Archives for May 17, 2018

It is gratifying to know that state legislators and education regulators across the nation are moving to improve financial literacy education at the high school level. It seems logical to offer personal finance courses to high school students, since they soon will be dealing with college loans and other financial decisions related to entering the workforce.

In three report cards issued biennially since 2013, Center for Financial Literacy at Champlain College has graded states for their high school efforts.

In truth, there have been too many D and F grades, but initiatives in several states signal that states are beginning to take the subject seriously.

In recent months, Wisconsin and Kentucky passed laws to improve personal finance education, Vermont and Delaware have implemented regulatory changes, and Massachusetts, Louisiana and Florida may pass legislation.

If all these changes are put in place, we would have 1 out of 5 states with Ds and Fs, whereas after our first report card in 2013, it was 1 out of 3.

This means more high school graduates will be better prepared for work or college and the financial decisions both bring.

But what about elementary and middle school? There are not enough states that require personal finance education in those grades. More should.

This subject is as important in today’s world as math and reading, and should start early at home and in school and continue through college.

In mathematics, you start with counting, move on to addition and subtraction, and then move on to division and multiplication. You need to learn letters before you can read. Personal finance education should be a cumulative process, with age-appropriate topics taught each school year.

Teaching young people about money, its value, how to save, invest and spend, and how not to waste it — can and should be taught in elementary and middle school. Here’s the plan:

Elementary School Learning Goals

• Understanding of money and ways to earn it
• Basic knowledge of spending choices
• How savings accounts can protect their money and pay interest
• How dangerous it is to share financial information online
• Fundamental understanding of the concept of budgeting.

Middle School Learning Goals

• Understanding of compound interest and how it impacts savings and credit
• Knowledge of how credit cards and student loans work
• Grasp of concepts like opportunity costs and delayed gratification
• Appreciation of the links between education and income, careers and income
• Basic knowledge of college costs
• More advanced understanding of budgeting and saving
• Skills to protect their identity in this technologically driven world

Personal finance learning goals for high school have been or are being implemented by many states. Suffice it to say no young person should graduate from high school unprepared for the financial decisions he or she will have to make in college or the workplace.

Champlain College requires personal finance education, but too few colleges do. It’s a critical time to learn about budgeting, student loans, investing in 401Ks, how credit works and more, all of which will be staring college students in the face in just a few short years.

For those who don’t think personal finance is important enough to be taught in every grade, consider that financially illiterate adults were the victims who suffered the most during the Great Recession. If they had been taught personal finance in school, perhaps many would not have entered into those sub-prime mortgages.

On the positive side, when young children learn early about money, they are more likely as adults to save for rainy days and retirement, invest in stocks and avoid high-cost alternative financial services, like payday lending and auto title loans.

Are you looking to buy a home in the current seller’s market? We’d wish you good luck, but making a standout offer on a home requires more preparation than luck.

To uncover successful home buying tactics in a competitive market, the brokerage website Redfin analyzed approximately 14,000 home purchase offers from 2016 to 2017 where competing bids were involved. The highest bid doesn’t always win – it can be the offer that makes the most overall impact or gives the seller greater confidence that the deal will close.

Consider these six effective tips from the Redfin study. They may put your offer over the top.

1. Write a Letter – A personal touch can go a long way. Write a cover letter with your offer explaining why you love the home and how you will take care of it. Do you love the layout, the landscaping, or the neighborhood? Are your children looking forward to their new home and school district? Let the buyer know.

A cover letter can establish a powerful emotional connection with the seller and increase the odds of a successful offer by 52.2%, according to the study.

2. Waive Financial Contingencies – Many homebuyers are financially challenged enough to require a financial contingency – ranging from refundable deposits to making the entire deal contingent on the sale of their own home. Removing financial contingencies gives the seller greater confidence that you will make good on your purchase offer.

According to Redfin, waiving financial contingencies increases your offer’s odds of success by just under 58%. In the most competitive markets, this may be the entry requirement to put in a serious bid.

3. Make an All-Cash Offer – It’s the ultimate waiving of financial contingencies – no financing at all. Few people can afford this tactic, but if you can, Redfin estimates that your odds of a successful bid are almost doubled. In the upper 10% of the price range, an all-cash offer is over four times more likely to succeed.

4. Escalation Clause – An escalation clause will automatically increase your bid up to a pre-established limit in case somebody else submits a bid higher than your original offer. You can extend your buying power with reasonable risk – assuming you have correctly calculated how much extra you can afford to pay.

5. Waive Inspection Contingency – By waiving the inspection contingency, you won’t be able to use the results of the inspection to cancel the deal or bargain for a better price. However, that’s a risk you may have to take to place your offer above others.

6. Pay for A Pre-Inspection – By commissioning your own inspection before submitting an offer, you will show the buyer that you are serious. In addition, both parties can be confident that no surprise will scuttle the deal. According to the study, almost one-third of home buying offers included either an inspection contingency waiver or a pre-inspection.

All of these strategies may help you close the deal, but they will only be effective if you have done due diligence on your local market and are honest about your financial situation. “Do not get sucked into a bidding war,” advises Jordan Goodman, the personal finance expert and author known as “America’s Money Answers Man”. “Get something you can afford and know in advance what that maximum is going to be.”

Check your local market for recent trends and choose a reasonably priced home. You’ll have financial latitude to use some of these tactics and the insight to know which ones will work.

Are you considering bypassing the hotel or resort experience for your summer vacation and opting for a summer home rental instead? Home rental networks are on the rise and have never been easier to use, thanks to the increased web presence and sites like VacationHomeRentals.com, Airbnb, VRBO, and VacationRentals.com.

However, just because travel agents and middlemen are being squeezed out does not mean that you are getting the best deal possible. You can negotiate with a vacation rental owner to receive an even better deal by following these steps:

Outline Your Goals – Know what you are negotiating for, and what you are willing to give up in return, if anything. Are you willing to stay longer or at different times for an improved nightly rate? Are certain amenities important to you? Can you handle a larger up-front deposit for a rate discount? Have all of your negotiating points and strategy planned out in advance, and you will know when you should walk away from a deal.

Do Your Homework – Research your rental options in the area, and make a list of your preferred choices. Get the best understanding you can of the booking market during your preferred time — is it peak season, are there festivals or events drawing unusual crowds, or are there other hurdles to occupancy?

Keep your vacation times flexible if possible. If you can offer a stay that is complementary to the rental’s typical business, you have tremendous leverage. Do not be afraid to use that leverage, but do not lead with it. Give the rental owner the impression that you are doing them a favor by altering your plans.

Be Courteous – Nobody likes doing business with an obnoxious negotiator. Say that the offering does not exactly fit your time and budget needs, and you were wondering if a certain counteroffer could be met. Keep your counteroffers reasonable, and do not mention that you have other options. Rental owners already know that, and they do not like to be reminded of it.

Book Early or Book Late – As strange as it may sound, you can have leverage on both ends of the timeline. Booking early can give you the best combination of price and selection. However, if you are willing to gamble on availability, last-minute deals can be found for most destinations. They may not be in the exact location you want or have all the amenities you want, but the savings are significant.

However, if you go this route, be prepared to find a hotel if you have to, and realize when it is too late to do anything based on an area you are visiting (part of your “homework” above).

Sell Yourself as an “Easy” Customer – Rental owners love “easy” customers who simply enjoy their time, are respectful of their rental property, throw no parties, and cause no problems. If you fit into that category, find subtle ways to let them know that you are low maintenance.

On the other hand, if your family really does not fit that mold, don’t misrepresent yourself. Rowdy kids or uncontrolled pets will earn you a reputation you do not want for future rentals. Find a rental that is a bit more tolerant, and be prepared to pay extra.
Congratulations! You have successfully negotiated a great deal for your vacation rental. Now it is up to you to follow through.

Be a good and respectful guest, follow all the house rules, and leave everything in the same condition you found it in, if not better. If you had an excellent experience, do not forget to refer others to the rental — and let your host know that you will be referring them to others. You may receive a similarly good deal, or even a better one, the next time you stay there.

If you want more credit, check out our list of travel credit card offers to earn rewards on your vacation.

ALTHOUGH most of us marry for love, notably Prince Harry and his bride Meghan Markle this weekend, there are also financial benefits to tying the knot. So if you are legally wed, make full use of the tax, savings and pension advantages that come with saying “I do”.

Rebecca O’Keeffe, head of investment at online broker Interactive Investor, said proper financial planning is at the core of every successful partnership: “Nobody marries for the tax relief, but knowing how to benefit financially may help you live happily ever after.”

MARRIAGE ALLOWANCE

Married couples can save up to £238 in tax this financial year by claiming the marriage allowance.

If one spouse earns less than this year’s personal allowance of £11,850, they can transfer £1,190 of the allowance to their other half.

O’Keeffe said: “This applies if their partner earns between £11,851 and £46,350 a year, or £43,430 in Scotland. It does not apply if they earn enough to pay 40 or 45 per cent tax.”

You can backdate claims to include any tax year since April 5, 2015, assuming you were eligible.

INHERITANCE TAX

Everyone can pass on £325,000 of assets, free of inheritance tax (IHT) on death.

They can also take advantage of the main residence nil rate band, which applies when passing on your home to any children or grandchildren, currently worth another £125,000.

O’Keeffe said this will rise to £175,000 by April 2020: “At this point, homeowners may be able to pass on up to £500,000 to direct descendants free of IHT.”

Married couples and civil partners can double this to a maximum of £1million, because they can pass their IHT allowance to their surviving spouse free of tax on death.

They can also inherit ISA savings and retain the tax benefits for life, through the additional permitted subscription (APS) allowance.

Neither of these is available to cohabiting couples, which exposes more of their estate to hefty 40 per cent IHT tax rates.

Same-sex couples can apply to be civil partners and claim these tax breaks, but currently heterosexual couples cannot.

CAPITAL GAINS TAX

Every adult individual has an annual capital gains tax (CGT) allowance, and this permits them to take £11,700 of gains in the current tax year.

Capital gains above that sum may be taxed at either 10 or 20 per cent, rising to 18 or 28 per cent on investment properties.

O’Keeffe said married couples can transfer assets between each other free of tax, and use this to double their CGT allowance.

She explained: “Split the assets so that you both use your annual allowances, with the lower taxpayer making the additional capital gains to minimise the tax due.”

PENSIONS

Married couples also have an edge when it comes to workplace final salary pension schemes, which typically pay 50 per cent of the income to a surviving spouse when the policyholder dies.

Unmarried couples may still benefit, but only at the discretion of scheme trustees, said O’Keeffe: “You may have to jump through hoops before the surviving partner receives the money.”

TRANSFER OF ASSETS

The freedom married couples have to pass assets between each other allows them to take advantage of two other tax breaks.

The personal savings allowance lets basic rate taxpayers earn up to £1,000 in tax-free interest outside an ISA, falling to £500 for 40 per cent taxpayers, while the dividend allowance lets you earn £2,000 from dividends free of tax.

Tom Adams, head of research at independent savings advice site SavingsChampion.co.uk, said spouses can take advantage by splitting their investments and savings, adding: “Any interest or dividends that exceed these allowances should go into the name of the lower taxpayer.”

He warned: “That person technically has sole access to the money and may spend it.”