11 Best Hotel Booking Apps of 2021 – Get Cheap Deals on Rooms

You have more choices than ever when it comes to booking hotels. And using a hotel booking app can help save you time, hassle, and money when planning your next trip. Here are the apps you should download for your next trip.

Independent Hotel Booking Apps

Independent apps are not affiliated with a specific hotel brand or chain. Instead, they aggregate options across a range of hotel chains and independently owned accommodations to provide you with a bevy of choices. Here are the heavy hitters among independent booking apps.

1. Booking.com

Arguably the most popular website for reserving accommodations, Booking.com has a robust, easy-to-use app that deserves a spot on your smartphone. One of its best features is the sheer number of options it offers, including accommodations in off-the-beaten-path locations around the world.

If you’re traveling to a country where you don’t speak the language, the app makes it easy to view the address of your hotel in the local language. If you need to show a taxi or Uber driver where you’re headed, you can simply pull it up in the app and point.

Finally, the interface makes it easy to see all past, current, and future trips, and it highlights any loyalty discounts you’re eligible for at properties across the globe.

2. Hotels.com

Another major player in the online booking space, Hotels.com includes hundreds of thousands of properties in more than 200 countries and territories. One of the perks users like most about Hotels.com is that you get one night free for every 10 nights you book through it.

Redeeming reward nights incurs a $5 charge if you use the website to book. However, if you use the app to make a reward booking, you won’t be charged this fee. The app also lets you view or modify current reservations and view your reward progress toward free nights.

3. Priceline

Priceline was established in 1997 and is one of the longest-running hotel booking sites. The website is popular for its “Name Your Own Price” feature, which is now also available on the app.

You can book hotels, flights, rental cars, and even cruises through the Priceline app with a tap of your finger. The app includes exclusive discounts and promotions on hotels not found on the website. Priceline focuses on offering deeply discounted prices on travel but does not include a rewards or loyalty program.

4. Expedia

If you enjoy playing the travel rewards game and want to see just how steeply discounted a rate you can find, Expedia is the app for you. It often features exclusive app-only deals like double rewards points and extra discounts that may not be available on the Expedia website. You can also use the app to book other Expedia services like flights, rental cars, tickets, and tours.

5. HotelsCombined

A relative newcomer to the accommodation aggregate world, HotelsCombined sets itself apart from the rest in a few ways. It offers tons of pictures of potential hotels, which appeals to people who want to know exactly what they’re getting into when booking a room. It also has a “Price Alert” feature that lets you sign up for an email notification when a room you’re interested in drops in price by 10% or more. If there’s a specific hotel you want to stay in and you can plan ahead, this feature might be just the ticket for scoring a great deal.


Hotel Booking Apps For Last-Minute Deals

According to Business Insider, hotels have an average occupancy of about 65%. That means 35% of their rooms go unused each night. There are apps that take advantage of this fact, offering these vacant rooms for far less than their list price. If you enjoy the thrill of booking your nights’ accommodation at the eleventh hour, or if you need a place to stay in a strange city on the fly, these apps have you covered.

6. HotelTonight

Perhaps your Airbnb host cancels your reservation the day of your arrival, or you miss your flight and the first available connection isn’t until the next day. With HotelTonight on your phone, you can book a hotel for the same evening or up to seven days in advance.

HotelTonight aggregates a city’s empty hotel rooms in one place, and you can book one for up to 50% off the full price. Deals through the app go live at noon each day, and in some cities, you may have thousands of hotel rooms to choose from across multiple price points. The app is user-friendly and has a tiered loyalty program called HT Perks, which can net you even better rates the more loyalty credits you accrue. Even better, those loyalty points never expire.

7. One Night

If flying by the seat of your pants when you travel sounds appealing, One Night is the app for you. Using the One Night app, you can book a reservation only after 12pm for the same day in a select number of cities. Once you book a night, you can extend your accommodations for up to seven days.

The thing that sets One Night apart from other last-minute booking apps is that when you select your hotel, the app gives you hour-by-hour suggestions for fun, quirky things to do in your destination city. If you like to travel like a local, this is the app for you.

Hotel Chain Apps

If you take advantage of travel loyalty programs, it’s smart to have the app of your preferred hotel on your smartphone. With these apps, you can skip the line, choose your room, and unlock other member perks with ease.

8. Marriott

Marriott boasts more than 6,700 hotels in 130 countries. That means 1 out of every 15 hotel rooms in the world is owned by the Marriott group. So you definitely won’t be starved for choices if you book accommodations on the Marriott app.

Once you make your booking, you can request upgrades and late checkouts right from your phone. You can also request extras for your room, like a hair dryer or extra towels, from the app. If you frequently stay at Marriott or any of its 30 brands of hotel properties for work or play, keep this app on your phone.

9. Hilton Honors

If you’re a Hilton Honors devotee, you’ll love the app feature that everyone raves about: getting to choose your exact room ahead of time. At many hotels ,you can see a map of the property and pick the room you want via the app. This is especially popular with travelers who have a particular preference, such as a high floor with a view or distance from the elevator, or who want to be near a specific amenity like the pool or fitness center.

The app also has a digital key feature, so you can use your smartphone to unlock the door to your room at select properties. Finally, being able to check out of your room at the end of your stay via the app means you won’t be stuck in line at the front desk during checkout.

10. Hyatt

After a relaunch in August 2019, Hyatt’s mobile app, called World of Hyatt after their rewards program, is up and running with better functionality than the previous version. Among its features are the ability to stream personal entertainment content through the TV in your room with Chromecast, unlock your room door with your phone, and contact the hotel directly in real time through a new chat function both before and during your stay. You can view your progress toward rewards and see any points they’ve earned with previous stays at a Hyatt property.

11. IHG

Shorthand for InterContinental Hotels Group, IHG has almost 6,000 hotels across the world. Its app encourages customers to book travel directly with the chain instead of using a third-party site. It does this by offering a member-exclusive rate with savings of 3% on average if you book directly.

The app also features special rewards offers and discounts and lets you view your points balance toward a free or discounted stay. In addition to a user-friendly interface, the app also has a travel tools section with neighborhood guides and maps. Finally, it offers a white noise feature in case you don’t sleep well in hotels or suffer from insomnia.


Final Word

If you enjoy hunting out the best hotel deal to save money on vacation, or if you like racking up loyalty points you can trade in for free nights and other perks, it pays to download the above apps to your smartphone. From skipping the line at check-in to maximizing your savings to simply being able to view the property ahead of time, using hotel booking apps is an easy, free way to be a savvy traveler.

What’s your favorite hotel booking app? Why?

Source: moneycrashers.com

How Long Do Inquiries Stay on Your Credit Report & Affect Your Score?

Your credit score is an important part of your financial life. Good credit can help you qualify for loans and credit cards and secure lower interest rates on those loans. Poor credit can make it expensive to borrow money and make some lenders refuse to lend you any money at all.

Usually, when you apply for a loan or credit card, the lender looks at a copy of your credit report. This places an inquiry on your report, which drops your score by a few points.

Understanding the impact of credit inquiries and how long the impact lasts can help you manage your credit score while applying for loans.

Calculating Your Credit Score

Your credit score is a three-digit number that lenders can use to quickly gauge your trustworthiness as a borrower. Scores range from a low of 300 to a high of 850, with higher scores being better. Generally, anything above 760 is seen as an excellent score while scores above 700 are good.

There are three major credit bureaus: Experian, Equifax, and Transunion. Each tracks your interactions with debt and credit to build a credit report for you. Using the information on those reports, as well as a formula from FICO, they calculate your credit score, often called your FICO score.

There are five factors that affect your credit score.

1. Payment History

Your payment history is the most important part of your credit score, determining more than a third of it alone. It tracks your history of timely vs late and missed payments. Making timely payments helps your score. Missed and late payments hurt your score.

One missed or late payment has a much larger impact on your credit than a single timely payment, so it’s essential that you work to never miss a due date if you want to have good credit.

2. Credit Utilization

Your credit utilization measures two things, your total amount of debt and the amount of credit card debt you have in relation to your credit card’s combined limits. The less debt you have, the better it is for your credit score.

3. Length of Credit History

The length of your credit history is also composed of two factors. One is the total amount of time you’ve had access to credit. A longer credit history means more experience with debt, which can help your score.

The other is the average age of your credit accounts. Lenders prefer borrowers who stick with credit cards and loans over those who bounce from account to account. The older your average account, the better it will be for your score.

4. Credit Mix

The more different types of loans you’ve had, such as mortgages, auto loans, and student loans, the better it will be for your credit score. Dealing with different types of debt shows that you can handle all the different types of credit.

5. New Credit

New credit looks at both any new accounts that you’ve opened as well as new loans you’ve applied for. This is where credit inquiries appear on your report. Each inquiry can decrease your credit score slightly.


What Is a Credit Inquiry & How Long Does It Affect Your Credit?

When you apply for a new credit card or a loan, the lender wants to know whether you’ll repay your debts.

Typically the lender asks one or more of the credit bureaus to send a copy of your credit report. When a credit bureau receives the request, it makes a note of the inquiry on your credit report. Each credit inquiry decreases your score by a few points.

Credit inquiries reduce your score because applying for new loans on a regular basis can indicate a risky borrower. If someone asks a lender if they can borrow $25,000 to buy a car, that is a relatively reasonable request.

But if someone asks to borrow $25,000 for a car, then needs another $10,000 personal loan the next week, and $50,000 the week after that, and then a new credit card a day later, it can throw up red flags. The person might be sending in so many applications because they’re running into financial trouble or because they don’t plan to repay those debts.

A single inquiry on your credit report can reduce your score between five and 10 points. It’s not a huge impact, but it’s noticeable for someone who is right on the border between good and excellent credit or fair and good credit.

Each additional inquiry drops your score, so applying for multiple loans can cause your credit score to drop quickly.

The impact of each credit inquiry reduces over time. If the rest of your credit report is good, your score will return almost to normal within a few months. Inquiries completely fall off your report after two years.


Hard Inquiries vs. Soft Inquiries

When someone checks your credit report, it can place an inquiry on the report and drop your score. This can sound scary to people who use a credit monitoring service to keep an eye on their credit score.

The good news is that not every inquiry will hurt your credit score. When you apply for credit, lenders typically make something called a hard inquiry when asking the credit bureaus for a copy of your report. The bureaus take note of hard inquiries and put them on your credit report.

By contrast, soft inquiries are used by credit monitoring services or companies offering promotional credit offers or those helping you check if you’re pre-approved for certain products.

The credit bureaus don’t record soft inquiries into your credit, which means that soft inquiries have no effect on your credit score.

In simple terms, applying for a new loan or credit card usually involves a hard inquiry. Checking your credit without actually applying for a loan or credit card usually involves a soft inquiry.


What About Rate Shopping?

One of the best ways to save money on a loan — especially a large loan like a mortgage or an auto loan — is to shop around. If you get quotes from multiple lenders, you can choose the one with the lowest interest rate and fees to minimize your costs.

If each application results in a hard inquiry that hurts your credit score, rate shopping too extensively could damage your credit.

The good news for borrowers is that the FICO scoring formula accounts for the importance of rate shopping. For large loans like mortgages, auto loans, and student loans, all inquiries that occur within a short span — 14 to 45 days depending on the formula used — are treated as a single inquiry when calculating your score.

That means that you can safely compare rates from multiple lenders, as long as you get your quotes within a short period.


Final Word

Applying for credit cards or loans can place credit inquiries on your credit report, which can drop your score. To make sure you keep your score healthy, do your best to only apply for loans that you need.

As long as you use your credit responsibly and don’t apply for too many accounts in a short period, you shouldn’t have to worry about the impact that inquiries have on your credit score.

Source: moneycrashers.com

The Pros & Cons of Offering Owner Financing (When You Sell Your Home)

Sometimes, home sellers find a buyer eager to purchase but unable to finance the property with traditional mortgage financing. Sellers then have a choice: lose the buyer, or lend the mortgage to the buyer themselves.

If you want to sell a property you own free and clear, with no mortgage, you can theoretically finance a buyer’s full first mortgage. Alternatively, you could offer just a second mortgage, to bridge the gap between what the buyer can borrow from a conventional lender and the cash they can put down.

Should you ever consider offering financing? What’s in it for you? And most importantly, how do you protect yourself against losses?

Before taking the plunge to offer seller financing, make sure you understand all the pros, cons, and options available to you as “the bank” when lending money to a buyer.

Advantages to Offering Seller Financing

Although most sellers never even consider offering financing, a few find themselves forced to contemplate it.

For some sellers, it could be that their home lies in a cool market with little demand. Others own unique properties that appeal only to a specific type of buyer or that conventional mortgage lenders are wary to touch. Or the house may need repairs in order to meet habitability requirements for conventional loans.

Sometimes the buyer may simply be unable to qualify for a conventional loan, but you might know they’re good for the money if you have an existing relationship with them.

There are plenty of perks in it for the seller to offer financing. Consider these pros as you weigh the decision to extend seller financing.

1. Attract & Convert More Buyers

The simplest advantage is the one already outlined: You can settle on your home even when conventional mortgage lenders decline the buyer.

Beyond salvaging a lost deal, sellers can also potentially attract more buyers. “Seller Financing Available” can make an effective marketing bullet in your property listing.

If you want to sell your home in 30 days, offering seller financing can draw in more showings and offers.

Bear in mind that seller financing doesn’t only appeal to buyers with shoddy credit. Many buyers simply prefer the flexibility of negotiating a custom loan with the seller rather than trying to fit into the square peg of a loan program.

2. Earn Ongoing Income

As a lender, you get the benefit of ongoing monthly interest payments, just like a bank.

It’s a source of passive income, rather than a one-time payout. In one fell swoop, you not only sell your home but also invest the proceeds for a return.

Best of all, it’s a return you get to determine yourself.

3. You Set the Interest Rate

It’s your loan, which means you get to call the shots on what you charge. You may decide seller financing is only worth your while at 6% interest, or 8%, or 10%.

Of course, the buyer will likely try to negotiate the interest rate. After all, nearly everything in life is negotiable, and the terms of seller financing are no exception.

4. You Can Charge Upfront Fees

Mortgage lenders earn more than just interest on their loans. They charge a slew of one-time, upfront fees as well.

Those fees start with the origination fee, better known as “points.” One point is equal to 1% of the mortgage loan, so they add up fast. Two points on a $250,000 mortgage comes to $5,000, for example.

But lenders don’t stop at points. They also slap a laundry list of fixed fees on top, often surpassing $1,000 in total. These include fees such as a “processing fee,” “underwriting fee,” “document preparation fee,” “wire transfer fee,” and whatever other fees they can plausibly charge.

When you’re acting as the bank, you can charge these fees too. Be fair and transparent about fees, but keep in mind that you can charge comparable fees to your “competition.”

5. Simple Interest Amortization Front-Loads the Interest

Most loans, from mortgage loans to auto loans and beyond, calculate interest based on something called “simple interest amortization.” There’s nothing simple about it, and it very much favors the lender.

In short, it front-loads the interest on the loan, so the borrower pays most of the interest in the beginning of the loan and most of the principal at the end of the loan.

For example, if you borrow $300,000 at 8% interest, your mortgage payment for a 30-year loan would be $2,201.29. But the breakdown of principal versus interest changes dramatically over those 30 years.

  • Your first monthly payment would divide as $2,000 going toward interest, with only $201.29 going toward paying down your principal balance.
  • At the end of the loan, the final monthly payment divides as $14.58 going toward interest and $2,186.72 going toward principal.

It’s why mortgage lenders are so keen to keep refinancing your loan. They earn most of their money at the beginning of the loan term.

The same benefit applies to you, as you earn a disproportionate amount of interest in the first few years of the loan. You can also structure these lucrative early years to be the only years of the loan.

6. You Can Set a Time Limit

Not many sellers want to hold a mortgage loan for the next 30 years. So they don’t.

Instead, they structure the loan as a balloon mortgage. While the monthly payment is calculated as if the loan is amortized over the full 15 or 30 years, the loan must be paid in full within a certain time limit.

That means the buyer must either sell the property within that time limit or refinance the mortgage to pay off your loan.

Say you sign a $300,000 mortgage, amortized over 30 years but with a three-year balloon. The monthly payment would still be $2,201.29, but the buyer must pay you back the full remaining balance within three years of buying the property from you.

You get to earn interest on your money, and you still get your full payment within three years.

7. No Appraisal

Lenders require a home appraisal to determine the property’s value and condition.

If the property fails to appraise for the contract sales price, the lender either declines the loan or bases the loan on the appraised value rather than the sales price — which usually drives the borrower to either reduce or withdraw their offer.

As the seller offering financing, you don’t need an appraisal. You know the condition of the home, and you want to sell the home for as much as possible, regardless of what an appraiser thinks.

Foregoing the appraisal saves the buyer money and saves everyone time.

8. No Habitability Requirement

When mortgage lenders order an appraisal, the appraiser must declare the house to be either habitable or not.

If the house isn’t habitable, conventional and FHA lenders require the seller to make repairs to put it in habitable condition. Otherwise, they decline the loan, and the buyer must take out a renovation loan (such as an FHA 203k loan) instead.

That makes it difficult to sell fixer-uppers, and it puts downward pressure on the price. But if you want to sell your house as-is, without making any repairs, you can do so by offering to finance it yourself.

For certain buyers, such as handy buyers who plan to gradually make repairs themselves, seller financing can be a perfect solution.

9. Tax Implications

When you sell your primary residence, the IRS offers an exemption for the first $250,000 of capital gains if you’re single, or $500,000 if you’re married.

However, if you earn more than that exemption, or if you sell an investment property, you still have to pay capital gains tax. One way to reduce your capital gains tax is to spread your gains over time through seller financing.

It’s typically considered an installment sale for tax purposes, helping you spread the gains across multiple tax years. Speak with an accountant or other financial advisor about exactly how to structure your loan for the greatest tax benefits.


Drawbacks to Seller Financing

Seller financing comes with plenty of risks. Most of the risks center around the buyer-borrower defaulting, they don’t end there.

Make sure you understand each of these downsides in detail before you agree to and negotiate seller financing. You could potentially be risking hundreds of thousands of dollars in a single transaction.

1. Labor & Headaches to Arrange

Selling a home takes plenty of work on its own. But when you agree to provide the financing as well, you accept a whole new level of labor.

After negotiating the terms of financing on top of the price and other terms of sale, you then need to collect a loan application with all of the buyer’s information and screen their application carefully.

That includes collecting documentation like several years’ tax returns, several months’ pay stubs, bank statements, and more. You need to pull a credit report and pick through the buyer’s credit history with a proverbial fine-toothed comb.

You must also collect the buyer’s new homeowner insurance information, which must include you as the mortgagee.

You need to coordinate with a title company to handle the title search and settlement. They prepare the deed and transfer documents, but they still need direction from you as the lender.

Be sure to familiarize yourself with the home closing process, and remember you need to play two roles as both the seller and the lender.

Then there’s all the legal loan paperwork. Conventional lenders sometimes require hundreds of pages of it, all of which must be prepared and signed. Although you probably won’t go to the same extremes, somebody still needs to prepare it all.

2. Potential Legal Fees

Unless you have experience in the mortgage industry, you probably need to hire an attorney to prepare the legal documents such as the note and promise to pay. This means paying the legal fees.

Granted, you can pass those fees on to the borrower. But that limits what you can charge for your upfront loan fees.

Even hiring the attorney involves some work on your part. Keep this in mind before moving forward.

3. Loan Servicing Labor

Your responsibilities don’t end when the borrower signs on the dotted line.

You need to make sure the borrower pays on time every month, from now until either the balloon deadline or they repay the loan in full. If they fail to pay on time, you need to send late notices, charge them late fees, and track their balance.

You also have to confirm that they pay the property taxes on time and keep the homeowners insurance current. If they fail to do so, you then have to send demand letters and have a system in place to pay these bills on their behalf and charge them for it.

Every year, you also need to send the borrower 1098 tax statements for their mortgage interest paid.

In short, servicing a mortgage is work. It isn’t as simple as cashing a check each month.

4. Foreclosure

If the borrower fails to pay their mortgage, you have only one way to forcibly collect your loan: foreclosure.

The process is longer and more expensive than eviction and requires hiring an attorney. That costs money, and while you can legally add that cost to the borrower’s loan balance, you need to cough up the cash yourself to cover it initially.

And there’s no guarantee you’ll ever be able to collect that money from the defaulting borrower.

Foreclosure is an ugly experience all around, and one that takes months or even years to complete.

5. The Buyer Can Declare Bankruptcy on You

Say the borrower stops paying, you file a foreclosure, and eight months later, you finally get an auction date. Then the morning of the auction, the borrower declares bankruptcy to stop the foreclosure.

The auction is canceled, and the borrower works out a payment plan with the bankruptcy court judge, which they may or may not actually pay.

Should they fail to pay on their bankruptcy payment plan, you have to go through the process all over again, and all the while the borrowers are living in your old home without paying you a cent.

6. Risk of Losses

If the property goes to foreclosure auction, there’s no guarantee anyone will bid enough to cover the borrower’s loan debt.

You may have lent $300,000 and shelled out another $20,000 in legal fees. But the bidding at the foreclosure auction might only reach $220,000, leaving you with a $100,000 shortfall.

Unfortunately, you have nothing but bad options at that point. You can take the $100,000 loss, or you can take ownership of the property yourself.

Choosing the latter means more months of legal proceedings and filing eviction to remove the nonpaying buyer from the property. And if you choose to evict them, you may not like what you find when you remove them.

7. Risk of Property Damage

After the defaulting borrower makes you jump through all the hoops of foreclosing, holding an auction, taking the property back, and filing for eviction, don’t delude yourself that they’ll scrub and clean the property and leave it in sparkling condition for you.

Expect to walk into a disaster. At the very least, they probably haven’t performed any maintenance or upkeep on the property. In my experience, most evicted tenants leave massive amounts of trash behind and leave the property filthy.

In truly terrible scenarios, they intentionally sabotage the property. I’ve seen disgruntled tenants pour concrete down drains, systematically punch holes in every cabinet, and destroy every part of the property they can.

8. Collection Headaches & Risks

In all of the scenarios above where you come out behind, you can pursue the defaulting borrower for a deficiency judgment. But that means filing suit in court, winning it, and then actually collecting the judgment.

Collecting is not easy to do. There’s a reason why collection accounts sell for pennies on the dollar — most never get collected.

You can hire a collection agency to try collecting for you by garnishing the defaulted borrower’s wages or putting a lien against their car. But expect the collection agency to charge you 40% to 50% of all collected funds.

You might get lucky and see some of the judgment or you might never see a penny of it.


Options to Protect Yourself When Offering Seller Financing

Fortunately, you have a handful of options at your disposal to minimize the risks of seller financing.

Consider these steps carefully as you navigate the unfamiliar waters of seller financing, and try to speak with other sellers who have offered it to gain the benefit of their experience.

1. Offer a Second Mortgage Only

Instead of lending the borrower the primary mortgage loan for hundreds of thousands of dollars, another option is simply lending them a portion of the down payment.

Imagine you sell your house for $330,000 to a buyer who has $30,000 to put toward a down payment. You could lend the buyer $300,000 as the primary mortgage, with them putting down 10%.

Or you could let them get a loan for $270,000 from a conventional mortgage lender, and you could lend them another $30,000 to help them bridge the gap between what they have in cash and what the primary lender offers.

This strategy still leaves you with most of the purchase price at settlement and lets you risk less of your own money on a loan. But as a second mortgage holder, you accept second lien position

That means in the event of foreclosure, the first mortgagee gets paid first, and you only receive money after the first mortgage is paid in full.

2. Take Additional Collateral

Another way to protect yourself is to require more collateral from the buyer. That collateral could come in many forms. For example, you could put a lien against their car or another piece of real estate if they own one.

The benefits of this are twofold. First, in the event of default, you can take more than just the house itself to cover your losses. Second, the borrower knows they’ve put more on the line, so it serves as a stronger deterrent for defaults.

3. Screen Borrowers Thoroughly

There’s a reason why mortgage lenders are such sticklers for detail when underwriting loans. In a literal sense, as a lender, you are handing someone hundreds of thousands of dollars and saying, “Pay me back, pretty please.”

Only lend to borrowers with a long history of outstanding credit. If they have shoddy credit — or any red flags in their credit history — let them borrow from someone else. Be just as careful of borrowers with little in the way of credit history.

The only exception you should consider is accepting a cosigner with strong, established credit to reinforce a borrower with bad or no credit. For example, you might find a recent college graduate with minimal credit who wants to buy, and you could accept their parents as cosigners.

You also could require additional collateral from the cosigner, such as a lien against their home.

Also review the borrower’s income carefully, and calculate their debt-to-income ratios. The front-end ratio is the percentage of their monthly income required to cover all housing costs: principal and interest, property taxes, homeowner’s insurance, and any condominium or homeowners association fees.

For reference, conventional mortgage lenders allow a maximum front-end ratio of 28%.

The back-end ratio includes not just housing costs, but also overall debt obligations. That includes student loans, auto loans, credit card payments, and all other mandatory monthly debt payments.

Conventional mortgage loans typically allow 36% at most. Any more than that and the buyer probably can’t afford your home.

4. Charge Fees for Your Trouble

Mortgage lenders charge points and fees. If you’re serving as the lender, you should do the same.

It’s more work for you to put together all the loan paperwork. And you will almost certainly have to pay an attorney to help you, so make sure you pass those costs along to the borrower.

Beyond your own labor and costs, you also need to make sure you’re being compensated for your risk. This loan is an investment for you, so the rewards must justify the risk.

5. Set a Balloon

You don’t want to be holding this mortgage note 30 years from now. Or, for that matter, to force your heirs to sort out this mortgage on your behalf after you shuffle off this mortal coil.

Set a balloon date for the mortgage between three and five years from now. You get to collect mostly interest in the meantime, and then get the rest of your money once the buyer refinances or sells.

Besides, the shorter the loan term, the less opportunity there is for the buyer to face some financial crisis of their own and stop paying you.

6. Be Listed as the Mortgagee on the Insurance

Insurance companies issue a declarations page (or “dec page”) listing the mortgagee. In the event of damage to the property and an insurance claim, the mortgagee gets notified and has some rights and protections against losses.

Review the insurance policy carefully before greenlighting the settlement. Make sure your loan documents include a requirement that the borrower send you updated insurance documents every year and consequences if they fail to do so.

7. Hire a Loan Servicing Company

You may multitalented and an expert in several areas. But servicing mortgage loans probably isn’t one of them.

Consider outsourcing the loan servicing to a company that specializes in it. They send monthly statements, late notices, 1098 forms, and escrow statements (if you escrow for insurance and taxes), and verify that taxes and insurance are current each year. If the borrower defaults, they can hire a foreclosure attorney to handle the legal proceedings.

Examples of loan servicing companies include LoanCare and Note Servicing Center, both of whom accept seller-financing notes.

8. Offer Lease-to-Own Instead

The foreclosure process is significantly longer and more expensive than the eviction process.

In the case of seller financing, you sell the property to the buyer and only hold the mortgage note. But if you sign a lease-to-own agreement, you maintain ownership of the property and the buyer is actually a tenant who simply has a legal right to buy in the future.

They can work on improving their credit over the next year or two, and you can collect rent. When they’re ready, they can buy from you — financed with a conventional mortgage and paying you in full.

If the worst happens and they default, you can evict them and either rent or sell the property to someone else.

9. Explore a Wrap Mortgage

If you have an existing mortgage on the property, you may be able to leave it in place and keep paying it, even after selling the property and offering seller financing.

Wrap mortgages, or wraparound mortgages, are a bit trickier and come with some legal complications. But when executed right, they can be a win-win for both you and the buyer.

Say you have a 30-year mortgage for $250,000 at 3.5% interest. You sell the property for $330,000, and you offer seller financing of $300,000 for 6% interest. The buyer pays you $30,000 as a down payment.

Ordinarily, you would pay off your existing mortgage for $250,000 upon selling it. Most mortgages include a “due-on-sale” clause, requiring the loan to be paid in full upon selling the property.

But in some circumstances and some states, you may be able to avoid triggering the due-on-sale clause and leave the loan in place.

You keep paying your mortgage payment of $1,122.61, even as the borrower pays you $1,798.65 per month. In a couple of years when they refinance, they pay off your previous mortgage in full, plus the additional balance they owe you.

Of course, you still run the risk that the borrower stops paying you. Then you’re saddled with making your monthly mortgage payment on the property, even as you slog through the foreclosure process to try and recover your losses.


Final Word

Offering seller financing comes with risks. But those risks may be worth taking, especially for hard-to-sell properties.

Only you can decide what risk-reward ratio you can live with, and negotiate loan terms to ensure you come out on the right side of the ratio. For unique or other difficult-to-finance properties, seller financing may be the only way to sell for what the property’s worth.

Before you write off the returns as low, remember that your APR will be far higher than the interest rate charged.

Beyond the upfront fees you can charge, you’ll also benefit from simple interest amortization, which front-loads the interest so that nearly all of the monthly payment goes toward interest in the first few years — the only years you need to finance if you structure the loan as a balloon mortgage.

Just be sure to screen all borrowers extremely carefully, and to take as many precautions as you can. If the borrower can’t qualify for a conventional mortgage, consider that a glaring red flag. Seller financing involves risking many thousands of dollars in a single transaction, so take your time and get it right.

Source: moneycrashers.com

10 Best Health Care ETFs of 2021

Technological innovation is everywhere you look.

One of the biggest changes taking place thanks to advancements in technology is an evolution in health care. New technologies are making simple work of some of the most pressing medical conditions known to man. Even the COVID-19 pandemic has been proof that the health care sector is evolving, with vaccines being created and marketed within a year of the outbreak of the novel coronavirus.

Of course, the health care industry is massive. Well-researched investments in a variety of health care stocks and bonds have proven to be lucrative moves. But what if you don’t have the time or expertise to do the research it takes to make individual health care investments?

That’s where health care exchange-traded funds (ETFs) come in.

Best Health Care ETFs

Health care ETFs are funds that pool money from a large group of investors and then invest in health care stocks and other health care-focused investments.

As with any investment vehicle, not all health care ETFs are created equal. Some will come with higher costs than others, and returns on your investment will vary wildly from one fund to another.

With so many options available, it can be difficult to pin down which ETFs you should invest in. Here are some of the best options on the market today:

1. Vanguard Health Care Index Fund ETF (VHT)

  • Expense Ratio: 0.10%
  • One-Year Return: 29.89%
  • Five-Year Annualized Return: 15.10%
  • Dividend Yield: 1.42%
  • Morningstar Rating: 4 out of 5 stars
  • Top Holdings: The top holdings in the VHT portfolio include Johnson & Johnson (JNJ), UnitedHealth Group (UHC), Abbott Laboratories (ABT), Thermo Fisher Scientific (TOM), and Pfizer (PFE).
  • Years Up Since Inception: 14
  • Years Down Since Inception: 2

Vanguard is one of the best-known wealth managers on Wall Street. So, you can rest assured that when you invest in a health care ETF, or any other Vanguard fund, your money is in good hands.

The Vanguard Health Care Index Fund ETF is focused on investing in companies that sell medical products, services, equipment, and technologies using a highly diversified portfolio.

As a Vanguard fund, the VHT comes with an incredibly low expense ratio and a strong history of providing compelling returns for investors.

Pro Tip: Have you considered hiring a financial advisor but don’t want to pay the high fees? Enter Vanguard Personal Advisor Services. When you sign up you’ll work closely with an advisor to create a custom investment plan that can help you meet your financial goals.


2. Health Care Select Sector SPDR Fund (XLV)

  • Expense Ratio: 0.12%
  • One-Year Return: 23.75%
  • Five-Year Annualized Return: 13.15%
  • Dividend Yield: 1.49%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings: The top holdings in the Health Care Select Sector SPDR Fund portfolio include Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Abbott Laboratories (ABT), AbbVie (ABBV), Pfizer (PFE).
  • Years Up Since Inception: 17
  • Years Down Since Inception: 5

The Health Care Select Sector SPDR Fund is offered by State Street Global Advisors, one of the largest asset management companies on Wall Street. The firm behind this health care ETF is one with pedigree.

As a passively-managed fund, the XLV was designed to track the returns of the Health Care Select Sector Index, which provides a representation of the health care sector of the S&P 500.

As a result, the XLV ETF provides diversified exposure to some of the largest U.S. health care companies. The fund provides compelling returns and relatively strong dividends for the health care industry. As is the case with most funds provided by State Street Global Advisors, this ETF comes with incredibly low fees, far below the industry average.


3. ARK Genomic Revolution ETF (ARKG)

  • Expense Ratio: 0.75%
  • One-Year Return: 174.19%
  • Five-Year Annualized Return: 43.78%
  • Dividend Yield: 0.93%
  • Morningstar Rating: 5 out of 5 stars
  • Top Holdings:The top holdings in the ARKG ETF include Teladoc Health (TDOC), Twist Bioscience (TWST), Pacific Biosciences of California (PACB), Exact Sciences (EXAS), and Regeneron Pharmaceuticals (REGN).
  • Years Up Since Inception: 4
  • Years Down Since Inception: 2

The ARK Genomic Revolution ETF is offered by ARK Invest, yet another highly trusted fund manager on Wall Street. The ETF is designed to provide diversified exposure to companies that are working to extend the length and improve the quality of life for consumers with debilitating conditions through technological and scientific innovations in genomics.

Essentially, this fund invests in companies focused on the editing of genomes, or base units within DNA, to solve some of the most pressing problems in medical science.

With genomics being a relatively new concept that’s showing incredible promise in the field of medicine, companies in the space are experiencing compelling growth, making the ARKG ETF one of the best performers on this list.

However, it’s also worth mentioning that this is one of the higher-volatility ETFs on the list, which adds to the risk of investing.


4. Fidelity MSCI Health Care Index ETF (FHLC)

  • Expense Ratio: 0.08%
  • One-Year Return: 29.76%
  • Five-Year Annualized Return: 15.11%
  • Dividend Yield: 1.46%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings: The top holdings in the FHLC investment portfolio include Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Abbott Laboratories (ABT), AbbVie (ABBV), and Pfizer (PFE).
  • Years Up Since Inception: 6
  • Years Down Since Inception: 1

Fidelity is a massive company that has grown to become a household name thanks to its insurance division. It’s also one of the biggest and most well-trusted fund managers on Wall Street.

The company’s MSCI Health Care Index ETF has become a prime option for retail investors who want to gain diversified exposure to the U.S. health care industry.

The ETF was designed to track the MSCI USA IMI Health Care Index, which represents the universe of investable large-cap, mid-cap, and small-cap U.S. equities in the health care sector.

As can be expected from the vast majority of Fidelity funds, the FHLC is a top performer on the market with a relatively low expense ratio.


5. iShares Nasdaq Biotechnology ETF (IBB)

  • Expense Ratio: 0.46%
  • One-Year Return: 38.14%
  • Five-Year Annualized Return: 13.38%
  • Dividend Yield: 0.19%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings: The top holdings in the iShares Nasdaq Biotechnology ETF include Amgen (AMGN), Gilead Sciences (GILD), Illumina (ILMN), Moderna (MRNA), and Vertex Pharmaceuticals (VRTX)
  • Years Up Since Inception: 15
  • Years Down Since Inception: 4

iShares has become yet another leading fund manager on Wall Street, and the firm’s Nasdaq Biotechnology ETF is yet another strong option to consider if you’re looking for diversified exposure to the U.S. health care sector.

The fund was specifically designed to provide exposure to the biotechnology and pharmaceuticals subsectors of the health care industry, and does so by investing in biotechnology and pharmaceutical companies listed on the Nasdaq.

As an iShares fund, investors will enjoy market-leading returns through a diversified portfolio of investments selected by some of the most trusted professionals on Wall Street. The IBB expense ratio is around the industry-average ETF expense ratio of 0.44%, according to The Wall Street Journal, but the fund’s expenses are justified by its outsize returns.


6. iShares U.S. Healthcare Providers ETF (IHF)

  • Expense Ratio: 0.42%
  • One-Year Return: 31.67%
  • Five-Year Annualized Return: 16.5%
  • Dividend Yield: 0.54%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings: The top holdings in the IHF include UnitedHealth Group (UNH), CVS Health (CVS), Anthem (ANTM), HCA Healthcare (HCA), and Teladoc Health (TDOC)
  • Years Up Since Inception: 13
  • Years Down Since Inception: 1

The iShares U.S. Healthcare Providers ETF is designed to provide exposure to a different area of the health care industry. Instead of investing in companies that create treatments and therapeutic options, the IHF fund invests in companies that provide health insurance, specialized care, and diagnostics services.

To do so, the ETF invests in an index designed to track large U.S. health care providers.

The fund comes with an expense ratio that’s slightly lower than the average for ETFs, while providing performance that’s hard to ignore. While IHF isn’t the best dividend payer, the iShares U.S. Healthcare Providers ETF does provide compelling returns, making it a strong pick for any health care investor’s portfolio.


7. iShares U.S. Medical Devices ETF (IHI)

  • Expense Ratio: 0.42%
  • One-Year Return: 36.77%
  • Five-Year Annualized Return: 23.60%
  • Dividend Yield: 0.50%
  • Morningstar Rating: 5 out of 5 stars
  • Top Holdings: The largest holdings in the IHI investment portfolio include Abbott Laboratories (ABT), Thermo Fisher Scientific (TMO), Medtronic (MDT), Danaher (DHR), and Stryker (SYK).
  • Years Up Since Inception: 12
  • Years Down Since Inception: 2

The iShares U.S. Medical Devices ETF gives investors access to a diversified portfolio of stocks in the medical device subsector. Investments in the company center around products like glucose monitoring devices, robotics-assisted surgery technology, and devices that improve clinical outcomes for back surgery patients.

In order to provide this exposure, the iShares U.S. Medical Devices ETF tracks an index composed of domestic medical devices companies.

While the expense ratio on the fund is about average, its performance over the past 10 years has been anything but, with annualized returns throughout the period of more than 18%, earning it a perfect five-star rating from Morningstar.


8. iShares Global Healthcare ETF (IXJ)

  • Expense Ratio: 0.46%
  • One-Year Return: 19.93%
  • Five-Year Annualized Return: 11.51%
  • Dividend Yield: 1.27%
  • Morningstar Rating: 2 out of 5 stars
  • Top Holdings: The largest holdings in the iShares Global Healthcare ETF are Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Roche Holdings (ROG), Novartis (NOVN), and Abbott Laboratories (ABT).
  • Years Up Since Inception: 12
  • Years Down Since Inception: 3

If you’re not interested in choosing subsectors of the health care industry to invest in and would rather have widespread exposure to all sectors of health care in all economies, whether developed or emerging, the iShares Global Healthcare ETF is a strong pick.

The ETF comes with an expense ratio that’s nearly in line with the industry average, but its holdings are some of the most diverse in the health care ETF space.

Moreover, the IXJ ETF is known to produce relatively reliable gains year after year, closing in the green in 12 of the past 15 years.


9. Invesco S&P 500 Equal Weight Health Care ETF (RYH)

  • Expense Ratio: 0.40%
  • One-Year Return: 27.93%
  • Five-Year Annualized Return: 13.81%
  • Dividend Yield: 0.51%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings: The largest holdings in the RYH investment portfolio are Illumina (ILMN), Eli Lilly (LLY), Alexion Pharmaceuticals (ALXN), Abiomed (ABMD), and Catalent (CTLT).
  • Years Up Since Inception: 11
  • Years Down Since Inception: 3

Founded in 1935, Invesco is a fund manager that’s been around the block more than a few times. It’s all but expected that the firm would make an appearance in just about any “top ETF” list.

Based on the S&P 500 Equal Weight Health Care Index, the ETF provides diversified exposure to all health care stocks listed on the S&P 500. That means when you purchase shares of RYH, you’ll be tapping into a wide range of health care stocks.

In fact, the S&P 500 represents more than 70% of the market cap of the entire U.S. stock market, which is why it’s often used as a benchmark. So, by tapping into every health care stock listed on the index, you’ll be tapping into some of the highest quality U.S. companies in the space.


10. SPDR S&P Biotech ETF (XBI)

  • Expense Ratio: 0.35%
  • One-Year Return: 66.31%
  • Five-Year Annualized Return: 22.56%
  • Dividend Yield: 0.2%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings: The largest holdings in the XBI portfolio are Vir Biotechnology (VIR), Novavax (NVAX), Ligand Pharmaceuticals (LGND), Agios Pharmaceuticals (AGIO), and BioCryst Pharmaceuticals (BCRX).
  • Years Up Since Inception: 11
  • Years Down Since Inception: 3

Another fund offered up by State Street Advisors, the SPDR S&P 500 Biotech ETF is an impressive option. While it’s the last on this list, it has also been the top performer on this list over the past year and third best performer in terms of annualized returns.

The XBI ETF was designed to track the S&P Biotechnology Select Industry Index, an index designed to track the biotechnology subsector of the health care industry. As a result, an investment in this fund means you’ll be investing in all biotechnology companies listed on the S&P 500.

Not to mention, while returns on the XBIO have been impressive to say the least, the expense ratio on the fund is below the industry average. While the SPDR S&P Biotech ETF isn’t the biggest income earner on this list, it is a strong play with a relatively consistent history of producing gains far beyond those seen across the wider market.


Final Word

Health care ETFs are a great option for investors who are interested in using their investments to create some good in the world. Not only are the top ETFs in this space known for producing incredible returns, it feels good knowing that your investment dollars are helping companies produce medications, devices, and services designed to improve quality of life and extend the length of the lives of your fellow man.

Although investing in health care ETFs is a promising way to go about building your wealth in the stock market, it’s important to remember not all ETFs are created equal. So, it’s best to do your research, looking into key stats surrounding historic performance and expenses before diving into any fund.

Nonetheless, the ETFs listed above are some of the strongest performers in the health care industry, and make a great first watchlist for the newcomer to health care ETF investing.

Source: moneycrashers.com

How to Adjust Your Federal Income Tax Withholding Allowances

My husband and I were recently shocked by the amount of our income tax refund. At first, we were elated. It was enough to pay off our car, allowing us to live debt-free. At the same time, we were kicking ourselves for not having this money available for use during the past year.

Maybe you’ve had a similar experience — or the opposite (and decidedly less pleasant) one where you’ve had to pay more money in federal income taxes than you expected. Regardless, the issue is the same.

In both these situations, the amount withheld from your paycheck isn’t coinciding with the amount you really owe.

The best way to fix it is to adjust your federal income tax withholdings, which you can do in a few simple steps. But only make such an adjustment if you’re sure you need to.

When to Adjust Your Income Tax Withholding

You can adjust your withholding at any time. However, many life events can impact your taxes, so it’s a good idea to update your withholding whenever something significant changes.

These life events are a red flag you may need to revisit your withholding.

1. You Started a New Job

When you get a new job, your employer requires you to fill out a W-4 so they can determine how much federal income tax to withhold from your paycheck.

It may seem like just another routine part of your onboarding paperwork, but it’s crucial to complete the form accurately to ensure you won’t end up with an unexpected year-end tax bill.

2. You Got a Big Refund

If you received a large tax return from the IRS for last year’s taxes, that means your employer was taking too much money out of your paycheck. It’s exciting to get a big check, but think of it this way:

That’s money that belongs to you that you were essentially loaning the government interest-free. If you didn’t do that, not only could you have used that money throughout the tax year to pay for your expenses, but you could also have invested it and received interest on it.

It’s exciting when you can do something smart with your tax refund, but it is not the best financial situation.

For example, say you got a refund of $1,000. You gave the government $1,000, and the government gave you back $1,000.

Had your tax withholding amount been correct, you could have invested that $1,000 or had it available in an emergency fund instead. Instead, you gave the federal government an interest-free loan.

The IRS will only refund the amount you overpaid, with no interest. So your goal should be to have zero tax refund, or close to it.

3. You Owe Money to the IRS

It’s an awful feeling when you owe a large amount of money to the government, especially if you thought you might be getting a refund. But as with anything you must save up for, you need to put a little extra money aside with each paycheck to cover a considerable expense.

One way to do that is not to have the money in your possession at all. Out of sight, out of mind. Increase your withholding so the government gets the money before you receive it.

For example, if you owe $1,000 and get paid weekly, you can spread that $1,000 out over 52 weeks. So instead of owing the government $1,000 in one lump sum, give them an extra $20 each week to avoid owing when you file your taxes at the end of the year.

4. You’re Expecting Life Changes

When your life changes, so do your taxes.

Did you get married? Have a baby? Buy a home? Start giving charitable contributions? Are you expecting any of these changes in the next year?

All these things affect your taxable income and tax breaks like itemizing versus claiming the standard deduction or claiming the child tax credit. So take the opportunity to review your tax withholding and adjust accordingly.


How to Adjust Your Federal Tax Withholding

To adjust the amount of taxes withheld from your paycheck, the first step is on you, and the rest is on your employer. There are a few different methods to determine the withholding that makes the most sense for your tax situation.

Before you get started, have your previous year’s tax documents handy as well as your last pay stub.

1. Form W-4 Employee’s Withholding Certificate

If it’s been a few years since you filled out a Form W-4 for your job, you might think you need to calculate the number of allowances you need to claim to get the right withholding. But allowances aren’t part of Form W-4 anymore.

The Tax Cuts and Jobs Act of 2018 eliminated personal exemptions — a set amount taxpayers could deduct for themselves, their spouse, and each of their dependents

The old allowance method of calculating withholding was tied to those exemptions, so it didn’t make sense to use them anymore, and Form W-4 was redesigned in 2020 to reflect a new way of estimating your tax liability. Now, it includes just a handful of steps to help you complete the worksheet and adjust your withholding.

If you and your spouse are a two-earner household, pay special attention to Step 2, whether you’re going to be married filing jointly or separately, as it has instructions for joint filers that both hold jobs.

If you need more help, the IRS has a more user-friendly tool: a withholding calculator.

2. IRS Withholding Calculator

The easy-to-use IRS Tax Withholding Estimator is on the IRS website. To use it, you answer a series of questions about your filing status, dependents, income, and tax credits. That’s where having your previous tax documents and last pay stub comes in handy.

3. Fill Out a New Form W-4

Once you’ve used the Tax Withholding Estimator tool, you can use the results of the calculator to fill out a new Form W-4. Give it to your employer’s human resources or payroll department, and they’ll make the necessary adjustments.

Some employers have an automated system for submitting withholding adjustments, so check with your employer to see if they have this option available.

It’s a good idea to take action as soon as you know you need to adjust your withholding since it will impact every paycheck you earn for the rest of the year.


Final Word

The lower your withholding, the less tax your employer will withhold from your paycheck. That may seem like a good thing, but you don’t want to have too much withheld or you could be liable for an underpayment penalty when you file.

Managing taxes can be confusing, and withholding is just the first of many things you need to know to handle your taxes well. For more guidance, check out our complete tax filing guide.

Source: moneycrashers.com

Someone Took Out a Loan in Your Name. Now What?

Wise Bread Picks

Identity theft wears many different faces. From credit cards to student loans, thieves can open different forms of credit in your name and just like that, destroy your credit history and financial standing.

If this happens to you, getting the situation fixed can be difficult and time-consuming. But you can set things right.

If someone took out a loan in your name, it’s important to take action right away to prevent further damage to your credit. Follow these steps to protect yourself and get rid of the fraudulent accounts.

1. File a police report

The first thing you should do is file a police report with your local police department. You might be able to do this online. In many cases, you will be required to submit a police report documenting the theft in order for lenders to remove the fraudulent loans from your account. (See also: 9 Signs Your Identity Was Stolen)

2. Contact the lender

If someone took out a loan or opened a credit card in your name, contact the lender or credit card company directly to notify them of the fraudulent account and to have it removed from your credit report. For credit cards and even personal loans, the problem can usually be resolved quickly.

When it comes to student loans, identity theft can have huge consequences for the victim. Failure to pay a student loan can result in wage garnishment, a suspended license, or the government seizing your tax refund — so it’s critical that you cut any fraudulent activity off at the pass and get the loans discharged quickly.

In general, you’ll need to contact the lender who issued the student loan and provide them with a police report. The lender will also ask you to complete an identity theft report. While your application for discharge is under review, you aren’t held responsible for payments.

If you have private student loans, the process is similar. Each lender has their own process for handling student loan identity theft. However, you typically will be asked to submit a police report as proof, and the lender will do an investigation.

3. Notify the school, if necessary

If someone took out student loans in your name, contact the school the thief used to take out the loans. Call their financial aid or registrar’s office and explain that a student there took out loans under your name. They can flag the account in their system and prevent someone from taking out any more loans with your information. (See also: How to Protect Your Child From Identity Theft)

4. Dispute the errors with the credit bureaus

When you find evidence of fraudulent activity, you need to dispute the errors with each of the three credit reporting agencies: Experian, Equifax, and TransUnion. You should contact each one and submit evidence, such as your police report or a letter from the lender acknowledging the occurrence of identity theft. Once the credit reporting bureau has that information, they can remove the accounts from your credit history.

If your credit score took a hit due to thieves defaulting on your loans, getting them removed can help improve your score. It can take weeks or even months for your score to fully recover, but it will eventually be restored to its previous level. (See also: Don’t Panic: Do This If Your Identity Gets Stolen)

5. Place a fraud alert or freeze on your credit report

As soon as you find out you’re the victim of a fraudulent loan, place a fraud alert on your credit report with one of the three credit reporting agencies. You can do so online:

When you place a fraud alert on your account, potential creditors or lenders will receive a notification when they run your credit. The alert prompts them to take additional steps to verify your identity before issuing a loan or form of credit in your name. (See also: How to Get a Free Fraud Alert on Your Credit Report)

In some cases, it might be a good idea to freeze your credit. With a credit freeze, creditors cannot view your credit report or issue you new credit unless you remove the freeze.

6. Check your credit report regularly

Finally, check your credit report regularly to ensure no new accounts are opened in your name. You can request a free report from each of the three credit reporting agencies once a year at AnnualCreditReport.com. You can stagger the reports so you take out one every four months, helping you keep a close eye on account activity throughout the year. (See also: How to Read a Credit Report)

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Someone Took Out a Loan in Your Name. Now What?

Source: wisebread.com

12 Hidden Costs of Raising a Child – Expenses Parents Should Budget For

A USDA report pegs the total cost of raising a child at $233,610, or $284,570 if you factor in future inflation. That includes only the basics however, and excludes costs like helping with college education, birthday parties, and holiday gifts.

Include those, and you’re looking at $745,634, according to a report by NerdWallet — a jarring amount, no matter how much you earn.

Most of us know that kids come with extra costs like clothing, food, and possibly college tuition. But what about the hidden costs of raising a child? Kids require more than food and clothes, and often the less obvious costs get lost in estimates of just how much children cost to rear.

As you consider having children or plan your finances for an existing family, keep the following costs in mind. Just remember that although these expenses are common, they’re not written in stone, and you do ultimately control how much your own children cost you.

Hidden Costs of Raising a Child

Many parents, particularly mothers, take a career break to raise young children in their first years and often up to school age. It’s not like pressing the pause button and resuming play where you left it. Taking an extended break comes with significant costs, some less obvious than others.

1. Lost Income

On the obvious side, you lose out on the income from those years spent outside the workforce.

Imagine a family where both partners work, and upon having their first child, the mother decides to take a career break. They have a second child three years later, and the mom decides to stay at home until the youngest starts kindergarten at age 5.

That’s eight years of lost income. At a median full-time salary of $52,312 calculated by BLS, that comes to $419,496 in lost wages, not including wage growth over the next eight years.

This says nothing of lost retirement benefits, such as 401(k) matching, or lost returns on your own contributions to investments you could have made with that extra income. Compounded over the next 30 years, those lost returns can amount to millions of dollars.

2. Lost Career Momentum & Potential

Beyond the lost years of income, becoming a stay-at-home parent can stunt your career potential.

By the time you’re ready to reenter the workforce, you’ve fallen vastly behind your colleagues who have had many years to climb the corporate ladder. They’ve been advancing and winning promotions, while you’d be lucky to reenter your industry at the same level where you left.

The opportunity cost doesn’t end there, either. In today’s world of disruption and fast-paced change, eight years of falling out of touch with industry trends, best practices, and technological innovations puts you at a deep disadvantage compared to people still in the workforce and up to speed.

The bottom line: parents who take a break of several years from their career may reenter the workforce at a lower level than they left, and advance less over the remainder of their career. While there’s surprisingly little research on this effect, one study by Adzuna found that Brits who took a five-year career break took an average annual salary loss of £9,660 (about $12,500).

3. Less Time for Side Hustles

Even among parents who don’t take a career break, they simply don’t have the same free time to build extra income through a side hustle.

Historically, I spent much of my Saturdays working on either my business or writing. When my daughter was born, that came to an abrupt end, first because I was so sleep-deprived and later because my wife wouldn’t hear of it.

My father told me growing up that the 40-hour workweek was a baseline for survival, and it’s what you do outside those hours that determines your success, particularly in your 20s and 30s.

Although I believe in creating passive income streams and pursuing financial independence, you need to save a lot of money in the beginning to build momentum. That comes from a high savings rate and a high income, which often requires side gigs.

It’s not so easy to run a business on the side of your full-time job when you have young children.

4. Higher Housing Costs

A family of two can share a one-bedroom apartment. A family of three, four, or five? Not so comfortably.

At the time of this writing, Apartment Guide lists the average one-bedroom apartment rent at $1,621, compared to the average two-bedroom apartment rent of $1,878. That’s a difference of $257 per month, or $3,084 per year, just to add one more bedroom.

Larger homes cost more money, whether you rent or buy. And with the extra square footage comes higher utility costs to light, heat, cool, and power the property and everything in it.

They also require more maintenance for homeowners. The larger the roof, the more square footage there is to spring a leak. The larger the lawn and grounds, the more time and/or money they cost to maintain. And so on.

Expect to pay thousands of dollars more each year for a home that can accommodate your children, not just you and your spouse.

5. Transportation Costs

The same logic applies to transportation.

According to Kelley Blue Book, the average cost to buy a new compact car is around $20,000. The cost to buy a midsize SUV? A hefty $33,000, representing a 65% increase in cost.

As with housing, the difference in costs doesn’t end at the sticker price. It costs more to insure and fuel a beastly SUV than an efficient compact. When your kids reach their teenage years and start driving, they’ll need car insurance, which many parents pick up.

(Personally, I had to pay for my own as a teenager, and I recommend you do the same with your kids to give them practice earning and budgeting for real world expenses. But I digress.)

Some parents even go so far as to give their teenage kids a car, whether a hand-me-down or buying it for them as a gift.

Again, these costs remain voluntary. But it’s harder to drive your kids, their friends, and their gear to hockey practice in a sporty compact than in a minivan or SUV.

6. Medical Costs

People of all ages need medical care. And in the United States, medical care is expensive, no matter how you approach it.

Higher Health Insurance Premiums

Adding more people to your health insurance plan adds to your monthly premium. Period.

Well, not quite period. Some insurers, like Blue Cross Blue Shield, charge for each additional child up to the first three, then stop charging extra and only charge for the three oldest under the age of 21. Regardless, expect to pay more for family health insurance when you have children than you’d pay as a couple.

You may also decide you need more coverage as a family with kids than you did as a couple. For example, you may opt for dental coverage, or more inclusions, or a lower yearly ceiling on out-of-pocket expenses.

Higher Out-of-Pocket Expenses

Kids get into trouble, break their arms playing soccer, step on rusty nails while running around the neighborhood barefoot. And before they do that, babies require plenty of checkups and medical care of their own.

Every time they visit a doctor, need a prescription filled, or look cross-eyed at the health care system, you can expect to get hit with an out-of-pocket bill. Few health insurance plans cover 100% of all medical expenses with no deductible, and those few charge outrageous premiums.

And kids come with other medical costs. If you don’t want your kids to have crooked teeth, suddenly you find yourself with orthodontist bills. Eye exams, contact lenses, glasses — the list goes on.

Your kids will need plenty of medical care between birth and when they enter the workforce, and you’ll be on the hook for every penny.

7. Lessons, Tutoring, and Other Extracurriculars

If your child has dyslexia, they may need special tutoring to help them learn how to read. Many children need speech therapy as young kids. Many others require academic tutoring at some point or another.

If your kids want to learn an instrument, dive deeper into a sport, or pick up just about any hobby, they’ll need lessons.

Parents always forget to budget for these sorts of expenses until they strike, but kids — and just as often their parents — may want or need more than what resources their school offers for free. And when it happens, you need to be prepared to open your wallet.

8. Baby Paraphernalia

I was shocked and appalled at the amount of baby paraphernalia that flooded our apartment when we had a baby.

At every turn, I fought my wife to stop buying so much stuff. And at every turn, I lost the battle. She insisted on buying every gadget, every “cute” piece of baby clothing, every piece of nursery furniture she could get her hands on. From infrared baby monitors to smart chips that attach to diapers to track vital signs, we have it all.

As a minimalist, it drives me insane. Like so many middle-class parents, we have far more baby items than we need. Eventually, I stopped tallying the cost because it was pushing my cortisol levels through the roof.

You may consider yourself a reasonable human being, vigilant against unnecessary spending. But new parents get both anxious and excited — and their response to both is usually to buy more stuff. When you or your spouse gets pregnant, budget extra for spousal splurges when you try to predict how much it costs to have a baby.

9. Toys and Gifts

Again, parents all too often go wild buying gifts, toys, and unnecessary clothes, all in the name of spoiling their children.

It’s so insidious that many parents go into debt each holiday season. Between gifts, swag, and travel, the average American family spends $1,050 at the holidays according to a 2019 National Retail Federation study reported by USA Today.

You can and should fight the urge. But parents overspend on gifts and toys all the time, so it bears including here.

10. Electronics

Increasingly, kids need electronics for schoolwork, not just as frivolous gifts. In the era of COVID-19, they’ve become mandatory learning tools.

Laptops and tablets aren’t cheap though, and they come with notoriously short lifespans as they slip into obsolescence after a few short years. Between the time a child is old enough to use one and the time they move out and pay their own bills, they’ll likely go through dozens of devices between phones, tablets, laptops, and gadgets that haven’t been invented yet but will be all the rage 15 years from now.

Added together, that comes to tens of thousands of dollars.

11. Travel Costs

My wife and I once looked up the cheapest flights for the following week from our then home. We booked flights to Bulgaria for $160 round trip per person and spent only a few hundred dollars over the entire next week.

That doesn’t happen when you have kids, for several reasons.

First, you can’t just up and go during the travel offseason when you feel like it. Your kids have school, so you have to travel when everyone else and their mother travels: during school holidays. Which means always traveling during the expensive high season.

Second, you have to pay for more, well, everything. More airline tickets. More hotel rooms, or a larger home on Airbnb. And then come the meals, entertainment, entrance passes, and so forth. All of it costs more money.

When you travel with an infant, you can avoid many of those costs. But they don’t stay infants very long, and soon you find yourself traveling with teenagers who insist on doing the exact opposite of what you want to do. So you end up paying to do both.

And good luck doing low-key travel like backpacking or hiking trips with social media-addicted kids and teens.

If you really want to travel the way you used to with your spouse, you end up either having to hire a nanny or ship your kids off to summer camp — both of which cost an arm and a leg in themselves.

12. Life Insurance

Many couples can responsibly dodge life insurance, provided they both work. If the worst happens, the surviving spouse can still pay their bills, albeit with the possible need to downsize.

Add children to the mix, however, and you have more mouths to feed — plus all the other expenses outlined above. Losing one spouse, particularly a primary breadwinner, could tip the family into poverty or at the very least require a massive, painful change in lifestyle.

Having children doesn’t necessarily require you to buy life insurance. I don’t have it, as one of the many side benefits of the FIRE lifestyle. But when you have children, you need to plan for contingencies like losing a spouse, and making sure your family can survive without them.

Often that means a life insurance policy, and even when it doesn’t, you still need a plan in place.


Final Word

Having children is not all financial doom and gloom. Yes, some expenses remain unavoidable, no matter how frugally you live. But many of the expenses above represent average expenses among parents with little financial literacy. You can minimize many of them with a little more awareness, and avoid others entirely.

The costs of raising children also operate on an economy of scale. While you and your spouse don’t want to share a bedroom with your child after the first few months, you can put two children in the same second bedroom, for example. Younger children can benefit from hand-me-downs such as cribs, strollers, and clothes. And once you bite the bullet to buy a minivan, having a third child doesn’t change your transportation needs any further.

It doesn’t have to cost $745,634 to raise a child. But it certainly can if you’re not careful.

Source: moneycrashers.com