Military Finance Network

Options for Refinancing a VA Loan

Ryan — Fri, 12 Mar 2010 17:35:11 +0000

Those who served our nation have access to one of the most powerful home loan programs on the planet, the VA loan. That also includes a couple of the most flexible and financially beneficial refinance programs available to consumers.

Cash-out refinancing loans and interest rate reduction refinancing loans (IRRRL or VA streamlines) are two primary, VA-guaranteed options for veterans looking to lower or reorganize their VA loan payments.

Cash-out refinancing loans

Veterans in need of refinancing a lien against their home can pursue a cash-out refinancing loan. Lenders will conduct a full appraisal and credit check, but veterans could receive a loan amount that is 100 percent of the appraised value. Should the loan amount exceed the amount needed to pay off the lien, veterans can take the difference in cash pending the lender’s approval.

Interest Rate Reduction Refinancing Loans (IRRRLs)

While cash-out refinancing requires veterans to take out the loan on their primary residence, IRRRLs only require the borrower prove prior occupancy of the property. The major benefit of IRRRLs is refinancing a VA loan at a lower interest rate. Borrowers can either reduce the original VA loan’s interest rate or convert a VA adjustable rate mortgage (ARM) loan to a fixed rate. Unless borrowers are converting an ARM loan, the monthly principal and interest will decrease.

Lenders may require an appraisal, credit check and underwriting, but the VA does not require these for IRRRLs, thus reducing paperwork for veterans. As an added IRRRL perk, veterans can add up to 10 years to the original loan term, as long as the total does not exceed 30 years and 32 days.

Just like VA loans, these refinancing options offer advantages to veterans that conventional options don’t match.

For more information on VA loan refinancing options, visit www.vamortgagecenter.com.

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Is Military Retirement Pay Enough to Retire On?

Ryan — Wed, 10 Mar 2010 14:55:38 +0000

Military retirees have one of the best pension plans in the US. After only 20 years, military retirees can retire with 50% of their basic pay, full medical coverage, and a slew of other benefits that will stay with them throughout the remainder of their lives. It is not a stretch to say that a military retirement is worth millions over the life of the retiree.

Considering that one can begin receiving retirement benefits around age 40 and potentially receive the benefits for another 40 years or more, this is an extremely good deal. But is it enough to live off for the rest of your life?

Can you live off military retirement?

For most people retiring from the military services after 20 years, the answer is most likely “no.” A military retirement is fairly generous compared to most civilian retirement plans, and can even be worth millions over the life of the retiree. However, the immediate cash flow is probably not enough for most people to retire immediately, especially for many retired enlisted military members who bring in $20,000-$30,000 per year.

Living on military retirement pay becomes even more difficult if you have a mortgage, credit card debt, a car loan, and other regular payments. I many cases, a military pension is a great financial blessing, but it may not be enough to live on.

Making it work – living off military retirement pay

Not everyone can make a living from a military pension, but there are some people who are able to do it. One example is a couple who both retired from the military and had their story featured in CNN Money. They both are military retirees who will receive a combined $58,500 per year in military retirement pay, in addition to other military retiree benefits such as medical care. This is not a bad sum of money for not doing anymore work for the remainder of their lives!

Even with their retirement pay and health benefits, there are some potential roadblocks to their plan not to work anymore. Their retirement pay currently covers their fixed costs including their mortgage and other regular bills. But it won’t give them a lot of freedom if they need to support their children through college, or have many unexpected large expenses arise. Even something like taking a family vacation will need to be carefully planned.

I think it may be possible for them to do it, but I imagine that after awhile they will want to find some source of work to keep them occupied. It may not be a traditional 9-5 job, but it may be a part time job, or a hobby that provides them income.

The most important thing about their situation is this: their military retirement pay and benefits are giving them the option and freedom to decide whether or not they work. The freedom of bringing in $58,500 per year without doing anything else gives them the opportunity to work, or choose more rewarding work if they decide to do that. That is a beautiful thing!

How to stretch your military retirement pay

The key to being able to retire on your military pension is paying off as many loans and credit cards as possible before you officially retire from the military. Debt is the quickest way to enslave yourself and tie up your future pension checks. But eliminating your debt gives you the opportunity to use your money for more important things, such as your regular living expenses, vacations, and other enjoyable activities.

Another important factor in military retirement is the addition of other sources of retirement funds, especially those which will be available to you later, when inflation erodes the relative value of your military retirement pension. That is why it is important to open a Roth IRA, Thrift Savings Plan, or other investments. You can open a TSP account through your military pay unit or you can check out the best IRA brokerages for good places to start your civilian retirement plan.
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A Military Retirement is Worth Millions of Dollars

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A Military Retirement is Worth Millions of Dollars

Ryan — Thu, 04 Mar 2010 15:22:05 +0000

That’s a bold headline, especially if you a retired enlisted military member only bringing in a little over a thousand dollars a month in retirement pay. But it’s true. A military retirement is worth well over a million bucks. In some cases it is worth millions of dollars.

Before we get too deep into this, I want to define what I am talking about. I’m talking about two factors – the long term value in regard to how much you will receive in direct pension over the lifetime of your retirement benefits and the value of the retirement benefits including healthcare coverage, and other benefits. Combined, these benefits are easily worth over a million dollars, even if you don’t have the spending power of a million dollars right now.

How Much is Military Retirement Really Worth?

Let’s look at an example of retirement pay for an average military career. Since military members are eligible for retirement benefits at 20 years, we will use a reasonable rank and service time for our examples.

It is reasonable to assume that the average enlisted member will be able to retire at 20 years having achieved the rank of E-7, and the average officer should be able to retire at 20 years at the rank of O-5. Of course there will be outliers based on when you served, your career field and other factors, but these ranks and service times should apply to the majority of careers (if anything I am aiming on the conservative side because many people choose to serve longer than the 20 year mark, earning an extra 2.5%-3.5% on their retirement pay per additional service year, depending on whether they take the high 3 retirement plan or the Redux retirement plan).

Example Monthly and Annual Military Retirement Pay

As we mentioned, we will look at a military retiree with 20 years service at the ranks of E-7 for enlisted and O-5 for officers. The base pay for these ranks in 2009 is:

E-7 Monthly: $3,995.40

E-7 Annually: $47,944.80

O-5 Monthly: $7,697.40

O-5 Annually: $92,368.80

Most retirees at 20 years will receive 50% of their base pay, which would equal the following amounts:

E-7 Monthly: $1,997.20

E-7 Annually: $23,972.40

O-5 Monthly: $3,848.70

O-5 Annually: $46,184.40

How much is Military Retirement Pay Worth Over a Lifetime?

The next factor to consider is that military retirement pay will be there day in and day out. There are few places in the world that someone can receive a lifetime pension starting at or around age 40. Many military retirees will receive a monthly cash payment for over 40 years. When you add in cost of living adjustments and inflation adjustments, we’re talking about some serious cash!

Using the numbers above from a recently retired E-7 or O-5, we get the following lifetime payments (note: these military retirement pay numbers are not adjusted for inflation and do not include any COLA increases; this is not a planning tool, but for illustration purposes only. Your specific retirement benefits will vary based on your situation):

E-7 retirement pay for 20 years: $479,448.00

E-7 retirement pay for 30 years: $719,172.00

E-7 retirement pay for 40 years: $958,896.00

O-5 retirement pay for 20 years: $923,688.00

O-5 retirement pay for 30 years: $1,385,532.00

O-5 retirement pay for 40 years: $1,847,376.00

Even without COLA or other inflation adjustments, we can see that we are reaching some serious numbers. Each additional year you serve before you retire can add another 2.5% to your monthly and annual pay, and each higher pay grade you achieve can add hundreds, or even thousands of dollars per year. As previously mentioned, the numbers used in this article are meant to be a conservative estimate.

Value of Military Retirement Medical Benefits

OK, there is a minimal TriCare payment, but compared to what civilians pay, it is basically a non-issue. Benefits for retired military members are also guaranteed – they won’t drop you after you have required expensive procedures or for pre-existing conditions. Guaranteed medical coverage is a huge blessing in today’s American society. Here is a little more information about kinds of insurance available to civilians: comparing individual and group health insurance. Hopefully that will hep you better understand the value of military retiree medical benefits!

Military sponsored medical benefits are incredibly valuable, especially as you get older and when they cover your spouse. There are very few civilian plans that are similar to this. Most people spend several thousand dollars per year for basic medical coverage, and this doesn’t include out of pocket expenses for doctors visits, medical procedures, prescription medication and other associated costs. It would not be unreasonable to place a value of $10,000 per year on military retiree medical benefits, even for a healthy individual. Add a spouse to the benefits, guaranteed coverage, little to no out of pocket expenses for complex medical procedures, and other factors, and the medical benefits alone can be worth hundreds of thousands of dollars or more over the course of a lifetime (and in some instances, into the millions of dollars for people who receive complex medical care over a long term period).

Commissary, Base Exchange, and other Base Benefits

I won’t even try to assign a value to these benefits because they don’t apply to all military retirees equally. Some people may practically live on base, visiting the base clubs, shopping at the exchanges, using the gyms, auto hobby shops, etc. and other people may not live near a base and may not be able to take advantage of any of these benefits. So this category falls in the “good deal if you can get it” benefit, but not a core part of the equation. But it is still worth mentioning because many retirees save a lot of money each year by shopping on base.

Your military retirement is worth millions

Thousands of dollars coming in on a regular basis quickly add up over the years. Add in increases for inflation, essentially free health care, and other benefits and you can see how the value of a military retirement can quickly be worth millions of dollars over a lifetime.

I didn’t stay in long enough to qualify for military retirement benefits – I separated from the USAF with an Honorable discharge after 6.5 years of service. Part of me looks at the military retirement system with a bit of longing. It is a great system for those who qualify and I would love to be able to receive military retirement benefits for the rest of my life. However, separating from the military was the best move for me at the time and I have no regrets regarding my separation or my military service. I am proud to have served and the military is a large part of who I am today.

*disclaimer about this article: The calculations are for illustrative purposes only and do not reflect the exact retirement benefits you will receive. This is a simplified look at military retirement benefits and does not take many factors into consideration, including taxes, disability benefits, inflation, COLA, and other factors.
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A New Commander at Military Finance Network

Ryan — Mon, 01 Mar 2010 20:48:30 +0000

If you look closely, you will notice that Military Finance Network has a new author listed for all of the articles. What’s going on, you might ask? Well, we’re having an unofficial change of command ceremony. It’s unofficial because the author is actually the same person that has been here all along. For the last few years I have been using my middle name as an online pseudonym for my blogging endeavors.

Blogging under a pseudonym

Lot’s of folks use a pseudonym online. I started it when I began writing my other personal finance blog, Cash Money Life. When I started blogging I was new to online communities. I primarily used the internet for e-mail, shopping, and online banking. I was unsure about creating a website that deals with financial topics and using my real name. I thought it might make me a target for identity theft or give friends and coworkers too much information about my financial situation. There were also many other bloggers who were anonymous when I started blogging, so I thought that even if it wasn’t what everyone did, it was acceptable. And it was, and still is acceptable to be anonymous online. But I have reached the point where I prefer to use my real name.

Why I chose to use my real name

The main reason I am now using my real name online is for transparency. I want people to know the information they are reading is coming from a real person and not an anonymous “internet writer.” There are other reasons for the change as well – juggling two identities was cumbersome. I had to use my real name when dealing with advertisers and other professional interests, then use my middle name for writing, answering comments, and other issues. Explaining the use of two names was tiresome for me and confusing to some people I dealt with.

What changes?

Nothing. I am still drawing on my military and personal finance background to offer you information that will be helpful to your financial situation. The focus will be core financial concepts and military and veteran benefits programs to help you maximize the money in your wallet.

Should you blog anonymously?

This is a broad question with a lot of ramifications. Before jumping in, look at your situation, what you will be blogging about, your goals, and other factors such as your work arrangements, policies at work, intended audience, etc. I wrote more in depth about the topic at Cash Money Life, and you can read my thoughts on blogging anonymously for more information.

As always, feel free to reach out with questions or comments and I will get back to you as quickly as is reasonable. Thanks for reading, and thanks for your service!
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How to Use a Credit Card to Build Your Credit Score

Ryan — Fri, 19 Feb 2010 16:13:38 +0000

My first experience building credit was with a credit card that I opened while I was attending college. Thankfully, I avoided the classic college mistake of maxing out the card in the first month of ownership, then living with debt for the next 10 years. My goal was to apply for the credit card, make a several hundred dollar purchase, then pay off the loan over a couple months to prove I was capable of making regular payments. I paid a few dollars in interest charges over the time I made those payments, but in my opinion, a few dollars in finance charges was well worth building my credit history and credit score.

It has been well over ten years since I opened my first credit card and I haven’t made a finance charge on a credit card since then. That experience and several other successful loans since then have helped me build a high credit score and a favorable credit history.

Using credit cards to build credit history and credit score

Credit cards aren’t the only way to establish your credit history, but they are usually the easiest way to create a credit history because it is usually easier to open a credit card than other forms of credit such as a car loan or mortgage (lenders are less likely to lend that much money to someone who doesn’t have any credit history).

Once you have established a line of credit, your actions are reported to the credit bureaus which begin recording your credit history on your credit report. Over time, your actions will be used to determine your credit score. Here is more information about the difference between credit report and credit score.

No credit or poor credit? If you are having trouble getting approved for a credit card, then you should check out secured credit cards, which require a deposit and sometimes come with an annual fee. The deposit works as collateral for your charges and if you don’t make on time payments, the bank will use your deposit to pay your charges. Secured credit cards cost a little more than traditional credit cards, but they often come with guaranteed approval and with proper use will help you improve your credit score. After proving your ability to make payments, you can often upgrade your secured credit card to a non-secured card that has a better interest rate and doesn’t come with annual fees.

Important notes about building credit with a credit card

Getting a credit card can help you build your credit so long as you treat it responsibly – otherwise you are only going to hurt your credit score. Credit cards can be a trap for some people, so it’s best to make sure you only make charges you can and will pay in full each month. Otherwise you may find yourself getting into a cycle of debt that is difficult to escape from.

Tips to establish your credit and increase your credit score:

Understand how your credit score works.

Only charge what you can pay with cash.

Pay your full credit card bill each month.

Repeat the process.

Add time.

The key to establishing a good credit history and credit score is being able to prove that you are responsible and can continually pay loans that you receive. There is no silver bullet to improving your score quickly; it takes time and commitment.
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Why Military Members Should Open Roth IRAs

Ryan — Tue, 16 Feb 2010 14:56:29 +0000

Military members have one of the best pension plans in the US. After 20 years of service, military members can “retire” with a 50% pension. The percentage can go higher if members are willing to serve more time. But you’ll notice I put quotes around the word “retire.” For most military members, 50% of their pay will not actually be enough to maintain their standard of living throughout retirement. It is a great start, but it usually isn’t enough. Then you need to consider that most military members never complete the 20 years needed to receive military retirement benefits.

For these reasons, it is essential that military members take retirement planning into their own hands. And one of the best ways to do that is to contribute to your own retirement accounts that you can take with you anywhere you go – regardless of whether you remain in the military or separate from the service. One of the best plans most military members are eligible for is the Roth IRA, an individual retirement account that offers great tax benefits.

The benefits of investing with a Roth IRA

The Roth IRA is one of my favorite retirement account options because it offers great future tax benefits. Contributions to a Roth IRA account are not t ax deductible like a Traditional IRA, meaning you don’t get a tax break the year you make the contribution. But the benefit is that Roth IRA contributions come from money that has already been taxed, and it will grow without the drag of taxes until you make withdrawals in retirement. Provided you meet age or other requirements, you will not pay any taxes on your withdrawals.

Why military members should get a Roth IRA

In addition to the tax benefits mentioned above, there are three more reasons why military members should consider opening a Roth IRA as a retirement planning option. Military members can make Roth IRA contributions with non-taxable income making their contributions and withdrawals tax free, the can receive extensions to make contributions, and they often have lower tax brackets than their cash flow would suggest.

Contribute to Roth IRA with non-taxed combat pay. IRS rules require Traditional and Roth IRA contributions to be made from income that was subjected to federal income tax. This made it impossible for some service members who received non-taxable income from designated war zones ineligible to contribute to Roth IRAs. However, the The Heroes Earned Retirement Opportunities Act was signed into effect a few years ago (and and made retroactive to years after 2003), which makes it possible for military members to contribute to a Roth IRA, even if they did not pay federal income tax on their income.

This is a huge benefit because one of the requirements for contributing to a Roth IRA is using income that has been subjected to federal income tax. As we saw earlier, post tax money is contributed to a Roth IRA and withdrawals are made tax free. The HEROs Act makes it possible for some military members to contribute funds to their Roth IRA that has never and will never be taxed.

Additional time to make contributions. Military members who deploy to an overseas location may have additional time to contribute to their Roth IRAs. Roth IRAs already have a generous contribution deadline: You can contribute anytime from the beginning of the calendar year to the tax deadline. For example, you can contribute for a Roth IRA for the 2009 year anytime between January 1, 2009 and April 15, 2010. Military members who deploy may have a longer extension on top of this. Military members and their spouses may qualify for a deadline extension of up to 180 days after they return from a combat zone, hazardous duty area or certain other deployments. The extension doesn’t just apply to IRA contributions, but also to filing tax returns, paying taxes, and claiming a tax refund.

Lower tax brackets. Most military members actually receive more income than their taxable earnings would lead you to believe. Take, for instance, the BAH, BAS, and other non-taxable benefits you may receive. Depending on your rank and location, you could easily bring in $1,000-$2,000 per month in non-taxable income. These funds also don’t count toward your current tax bracket, meaning you are probably in a lower tax bracket than someone else with comparable “total” income.

This is a great opportunity to pay taxes at your current “low” tax bracket, make contributions to your Roth with post-taxed income, enjoy the compounding of your contributions without the drag of taxes, and make tax free withdrawals in retirement. Contributions to a Roth IRA when you are in a low tax bracket almost always beat contributing to a Traditional IRA because the future tax break will almost certainly be worth more than the current tax break offered by a Traditional IRA.

Opening a Roth IRA

Roth IRAs are flexible retirement plans that offer individuals the opportunity to invest in almost any form of investment. Roth IRAs are easy to open and transportable; you can transfer your Roth IRA to another bank or brokerage firm if you ever decide you want to move your money elsewhere. Here is a list of the best places to open a Roth IRA. You can also check with your current investment provider to see if they offer Roth IRAs.
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VA Loan Eligibility and Financing

Ryan — Thu, 11 Feb 2010 10:25:49 +0000

This is the third in a series of posts about VA loans. Military homebuyers across the country continue to flock to VA loans. These flexible, low-cost loans have helped almost 20 million veterans become homeowners since World War II.

The government guarantees about a quarter of a borrower’s mortgage, giving approved lenders a greater degree of security. In turn, that security often leads to excellent loan terms for qualified veterans.

On the whole, VA loans are typically easier to qualify for than conventional loans. They also come with some significant financial benefits. Despite that, only a fraction of the nation’s 24 million veterans have taken advantage of their VA loan benefits.

What’s worse is that a whopping 20 percent of veterans don’t even know the program exists, according to a 2004 study by the Department of Veterans Affairs. The reality is that millions of Americans already qualify for these high-impact loans.

Qualifying for a VA loan

The VA has some initial criteria that prospective borrowers must meet in order to continue with the process. At this time, those considering a VA loan must be:

Military members who’ve served 181 days on active duty or three months during war time may be eligible.

People who have spent at least a half-dozen years in the National Guard or Reserves.

Spouses of those killed in the line of duty.

Those who fall into one of those categories must then fill out a Certificate of Eligibility, or COE. This is an official VA document that basically certifies your ability to participate in the program. Applicants can obtain these through the VA directly or through a VA broker.

VA officials look over the Certificate of Eligibility and ultimately determine whether a prospective borrower can participate.

The VA Loan Guaranty Program doesn’t have explicit income or credit standards to qualify. But the VA does not issue loans — it guarantees them. VA-approved lenders will require a credit score of at least 620.

VA Loan Limits

The VA uses a loan limit system that limits how much a participant can borrow with a VA guarantee. Throughout most of the country, qualified borrowers can get up to $417,000 without putting down a single dollar.

That limit is higher in some of the nation’s more expensive housing markets.

Except in those high-cost areas, VA borrowers looking for a house that costs more than $417,000 must cover the difference out of pocket.

For more information about VA Loans eligibility and financing, visit www.vamortgagecenter.com.
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Should You Use a HELOC to Consolidate Credit Card Debt?

Ryan — Tue, 09 Feb 2010 15:52:45 +0000

Credit card debt can be a budget killer, especially with many credit card companies raising interest rates.It’s not uncommon for credit cards to come with interest rates around 15% or higher. It can take 10 years to pay off your credit card debt if you only pay the minimum on each card. Even if you pay extra on your cards it can take years.

The best way to get rid of credit card debt is a combination of lowering the amount of interest you pay and paying extra on your credit cards. I recently had a reader contact me about using a Home Equity Line of Credit (HELOC) to consolidate his credit card debt so he can pay it off more quickly. Below is his question, some pros and cons to using s HELOC to consolidate credit card debt, and some alternative options.

Should I use a HELOC to consolidate credit card debt?

I was on your website and was reading your information about HELOCs and other vehicles that can help to secure / pay off unsecured credit card debt. I am fortunate in the fact that my house is paid off in full and last year appraised at about 450k. That said, I have about 34k in credit card debt that is eating me alive. Is there a way for me to borrow against the full equity I have in my house to pay all the credit cards off? I want to make a wise choice and not a foolish one. Please let me know what my options are.

Thanks, Chris

Chris, thank you for reading my blog and contacting me.It’s awesome that you eliminated your mortgage, and hopefully you can eliminate your credit card debt. The following is giving general information, not recommendations. Always do your research before making important financial decisions.

Pros and Cons of using a HELOC to consolidate Debt

HELOCs are a flexible line of credit. They are always open, which means you have access to the equity in your home at any given time. Their flexibility makes them a great option for debt consolidation, home improvements, or an emergency source of funds. The interest rates are also usually affordable, often coming around 5% or so.

While there are many benefits and uses for HELOCs, there are also associated cons to using a HELOC. The biggest downfall is that you are tapping home equity; if you default on the loan, the bank can take your home. Because you are laying your house on the line, you need to make sure you have the cash flow to cover the loan.

Best debt consolidation options

The most important things to look for when doing your own debt consolidation plan is the interest rate, whether or not the debt is secured, and flexibility. Your credit cards are currently unsecured loans, meaning the banks can’t repossess anything if you default on your loan. A mortgage or HELOC would be a secured loan, as would a car loan, meaning the lender could repossess the item if you default.

o% balance transfer credit cards. 0% balance transfers allow you to transfer your credit card debt to a 0% interest credit card. There is usually a 3-5% fee to do transfer your credit card debt, but you lock in 0% interest rates for up to 12 months. This is an incredible deal if you can pay off your credit card debt in that amount of time, and will probably save you the most amount of money in the long run. You can save a lot of money with 0% balance transfers.

HELOC. The next option to save the most amount of money is a HELOC, which usually has an interest rate around 5% or so. The downfall is that your debt is secured with your home, so if you don’t want to default!

Personal line of credit or P2P loan. You may be able to get a personal line of credit through your bank, or you may be able to get a peer to peer loan through a company such as Lending Club or Prosper, which both allow regular folks to loan people money for things like paying down credit cards at a lower interest rate. The interest rates are generally a little higher than HELOCs, but are lower than most credit cards.

Change your spending habits!

All of these ideas can help you save money, but the most important thing to do is to change your spending habits in regard to credit cards. You will not be able to pay your credit cards off quickly if you continue adding debt to them. Make the commitment to no longer using your credit cards, then consolidate your credit card debt to a lower interest rate. Then begin aggressively repaying your loans to get them eliminated as quickly as possible. Once you have completely eliminated your debt you will enjoy a much higher monthly cash flow and you can begin watching the power of compound interest work for you, not against you!

Best of luck, and I hope you are able to pay of your credit card debt soon!
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Which Types of Insurance Do You Really Need?

Ryan — Thu, 28 Jan 2010 15:10:27 +0000

If I told you it was a good idea to spend money on something you may not ever use, you might think I was giving bad advice. While it seems like it might be bad advice, it is actually one of the best pieces of advice I can give you. I’m talking about insurance, which after your mortgage and auto/transportation expenses, is probably your largest monthly expense.

Insurance is one of the few products I will gladly buy, knowing full well I may never use it. Why? Because I know that if I need it, it’s there, and it will hopefully prevent me from going broke.

Which types of insurance do you need?

Health insurance. Health insurance is one of the most essential forms of insurance you can buy. Just one hospital trip can run thousands of dollars, and a major illness can run tens of thousands or higher, depending on the necessary treatments.

To save money on health insurance, consider your needs and find a plan that gives you the maximum coverage at the best price. Consider looking at Individual Health Insurance vs. Group Health Insurance, a Health Savings Account, or Self-Employed Health Insurance

Auto insurance. If you own a car, then you are probably required to have a basic amount of car insurance, whether it be full coverage or liability only. To save money on car insurance, you should only have full coverage if your car is valuable or you still have a loan on it. You can also raise your deductible to save on auto insurance rates

Homeowners or renters’ insurance. Homeowners insurance is required if you have a mortgage on your property, as it protects the bank’s investment in you. You can save money on homeowner’s insurance premiums by increasing your deductible, combining other policies through the same provider, enhancing home security, and shopping for low rates.

Renter’s insurance is an often overlooked, but is a necessary form of insurance. Most people don’t realize they can purchase renter’s insurance for just a few dollars per month (I paid $120 per year for my last policy). Your rates may vary, but that is too inexpensive for the coverage and peace of mind you receive.

Life insurance. If you are single and don’t have anyone relying on your income, then you may not need life insurance. But if you have a family or other financial dependents, then life insurance is essential! There are many methods to determine how much life insurance you need, so I won’t cover that in this article. There are also several types of life insurance, including term life, whole life insurance, and variable life insurance policies.

Disability insurance or long term care insurance. These two forms of insurance are often overlooked, especially by younger individuals. But disability insurance can help you protect your most important asset – yourself. Many people also wonder if they need long term car insurance. Again, it comes down to many factors, but you should strongly consider it as you get older, especially if you have family history of health problems or are at high risk for certain health issues.

Specialized insurance. Consider your overall financial needs, and consider an umbrella policy or other special insurance program that can cover you in certain circumstances. You may also consider liability insurance if you own a business.

Types of insurance you don’t need

Mortgage protection life insurance. Mortgage protection life insurance is similar to a term life insurance plan, but only pays out the balance of your mortgage in the event you die. Why is it a bad idea? Because you receive less coverage as you pay down your mortgage, but your premiums remain the same (essentially paying more each month for a lower payout). Many people would be better off just buying a larger term life insurance plan.

Pet insurance, travel insurance, and others. Many additional forms of insurance are sold as add-on that are sold to people who haven’t planned their needs and are caught off guard when the insurance is offered. As with all things, do your research so you know exactly what type of insurance you are receiving, how much it costs, and whether or not it is really necessary.
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Check Your Credit Report Often

Ryan — Sat, 23 Jan 2010 01:40:51 +0000

Your credit report is one of the fundamental financial documents that represent your overall financial health. Your credit report is used whenever you apply for a loan, credit card, mortgage, and sometimes even a job or security clearance. Having a clean credit report, and a high credit score can save you thousands of dollars in interest over the life of a loan, and make it easier for you to be approved for a loan request.

What many people don’t know is that your credit report can be used to help you monitor your financial situation and detect identity theft. Because your credit is linked to so many aspects of your financial life, I recommend checking your credit report often – to verify accuracy of your credit report and help monitor for identity theft and other credit fraud.

Check your credit report often

Problems with your credit or fraud can cause huge problems if left unattended. The more quickly you detect an inaccuracy or fraud, the easier it is to get the problem taken care of. Because your credit report and credit score are so important, it is imperative that you ensure they are accurate. Thankfully, you can get a free copy of your credit report from each of the three major credit bureaus once per year from AnnualCreditReport.com. You should note that the free credit report does not come with a free copy of your credit score, but I will show you how to get that later in this article. Before we go further, let’s look at why you should monitor your credit report and examine some common errors found on credit reports.

The need to monitor your credit report

Your credit report is a historical list of each credit account you have ever opened or been listed on. Inaccurate information can cost you thousands of dollars – either from a lower credit score than you should truly have, or by not noticing when someone steals your identity and racks up thousands of dollars in debt in your name. Checking your credit report often will notify you quickly if there are any inaccuracies or other problems that need to be taken care of.

Reasons you should check your credit report often:

Accurate listings

Fraud detection / prevention

To work on improving your credit score.

Monitor for inaccuracies on your credit report

Mistakes happen. Some of them are honest errors, but some of them may be a more serious indication of fraud. Go through each line item thoroughly to verify it is a credit account you opened, and that the information is still accurate. It is not unheard of for information to be transcribed incorrectly and to see someone else’s information on your credit report. For example, if they have the same name or a similar Social Security Number. Look for some of these common errors and contact the credit bureau if you notice any errors or fraud.

Common credit report errors:

Inaccurate personal info. Name, Social Security Number, address, etc.

Inaccurate/outdated account info. Recent account closures, credit limit changes, etc.

Inaccurate listings for delinquencies or missed payments. Provide proof of your payments with bank statements or canceled checks.

Missing Accounts. Verify each account you have open is listed.

Duplicate Accounts. Double check that no accounts are listed more than once.

Phantom Accounts. Phantom accounts belong to someone else or don’t exist at all. These may be more common if someone has a with a similar name or Social Security Number as you.

Negative line items more than 7 years old. Your credit score should usually only list items that are within the last 7 years.

How to check your credit report for free

You can get a free copy of your credit report from each of the three major credit bureaus one time per year. To get your free credit report, simply go to AnnualCreditReport.com and sign up for your free credit report offer. Be sure to watch out for the “upgrades” that offer to sell you your credit score. We’ll show you how to get that in just a moment.

To maximize your value, get your credit reports 3 times each year (one every 4 months from a different credit bureau each time). For example, get your free credit report from Equifax, wait, get it from Experian, then TransUnion. You can also add your spouse or significant other to the mix, which will help you monitor his/her credit report as well as monitor any joint credit accounts you may have. In that scenario you can get a free credit report as often as every 2 months.

How to get your free FICO Credit score

While your credit report is free from AnnualCreditReport.com, your credit score is not. You have the option of buying it at a discounted price when you get your free credit report, or you can easily get your free FICO credit score by signing up for a free trial with a credit monitoring service, then cancelingit before the free trial period ends. The free trials usually last 7 – 30 days, which is plenty of time to save a copy of your credit report and credit score. It is the easiest way to get a free copy of both your credit report and credit score.
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