Connect with us

Bad Credit

Here’s What Bad Financial Advice Costs You

Published

on

Good financial advice leaves you better off. Bad advice does the opposite, and may even enrich someone else at your expense.

Here are some areas where you need to be particularly careful to seek out good advice, since bad advice can be so costly.

Investing

Most financial advisors aren’t required to put your best interests first. They’re allowed to recommend investments that cost more or perform worse than available alternatives. Why would they do that? Because the inferior investments pay them or their employers more than the better ones.

This kind of conflicted advice takes a heavy toll. White House economic advisors estimated in 2015 that conflicted advice cost Americans $17 billion a year and resulted in losses of one percentage point per year for affected investors.

One percentage point may not seem like a lot, but over time it adds up. Someone who contributes $5,000 a year to a retirement fund could have nearly $1 million at the end of a 40-year working career if the average net return is 7%. If higher costs reduce the return to 6%, the nest egg would total about $775,000.

Look for advisors who are fiduciaries, meaning they are required to put your interests ahead of theirs. You might also consider a robo-advisory service, which uses computer algorithms to design investment portfolios at low cost.

Financing college

The second-worst piece of college financing advice is “Don’t worry about the cost.” The worst? “College isn’t worth the cost.”

Education still pays off in higher lifetime earnings and lower unemployment. Someone with a high school diploma could expect to earn $1.3 million over a lifetime, according to research by the Georgetown University Center on Education and the Workforce. Someone with a bachelor’s degree can expect to earn $2.3 million. Unemployment rates are currently 2% for those with bachelor’s degrees and above, and 3.7% for high school graduates. Those rates peaked in 2009, just after the last recession, at 5% for college graduates and 11% for high school grads.

Rather than skip college, skip the costly debt. Limit your borrowing to federal student loans, which typically max out at $31,000 for undergraduate education.

Claiming Social Security

More than one third of Social Security recipients start benefits at the earliest opportunity, which is age 62. Fewer than 4% wait until age 70, when benefits max out. But starting Social Security at 62 can cost people up to $250,000 in lost benefits, according to a study for the National Bureau of Economic Research.

Unfortunately, many people don’t get good advice before they claim. Even Social Security itself may not be a good source, since its representatives have been known to steer people wrong.

Social Security claiming calculators, such as the free one at AARP’s site, can help you determine the lifetime impact of starting benefits later. If you have substantial retirement savings, you also should consider consulting a fiduciary financial planner about the best ways to coordinate Social Security claiming with retirement plan withdrawals.

Managing your credit scores

You may have heard that you don’t need to worry about your credit scores because they’re not important or because they’ll be good as long as you handle money responsibly. Neither is true, and having bad scores can cost you tens of thousands of dollars over your lifetime.

People with credit scores of around 720, for example, could expect average mortgage interest rates of 3.67% on a 30-year, $300,000 mortgage, according to Informa Research Services Inc. The monthly payment would be about $1,374. People with 620 scores, on the other hand, average 5.03% or $1,616 a month. That’s a difference of $86,891 over the life of the loan.

Similarly, someone with 720 scores could expect to pay $5,000 less on a six-year, $30,000 car loan than someone with 620 scores.

Higher interest rates aren’t the only cost. Bad credit also can cause you to pay more for insurance, make it harder to get an apartment and cause you to miss out on the best cell phone promotions.

This article was written by NerdWallet and was originally published by The Associated Press. 

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

Evicted California renters at greater risk of getting COVID-19

Published

on

After 70 years in Monterey County, 87-year-old Mary Martinez moved in the middle of a pandemic, evicted from her modest one-bedroom, second-floor apartment at 1118 Parkside St. in north Salinas.

According to her former landlord, Martinez was evicted because she allowed a “violent man” to live with her, violating the conditions of her lease. Martinez said the man is her epileptic nephew.

Advocates say that while evictions like Martinez’s are rarer during the pandemic, landlords are feeling the financial squeeze. Some have sold rental properties to make up for lack of income. That can leave renters out in the cold when their new landlord raises the rent by hundreds of dollars or requires all renters move out before they take over the building.

Source link

Continue Reading

Bad Credit

New program to help Black-owned online businesses | Technology

Published

on

ATLANTA _ Many Black entrepreneurs struggle to get bank loans and professional help to launch new businesses. A new program aims to remove those stumbling blocks.

An Atlanta nonprofit and another business have committed $150 million to the 1 Million Black Businesses effort, which will make loans and provide financial and business advice to Black-owned startups and established small businesses. Atlanta-based nonprofit Operation Hope, which helps consumers improve credit scores, is kicking in $20 million, and Shopify, the online e-commerce is adding another $130 million for the loans and website-hosting services.

Other services firms providing expertise or help include Aprio, an Atlanta-based accounting firm, and First Horizon Bank.

It’s a package of products that many Black entrepreneurs couldn’t get through a bank or credit union, said John Hope Bryant, CEO of Operation Hope.

“A bank won’t lend you money unless you can prove that you don’t need it,” Bryant said. “That’s especially true with minority-owned small businesses.”

Small businesses with Black owners were half as likely to obtain business loans as whites, according to a Federal Reserve survey published earlier this year.

The initiative is the latest effort to help Black consumers and businesses enter the financial mainstream. Earlier this month, a group that includes rapper Killer Mike opened a digital bank aimed at Black and Latino consumers.

Banks and credit unions have tried for years to help Black consumers open checking and savings accounts. The efforts helped, as the number of U.S. households without bank accounts fell to 5.4% in 2019 from 6.5% in 2017, the Federal Deposit Insurance Corp. said Monday.

Consumers who own checking and savings accounts typically have access loans with better rates and a wider variety of financial services.

The federal government’s $660 billion loan initiative for businesses hit by COVID-19, the Paycheck Protection Program, also helped few Black-owned businesses, Bryant said. PPP loans were based on a company’s number of employees and its rent obligations. many Black-owned small businesses typically didn’t have enough workers to qualify and are based out of the owner’s residence.

Bryant said a bad credit history may not prevent applicants from receiving a loan.

He hopes more companies will contribute services such as insurance advice or software typically available only to well-established businesses.

Bryant noted that 1MBB is not a charitable organization, as participating companies like Shopify will likely get a pipeline of new business customers through the program.

“This is not pure philanthropy,” he said. “Shopify believes that Black-owned businesses are good businesses if they’re properly supported.”

Source link

Continue Reading

Bad Credit

This Week’s Top Car Deals & Analysis – October 30, 2020

Published

on

The final days of October offer a chance to take advantage of outstanding model year-end deals. Most offers end November 2, which means there isn’t much time left to enjoy this month’s best lease deals and deepest new car discounts. We even found incentives that can help those with bad credit buy a new or used car.

2021 car deals. Interestingly, 2021 new car incentives are showing some surprises. For example, Audi is already offering up to $12,000 in savings when leasing the 2021 e-tron all-electric crossover. We even learned that the new Genesis GV80 SUV will debut with a $589/month lease deal plus special financing rates.

Believe it or not, the 2021 Hyundai Veloster N could prove to be a great value despite a nearly $4,700 price increase compared to the previous year. That’s because our analysis finds that better incentives can make it just $10/month more expensive to lease than the 2020 model. Talk about getting more for your money.

Why are small cars bad to lease? Even though smaller cars typically come with lower price tags, that isn’t always the case when leasing. A mix of lower discounts, worse residual values, and smaller discounts can actually make a Nissan Altima cheaper than a Versa despite having an almost $10,000 difference in MSRP.

Shorter-mileage leases. More brands are offering shorter mileage allowances on car leases. Although this is typically used to offer consumers more flexibility, we’ve found cases in which you can end up getting less for your money. If you don’t read all the fine print, this could make comparison-shopping difficult.

Bad credit car deals. If you have subprime credit, you may find it harder to get financed. However, some manufacturers are offering special incentives to help make cars & trucks more affordable. For example, Chevy is offering $2,000 in down payment assistance plus 9.9% APR for 72 months on the 2020 Trax.

$0 down leases. If you’re adamant about now putting down any money on a lease, you’ll love Sign & Drive leases. In addition to requiring no money down, $0 down lease deals can cover your first month’s payment. Even hot sellers like the Honda CR-V Hybrid offer $0 down and as little as $330/month on a lease.

The high cost of safety? Even though most major automakers are offering more safety features than ever before, our analysis finds that the highest IIHS safety ratings still require costly options in 2020. That’s starting to change, but the cost of buying a car with the most bragging rights is still very high.

Disaster relief. Those affected by some of this year’s natural disasters should be aware that automakers are offering assistance. California wildfire assistance programs like Ford Employee Pricing can save thousands when replacing a car. Similarly, a 2020 hurricane relief program from GM offers $1,000 in savings.

Spooky loan situations. There are some scary scenarios you can avoid when getting a car loan. However, boosting your credit score is possible with some determination because negative items on your credit report fall off after 7 years. Our network of dealers is specially equipped to help those with bad credit.

Upcoming vehicles. Genesis finally revealed the new GV70, a small luxury crossover based on the highly-rated G70 sedan. Whether it’s a redesigned car, truck, or SUV, odds are you’ll find it on our Previews page. That said, as we reported last week, discounts ahead of a redesign can result in substantial savings.

This Month’s Cheapest Lease Deals »



Source link

Continue Reading

Trending