under: , ,

Amanda ChatelBy Amanda Chatel

 For as long as I can remember, my father warned me about the dangers of credit cards.

After I got my first job the summer after high school senior year, it became clear just how irresponsible I was with that minimal income. The second I got paid, I would spend it.

It's not as though I was buying anything I needed because at the time I was living at home. However, that didn't stop me from figuring out ways in which I could burn through my funds. As a result, my parents suggested I never ever get a credit card, because it was guaranteed to lead to trouble. "Not only is math not your strong suit," my dad warned, "but you also have zero concept of the worth of a dollar."

He was right.

I was only a few weeks into my first semester of college when a credit card company in the Student Union Building lured me in with promises of "building credit," "learning responsibility," and, more importantly, access to invisible funds that were not mine. I was sold.

I put down my parents' combined income (since I was a student, after all), and received my first credit card a couple weeks later. I didn't tell my parents because I was 18 years old, mature and ready to prove them wrong.

Me and My Card

Being a grown-up means starting a credit history (of course) so I made my first purchase: shoes.

That was fun and easy, I thought.

I waited until my first paycheck -- I had a work-study job -- paid off the shoes in their entirety, then bought some more shoes. With a minimum payment of $15, I decided I could buy lots of things. I also bought clothes. And treated my friends to lunch if they didn't have the money.

Once the pizza place started taking credit card numbers, I ordered pizza for me and my roommate almost every night instead of going to the dining hall.

By the time sophomore year rolled around, I had two credit cards and a couple of thousand dollars in debt.

But hey, I got a part-time job at the Gap, which paid a whopping $8.50 an hour; in other words, I was about to hit the big time. However, working at Gap meant wearing their clothes. Before my first day, I bought several "key" pieces in preparation for my fancy new job.

Retail comes with some major perks, especially if you're a college student who firmly believes you can never have too many clothes. I felt it my responsibility to take advantage of my 50% off regular-priced items and 20% off sale stuff.

Enter: Credit Card Number Three

I got a third card because I was pushing my limits on the other two. I had things to buy, a new gorgeous boyfriend who was an art student in Boston, and someone had to pay for things!

When you're applying for a new card, hey, I figured, just put down your parents' combined income and "pad" it a bit with what you assume you'll eventually be making with your fancy degree in English. Voilà!

A few weeks later, I could feel the sturdiness that comes with a new credit card in the mail. My fella and I would be going to Bella Luna -- a great little restaurant downtown that we college kids usually only hit up when our parents were in town -- this weekend after all!

My monthly minimums between the three credit cards were only around $150. No problem! I had a job, and if I couldn't swing it, I'd call Mom and Dad for grocery money. Problem solved.

... And Then a Fourth

Once I reached senior year, the boyfriend and I had broken up and I was in need of retail therapy that could only be accomplished with a fourth (and final) credit card.

By this time, my parents knew about my cards, my father had done his fair share of yelling and had bailed me out several times for my monthly minimums already. But with my credit balance pushing $18,000, I was only given a $1,000 minimum.

Considering my previous lifestyle, $1,000 wasn't going to cut it. I bought myself some shoes, Grey Goose vodka, pizza and went home to drown my sorrows (with my shoes on, of course, as they cost a pretty penny).

By the time I graduated from college, I was somewhere between $20,000 and $25,000 in debt, thanks to not only my complete and utter lack of responsibility, but also to late fees and ridiculously high interest rates.

What Was I Going to Do About $25,000 in Debt?

My parents had washed their hands of helping me, because I ignored their warnings, and, frankly, it was not their responsibility to help me if I was too stupid to realize what I had done.

True to form, I defended myself: I'm an English major! Numbers are not my thing! Credit card companies are liars! But really, the only person lying to me was myself.

After graduating, once that first college loan kicked in, I knew I had royally screwed myself. Not only was I in debt to the credit card companies, but I was also in debt to the University of New Hampshire for a hefty sum, too.

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I moved back to my parents' house and tried to come up with a game plan. That plan? I was going to finally move to New York City to be a writer!

"You're not going anywhere," said my father. "You're going to get a job here, fix this mess, save up, and then you can do whatever you want with the rest of your life."

"But I can't be a writer in New Hampshire!" I protested.

"You should have thought of that when you were blowing money left and right."

How I Decided to File Bankruptcy

Living at home, I got a job in the admissions office at a local college, which didn't cut it financially, even if I was living rent-free at my parents' house.

So I decided to file for bankruptcy.

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A friend of the family suggested the idea. As the friend, who worked in finance, explained, there was no way I was going to get ahead money-wise if I didn't try to wipe clean the slate of my "youthful mistakes," and start anew.

Initially, I was completely against this, as were both my parents.

But, this friend explained, the debt had gotten so out of control I'd have to start making well over $100,000 stat (and still live with my parents) to just get even with the creditors. All that before I could even start dealing with my student loans!

After the judge approved the bankruptcy, I walked away with a clean slate ... and the inability to have credit cards for the next seven years. It seemed like a fair deal considering what I had done, so I reveled in the weight that had been lifted. I also felt embarrassed it had come to that point.

10 Years Later: What I'm Doing Now

Looking back, I clearly see not only the irresponsibility on my end, but the selfishness. I believed my parents would bail me out, as they always had, but I just kept taking and taking.

A few years after moving to New York City, I applied for a credit card again. Surprisingly, I got it. Before I could get into the same mess again, I bought a couple of things, paid them off immediately and cut up the card. The only credit card I have in my wallet these days is a Bloomingdale's card with a very low minimum that I keep just in case I want to treat myself to something small.

It's been 10 years since I filed for bankruptcy, and although I'd like to be able to say I learned a lesson about money, that would be a bit of a lie.

I did learn that when it comes to money I am, for lack of a better word, an idiot. I have yet to discern the meaning between need and want.

However, as someone who is now completely aware of this, I do make a valiant effort to be wary of how I spend my funds. I make sure bills are tackled first, groceries second, savings third, and only then will I indulge in things I want but don't technically need.

Apparently, people don't need over 30 pairs of shoes. And sadly, for me that has been the most difficult lesson to learn.

Amanda Chatel is a writer based in New York City.


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]]>Amanda ChatelAmandaChatelbankruptcycollege debtCollegeDebtCredit Cardcredit card debtcredit card debt settlementCreditCardDebtCreditCardDebtSettlementfiling for bankruptcyFilingForBankruptcyLearnVestMom and DadNew HampshireNew York CityStudent LoansStudentLoansLearnVestWed, 30 May 2012 11:45:00 ESTHow I Paid Off $27,000 in Credit Card Debt in Two Yearshttp://www.dailyfinance.com/2012/05/18/how-i-paid-off-27000-in-credit-card-debt-in-two-years/http://www.dailyfinance.com/2012/05/18/how-i-paid-off-27000-in-credit-card-debt-in-two-years/http://www.dailyfinance.com/2012/05/18/how-i-paid-off-27000-in-credit-card-debt-in-two-years/#commentsFiled under:

How I Paid Off $25,000 in Credit Card Debt in Two YearsBy Dana Burgess, as told to Gabrielle Karol


I live in Graham, Texas, with my husband and three children, who are 17, 14 and 9 years old. I work full-time at a public school as an "intervention" teacher, helping kids who need an extra push academically with reading and math.

When I first started racking up credit card debt, my husband was running two businesses, which we co-owned: a store that sold farm equipment and an auction company. The farm store wasn't doing so well at the time, so a lot of our money was going toward that business.

I had always been responsible for running the household, so when I didn't have the money for groceries, or for gas, I would just put it on my credit card. And then, occasionally, I would splurge on something and put that on the card as well. In three years, I racked up close to $63,000 in debt. It seems like a lot, but between paying for all the household utilities, food, phones and car payments -- and taking care of three kids -- it all adds up fast!

Dana's Wake-Up Call

My husband found out about one of the credit cards (there were six), and he was very upset about the balance, obviously -- he hadn't known that I had accumulated so much debt. And that was just the tip of our debt iceberg: He didn't even know how much was on the other cards!

Creditors had begun calling the house as well, and that's when I finally realized I needed to gain control over our finances and turn things around. I was so overwhelmed and stressed about it all the time, and I didn't want to be any longer. I had gotten us into this mess, and I knew I needed to make some big changes, for the good of my family.

So, I decided to get aggressive with our finances, trying to earn more while simultaneously paying off debt and learning to live with a whole lot less.

Taking the First Steps

Dana BurgessFrom my work as a teacher, I bring home about $2,900 per month. I set up automatic payments: $1,500 goes to paying off the cards with the highest interest rates, and the remainder goes to utilities, groceries and gas. My husband takes care of the mortgage payments, car insurance payments and extras for the kids like baseball-related expenses for my son, or summer camps, so I'm not responsible for those expenses.

Once I set my mind to paying down our debt, I tried to streamline every aspect of my life. I got rid of our second phone line and cut my gym membership -- I just started walking more for exercise. I used to get manicures frequently, which I cut out altogether, and now I just get my hair cut once a year. We used to eat out as a family, which we no longer do, either.

Plus, I started reading a lot of LearnVest articles, and I watched all the courses, which gave me a lot of good ideas on how to manage my money. I also signed up for email newsletters from a site called 5 Dollar Dinners, which sends coupons each day.

Baking My Way to Earning More

I also started working more outside of my job as a teacher, which allows me to contribute more money to paying off my debts. I sell Mary Kay cosmetics, and I can make between $300 and $400 for a two-hour Mary Kay party. Not bad!

Additionally, I bake cakes for events and weddings. My mother baked cakes so she could earn money while being a stay-at-home mom, and I swore up and down that I would never bake cakes. But when I needed the money, I thought, "I could do that, too!"

I sell little birthday cakes for about $25, and wedding cakes for $3 per slice. One time, I sold a wedding cake for $1,500! All of this extra money I put toward paying off my credit card debts more quickly.

Raising Kids on a Shoestring Budget

When I decided to take charge of my finances, I told my kids that things were tight, and that they would need to start saving up for the little things they wanted. I try not to make them stressed about money, so I won't go grocery shopping if they're with me, because they'll want things that aren't on the list, and that doesn't fit with the budget I need to follow.

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We have them work for us when we run auctions, and we'll pay them so they can buy new clothes or go out with friends. They also do odd jobs for their grandparents to make some extra money. I think it teaches them a lot about saving, and I hope it means they won't ever end up in a mess like I did!

How I Still Manage to Enjoy Life

As of April, I have a little over $36,000 (of the original $63,000) left to pay off.

I'm obviously really committed to paying off this debt, and working these part-time jobs does take a lot of time. But if something good happens, like I sell an expensive cake and can pay off an extra $200 on a credit card, I'll treat myself a little. It's always small, like ordering lunch for $6 or stopping by the Dairy Queen. Now that I'm not used to splurging all the time, even the littlest splurges seem much more special.

And I know that when I finally pay off all of my debt, and can settle my children in at college and help them financially, I'll just feel incredibly relieved. Just thinking about that motivates me to keep going.


LearnVest is the leading personal finance site for women. Need help managing your money? Our free Money Center will help you create a budget. Our free bootcamps will help you take control of your money, cut your costs or get out of debt. And our premium financial plans -- managed by LearnVest Certified Financial Planners -- can help you chart a course for the future you want.

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