What percent of income to allocate to mortgage?

 There are various rules of thumb for how much of your income to allocate to housing costs. Traditionally about 1/3 of take home pay was the guideline but with housing costs, both rents and mortgages, rising dramatically, you need to dive a bit deeper into your finances to determine what is a "safe" percentage to pay for housing. Unfortunately many young Americans will look at the numbers and laugh. If only! That's when it's time to think about Plan B which might be getting a roommate, living with parents, or moving to a less expensive area. To commit to paying 50% or more of income for housing means you won't be able to afford to invest for retirement, pay off student loans, get married, buy a home, start a family, etc. Hard choices. Maybe it's time to investigate affordable housing initiatives in your city.

Check out this detailed description of calculating housing affordability: https://www.bankrate.com/mortgages/what-percent-of-income-should-go-to-mortgage/#percent-income

How to Negotiate with Creditors to Reduce your Debt

 Many Americans are drowning in debt, especially medical debt, much of which is on high interest credit cards, getting deeper every year. Don't stick your head in the sand and ignore it. It won't go away; in fact, it will keep growing, often far beyond the original amount charged. 

Many creditors will reduce your interest rate if approached the right way. If you fail to try, you're stuck with debt that you might have been able to reduce with some time on the phone. Failing to pay, or defaulting, can ruin your credit score and future loan prospects, result in legal action against you or even seizure of your property. the biggest impediment to these tactics is debtor inertia according to Wall Street Journal writer Beth DeCarbo (WSJ 2/21/23). 

The BEST resource for persons in debt is the book Surviving Debt: Expert Advice for getting Out of Financial Trouble. Well worth the very modest cost of $20: https://library.nclc.org/SD/subscribe

 "A leading resource for nearly 30 years, and recently named "the best all around guide to navigating debt" by Business Insider, this updated 2023 edition of Surviving Debt provides practical and accessible advice from the nation’s consumer law experts on how to deal with crushing debt."

Since it is tax time, let's start with federal tax debt. "There is one thing about tax bills: They don't get better with age." Moe than 10 million taxpayers were delinquent in 2021 so you are not alone. Failure to file a tax return or pay taxes owed costs 5% of the unpaid taxes each month, up to 25%. On top of that 7% interest, compounded daily, is charged on the amount owed. On top of all that is a late payment penalty of  0.5% of the amount owed, accruing monthly. The longer you wait to deal with the debt, the worse it gets. If you fail to pay, the IRS can garnishee wages, take money from bank accounts, and seize and sell vehicles and real estate. Yikes! If that isn't motivation enough... 

What to do? Contact the IRS to set up a payment plan. If that is not feasible consider an "offer in compromise" which can reduce the overall liability. But avoid scammers who claim they can easily reduce your tax debt... for a fee. Deal directly with the IRS. 

If you've lost your job, incurred massive medical debt (only in America!), you may be able to negotiate to delay paying by convincing the IRS that you simply cannot pay... at this time so the debt becomes temporarily "not collectible" which provide temporary breathing space. 

Credit Card Debt

Borrowers can call their credit card companies directly to negotiate a lower interest rate, lower minimum payment, waive late fees or even reduce the amount owed. Another option is to transfer the debt to a zero interest card (for a limited time) or card with a lower rate but this may only prolong the problem. You need to be able to pay off the debt within the introductory low interest period, otherwise the interest rate on the new card may skyrocket. Absolutely avoid payday loans!

The National Foundation for Credit Counseling https://www.nfcc.org/ can help with credit card debt. The nationwide network can help consumers set up a budget and negotiate with credit card companies to set up a debt management plan. 

Mortgage Debt

Homeowners behind on their payments should contact their loan servicer (listed on monthly bill) ASAP. be honest about your situation and work with servicer to develop a repayment plan. You can request forbearance which can reduce or pause monthly payments. Avoid mortgage relief scammers. 

Student Loan Debt

A lot is in limbo with the Supreme Court decision being decided in summer 2023. Unlike most debts, student loans cannot be written off in bankruptcy. Some Utah politicians who filed multiple bankruptcies and sold homes on short sales and got relief from their debts are dead set against student loan relief. Contact your loan servicer to work out a plan. Explore income-driven repayment plans. Consider consolidating federal student loans with a lower monthly payment. 

Medical Debt

Only in America. The main driver of America's high bankruptcy rate is medical debt. Almost 1/4 of Americans owe medical or dental debt. See other sources in this blog for how to avoid and/or deal with medical debt. Nonprofit credit counseling services can help. Work with the hospital to ask for financial assistance, cost reduction or payment plans. Be prepared to provide documentation for your financial situation. Grants may be available from the Patient Advocate Foundation https://www.patientadvocate.org/.

It's Tax Time... and also retirement investing time

 In 2021, 85% of all American households made zero contributions to Individual Retirement Accounts (IRAs), whether traditional IRA or Roth IRA. anyone with earned income and non-earning spouses with a working spouse, can contribute up to $6,000 for the 2022 tax year. Persons 50 and older can invest an additional $1,000 in an IRA. 

Traditional IRAs offer a tax deduction at tax time but withdrawals in retirement are taxed. Roth IRAs provide no immediate income tax deduction but withdrawals in retirement are tax-free. Income limits for Roth contributions are $129,000 for single filers and $204,000 for married joint filers. Filers who earn too much to qualify for a Roth can do a "back door" Roth. First contribute to a non-deductible traditional IRA and then move the money to a Roth IRA, paying taxes on the earnings and then leave the money to grow tax free.

With most taxpayers over paying their taxes through withholding and getting a refund, consider starting or boosting your IRA contribution with your refund. Your future self will thank you. 

Which state has the largest houses? Why are houses getting larger as family size shrinks?

 Thanks to Marketplace Morning Report you can find the answer to which state has the largest houses. 

"Even as household sizes have declined, the average home grew from 909 square feet in 1949 to 2,480 in 2021."

"But what does more space get you? Many assume that more space leads to happiness. The Organization for Economic Cooperation and Development, for example, measures the number of rooms per person as part of its indicator for quality of life. But there’s no direct relationship between more space and wellbeing, according to a British study."

"The bigger the home, the greater likelihood for wasted space, which, in the end, is wasted money."
 
"When asked what people waste their money on, the first thing that Nobel Prize winning economist Robert Shiller named was bigger homes." 

So, which state has the largest homes? And find lots more fascinating data about American homes. See:

The 2022 American Home Size Index

https://www.ahs.com/home-matters/real-estate/the-2022-american-home-size-index/

Key Findings

• Fast-growing tech hubs in the Rocky Mountains have the largest homes. In Colorado Springs, the average home is 2,760 square feet – the largest of any major U.S. city.
• Areas with newer housing stock have larger homes. In Utah, the state with the largest homes, the typical home is 33 years old – 11 years newer than the U.S. median.
• High-density coastal cities have the most expensive real estate. In New York City, there are 28,182 people per square mile, and homes cost $1,519.57 per square foot on average – each the highest such figure of any major U.S. city.
• Expensive real estate may be driving people to look for cheaper homes elsewhere. From 2020 to 2021, the population of New York City fell 3.5% – the second largest decline of any major U.S. city.

 

Do you have a long lost, neglected retirement account from a previous job?

 Americans are changing jobs much more frequently than in past decades, especially since the Covid Pandemic started. It's so easy to forget about a retirement account from a job three changes back. But there is help and you shouldn't wait until the eve of retirement to track down your money. 

If you aren’t sure how to locate a "lost" accounts (or whether any exist), there are ways to find out. One is the National Registry of Unclaimed Retirement Benefits, a database that allows you to hunt down old plans using your Social Security number. The National Association of Unclaimed Property Administrators also runs a searchable website, and the Department of Labor has a special database for abandoned plans.

If you have parents approaching or in retirement, help them check for forgotten retirement accounts. 

Benefits for Veterans & Their Caregivers

A comprehensive guide provides information on available benefits for veterans and their caregivers to assist with day-to-day living. This guide covers a range of topics, including:

• Different types of benefits that are available for veterans and their caregivers, including financial, housing, transportation, and caregiving support
• How veterans and caregivers can be entitled to respite care
• Different support groups available for veterans and caregivers 

"According to studies, caregivers of veterans have a mean age of 70 years; that’s a lot to take on so late in life, and yet family members are still rising to the challenge for their loved ones. It is also believed that as many as 5.5 million Americans are currently caring for a veteran.

Aside from the obvious toll that it takes on a person to provide physical, mental, and emotional support for their loved ones, there are more practical problems that arise. For example, caregivers may need to alter their work schedule, or even give up their career altogether, meaning that there is a direct financial impact on the household. Where a mortgage or rent needs to be kept up with, this loss of income could also have a significant impact on the housing situation.

There are government programs designed to financially aid carers of veterans and currently, it is thought that as much as $5.9 billion is being spent annually to support these people."

Check out the resource: https://bestmobilityaids.com/veteran-and-caregiver-benefits/