Not everyone has the aptitude or the knack for understanding financial topics and investment. This is why many people use the advice given by professionals in the finance industry e.g. accountants, financial advisors, financial planners etc. Yet, more often than not, people like sifting through the financial tips and advice offered by some of the best financial brains in the country. This enables them to harness the sound advice given by people in the know. If you’re keen on enhancing your savings, consider the following tips.
When You Want to Finance Your First Home
Tara Siegel Bernard at The New York Times states that several new programs could help cash-strapped homebuyers obtain financing for their first homes. For instance, Fannie Mae and Freddie Mac recently introduced programs that enabled middle-income borrowers to pay as little as three percent as a down-payment for buying a home. The Federal Housing Agency reduced its annual mortgage premium and requires a down-payment of at least 3.5 percent.
These schemes can be very fruitful for homebuyers who don’t have the requisite amount of savings. It is worth noting that some of these programs only apply to first-time buyers. In addition, homebuyers would need to do the math before they sign the dotted line. This is especially so because the added mortgage-insurance fees could end up making these deals more expensive than the regular mortgages.
When You Want to Purchase a New Vehicle
Jessica Anderson at Kiplinger’s Personal Finance encourages consumers to consider leasing a new car instead of purchasing it outright.
If you can pay for the vehicle in cash or keep it past the loan payoff date, the chances of your benefiting are higher. However, if you’ll always have to deal with car payments because of long-term loans, leasing a car makes better sense.
When you lease a car, your payments will typically be lower. This is because you’ll be paying for the car’s depreciation only over the duration of the lease. In addition, most leases have a duration of approximately three years. As such, a leased car will almost always be under warranty. According to The Week, leasing the 2015 Chevy Malibu for three years will save you $4,600 than if you purchased it with a five-year loan and sold it after three years.
When You Want to Reduce Your Auto Insurance Premiums
Karen Damato at The Wall Street Journal states that even a fender bender can be quite expensive, when it comes to your auto insurance premium.
A new study commissioned by Bankrate revealed that low-risk drivers who injure a person or causes property damage in an accident could expect to see a 40 percent hike in their insurance premiums. Similarly, a claim for bodily injuries could increase premiums by up to 80 percent in states like California or Massachusetts.
Insurance companies usually hike premium rates for drivers involves in such accidents for about four to five years. Competing insurers will offer lower rates even after you’ve been involved in an accident. Therefore, ensure that you shop around before renewing your existing policy at the higher rates.
When You Want to Finance a Vacation House
Anya Martin of The Wall Street Journal advises people to snap up a vacation home if they’ve always desired one. This is especially so because owning a second home offers tax deductibility on the mortgage interest for the first $1 million of financing.
Last year, the sales of vacation homes rose by 50 percent. Experts expect this trend to continue because of a healthy stock market and the aging generation of Baby Boomers. Lenders recently reduced the down-payment requirement on vacation home mortgages to 20 percent. In addition, many lenders are offering interest rates that match the interest rates applicable to primary homes.
It is worth noting that you will need to prove that you’ll be able to repay both mortgage payments – if you took out a mortgage on your existing home. In addition, you would also need to consider that the credit score requirements for financing a second home might be higher.
When You Want to Claim Tax Breaks from Previous Years
Kimberly Lankford at Kiplinger advises people to claim old tax credits. After all, you can file an amended return and get a refund for the extra credit up to three years after the date on which you filed your original return.
Imagine a situation where you find that you failed to capitalize on the American Opportunity Credit discount in your last tax return. This credit is worth $2,500 per student for each of the first four years of college. Clearly, filling a few forms to avail of this is not too much to ask for.
To claim this tax credit, you will need to file a 1040X form for each tax year that you want to amend. You will also need to amend any other tax forms affected by this change. The tax authorities could take as long as 16 weeks for processing the amendment. It is worth noting though, that reducing your federal tax bill also reduces your state income tax.
When You Want to Prevent Your 401(k) from Shrinking
Emily Brandon at US News & World Report urges people to plug the leaks in their 401(k) accounts. Failing to plug leakages, such as early withdrawals and loans, could diminish their retirement wealth by one-fourth.
Many people turn to their 401(k) accounts when they want to make some big-ticket purchases. But this only ends up diminishing the value of their retirement wealth. To plug these leakages, it makes sense to create an emergency fund outside of your retirement account. This fund would be your anchor in tough times. Similarly, avoid cashing out your 401(k) when you change jobs. Instead, consider transferring the funds into an Individual Retirement Account (IRA).
Financial experts say that loans are the least damaging way to access your retirement savings before time. However, these loans could become due immediately if you happen to leave or lose your job. In this scenario, failure to repay the loan equates to an early withdrawal.
When You Receive Calls from the IRS Concerning Unpaid Taxes
Brianna Ehley at The Fiscal Times cautions Americans from becoming victims of a dangerous tax scam.
Over the past couple of years, nearly callers claiming to be agents of the IRS have contacted 300,000 people, claiming that these individuals owe unpaid taxes. In addition, the callers mention that these individuals need to make the balance payment immediately via prepaid debit cards or payment vouchers or risk facing arrest, deportation or the loss of their driver’s license. Estimates suggest that approximately 3,000 taxpayers have paid up a collective $14 million, thereby becoming victims of this scam.
It is worth noting that the IRS always contacts people by old fashioned mail if they owe any taxes. In addition, the IRS never asks taxpayers to pay unpaid taxes via prepaid debit cards or wire transfers. In situations like this, keeping your wits about you can help you avoid losing your hard-earned money to unscrupulous individuals.