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October 8, 2024 by Brett Tams

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Learn what it truly means to work with a certified financial planner (CFP) and how personalized advice can help you set and achieve your financial goals.

What should you know before working with a certified financial planner? What strategies can help you navigate societal pressures and make personal financial choices? Host Sean Pyles talks to Magda Doemeny, a certified financial planner with NerdWallet Advisors, to discuss the power of personalized financial advice and behavioral budgeting to help you understand how to align your financial goals with your personal values. They begin with a discussion of the role of certified financial planners, including the fiduciary responsibility of CFPs, the specialized knowledge they bring to areas like estate planning, and common strategies for cutting through societal noise to focus on personal priorities. They also discuss the innovative concept of behavioral budgeting, which involves creating sustainable financial habits like limiting dining out.

NerdWallet Advisory LLC, dba NerdWallet Advisors, is an SEC-registered investment advisor and wholly owned subsidiary of NerdWallet Inc. The advice provided in this episode of Smart Money was for illustrative purposes only and not intended as financial or investment advice specific to your personal facts or circumstances.

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Episode transcript

This transcript was generated from podcast audio by an AI tool.

Sean Pyles:

Welcome to NerdWallet’s Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I’m Sean Pyles. This episode, we’re going deep into financial planning, what it actually means to work with a financial planner, how working with a planner can improve your finances and why we sometimes have such a hard time changing our financial behaviors.

Over the last few months, we’ve shared a series of conversations between our listeners, a certified financial planner from the NerdWallet Advisors platform and me. In these conversations, our advisor, Magda Doemeny, has given a range of advice to our listeners. Today, we’re going to hear Magda’s philosophy around financial planning, who might benefit from working with a CFP and how people can better their finances on their own. Magda, welcome back to Smart Money.

Magda Doemeny:

Thanks, Sean.

Sean Pyles:

We’ve talked about this before, but give us that refresher. What is NerdWallet Advisors and what is your role there?

Magda Doemeny:

I’m an advisor on the NerdWallet Advisors team and we offer affordable financial planning memberships, which gives you access to a certified financial planner like myself for a low monthly cost. What we’ll do is we’ll go ahead and take a look at your financial situation and come up with a financial plan and give you some bite-sized action items for you to try and accomplish your goals. That will give you unlimited access to myself or your advisor, and we’ll check in periodically, but ultimately you can access us by scheduling a call or sending us a message at any time.

Sean Pyles:

All right, so let’s start with financial planning 101. What does it mean to be a certified financial planner? What is the financial planning process like? Give our listeners the intel.

Magda Doemeny:

The financial planning process is diverse, just like everyone’s financial situation is diverse. And so ultimately, the high-level process starts with understanding somebody’s current financial picture and their goals. You can have two people who have the exact same financial makeup and different goals and they would have wildly different advice given to them, because there are some people who want to spend the last penny on the day they die. And there are some people who want to accumulate so much wealth, they can pass it on for generations.

And so the advice you might give to somebody would look very different from that perspective. But really, what you’re trying to do is figure out what somebody is trying to accomplish with their money, whether it’s pay down debt, purchase something large like a home or a car, or make sure they can retire at a certain age, and then help them come up with the right ways to accomplish that via savings vehicles or investment vehicles or certain types of accounts that might work better for their situation.

Sean Pyles:

What sort of information do you need to take in from a client before you can really understand what they’re working with financially and how you might be able to help them?

Magda Doemeny:

The most basic part that you want to take in is their current financial picture. Probably pretty straightforward, but all of their assets. So how much money they have today and what types of accounts it’s in, how much money they’re making, if anything, and any debts that they may have, whether it’s credit card or mortgage. We want to get that full picture, but we also want to know their personal situation. We want to know if they’re married, if they have children, if they’re divorced, do they have grandchildren? And then we also want to know again, those goals related to those types of things.

So it’s a pretty robust introductory process when you’re going through this, whether it’s for the first time or just with somebody new because it’s important that we understand your full picture. And the other important aspect of this I find with many people, especially those who maybe have debt, is really understanding what money means to them and how they think about money, because that may impact how we suggest doing certain types of financial planning.

Sean Pyles:

A lot of quantitative hard numbers like what’s your budget look like? Are you saving for retirement? And then the qualitative stuff, what do you feel about money? What do you want from your money?

Magda Doemeny:

Exactly. A perfect example is that for an emergency fund, traditionally on paper we would say if you have a dual-income household, which means there are two people in your household that are earning an income, you only need three months worth of expenses in a high-yield savings account for an emergency. Why? Because the likelihood of both of you losing your job at the exact same time is fairly unlikely. And so that three months of expenses plus the secondary salary should be enough to get you through getting a job again.

However, you can sit down next to somebody who says they’re very anxious about money, they’re worried they’re going to run out of it, and they are just hoarding as much cash as they possibly can. Now while I don’t want them to have that much cash and I might tell them that we should do something with it, I might suggest they have six months worth of expenses because I know that getting three months would just cause too much anxiety and that’s not worth it.

Sean Pyles:

Okay. Now let’s talk a bit about what it means to be a certified financial planner. We talk about CFPs a lot in the personal finance space. I’ve been going through the education process to get my CFP certification, so I know a lot about this, but some people may wonder what’s the big deal? So Magda, what’s the big deal?

Magda Doemeny:

The biggest deal is that we have an obligation as fiduciaries to do right by the client.

Sean Pyles:

Fiduciary, meaning you put their interest first.

Magda Doemeny:

That’s exactly right. So we’re not intended to sell them a product or give them something that isn’t in their best interest. So that’s really important. The secondary is that we’ve gone through the training to understand the intricacies of the financial system.

The value you can find here is you can get a broad, a CFP that has a broad range of information and you can get folks who specialize in certain areas that might be niche. That can be really helpful because you know that that person has spent a good amount of their career deep diving into a specific area like maybe estate planning or something like that.

Sean Pyles:

And CFPs can also connect you with people in the state attorney to help you draft those documents. They’re really your one-stop shop for other things in the financial world, getting your estate plan set up, finding insurance that you need, et cetera.

Magda Doemeny:

Exactly. It’s another thing on the list that’s important to us is telling you what we don’t know. So it’s important that we always say, “This is outside of my scope of work, but happy to point you in the right direction of where you could get that piece of your financial picture taken care of.”

Sean Pyles:

So thinking back over your 10-plus years of being a financial planner, what do you think makes the difference between someone who is able to really benefit from your relationship, what a financial planner brings to their life, and someone who doesn’t really have a successful relationship with a financial planner, you or someone else?

Magda Doemeny:

I do think to start, it’s really important that for better or worse you jive with your financial planner. You need to make sure, kind of like a therapist, that when they’re speaking, you’re listening and they need to know that. This isn’t all about dollars and cents. Like we talked about, part of it is emotional. Money can bring out emotions in people, so you want to make sure that you are able to communicate well with your financial planner. Outside of that, I think the other really important aspect of being successful is making sure that you can commit to the process that is set forth.

A lot of financial planners are creating a plan in some capacity. The plans can look different, some can be long, some can be short and one might work better for you than the other. But when they set forth the plan, the intention is to try to take those actions and then check in regularly, whether it’s every three to six months or so to make sure that the plan can get adjusted, because life happens and things change. You may change jobs or get a pay raise or get married or what have you. And all those things impact how you might think about your finances.

Sean Pyles:

I think people may underestimate the amount of work that they have to do when it comes to working with a financial planner. They might want a planner to do all of these things for them. But I, much like therapy, see the need to actually enact uncomfortable change sometimes to get what you want out of your finances. And that can be hard for people to grapple with. But I do want to talk about some through lines in the conversations that we had with our listeners over the past few weeks. One thing that stood out to me really is how similar financial planning is to therapy.

As a somewhat broad generalization, I’ve noticed two main camps of people who go to therapy. I say as someone who’s been to therapy myself, there are clients who want a therapist just to give them permission to do what they want and justify their emotions and behaviors. And there are maybe also in the other camp clients who want to be directed and given guidance around how to change. I did see that in our conversations with listeners. Some people wanted guidance, others just wanted your stamp of approval. Is that common in financial planning relationships?

Magda Doemeny:

I do think it’s common depending on their situations. The idea of stamp of approval, those tend to be folks who are maybe underspenders and they’re sometimes so knowledgeable about their finances that it’s a hindrance to their personal life. And so they may want you to say, “Hey, loosen up a little bit. It’s okay. You can afford that thing.”

Sean Pyles:

Right. It’s like our conversation with Sean who had over a million dollars in assets and was afraid to really use it to enjoy his life.

Magda Doemeny:

Exactly, exactly. Then there are other folks who come looking for guidance, whether or not they actually, they might actually be looking for you to tell them it’s okay. And the hardest part, but also the most gratifying part of our job is being able to, in this gentlest way possible, tell them that they do have to stop doing that thing or maybe they can’t accomplish the goal the way they thought they wanted to accomplish the goal and we do need to actually change the behaviors. And so whether or not those folks are always open to coming in wanting a stamp of approval and not getting it is one thing.

But I do think making sure that you can take somebody who wants a stamp of approval and change them into somebody who can take action is really empowering and a really fun part of the job. But there are definitely people who come in here in this planning process ready to make a change. They just don’t know what to do. And that’s amazing, because their eyes are open. They’re looking for not the answers, because we’re not going to give you the answers, but looking for the structure to be able to start to make good or different financial decisions.

Sean Pyles:

They’re open to change, which is a huge thing.

Magda Doemeny:

Sean Pyles:

What you were just saying reminds me of our listener, Jim from Milwaukee, who is interested in cashing out his retirement account to move to San Diego. He seemed to want that stamp of approval from you, and you and I were both kind of turned off by the idea about him cashing out his retirement. And so you did have to do a really careful pivot of what his financial goals were and say, “Hey, how can you make some more money where you are now and fund that move in a less risky way?” So that’s an interesting part of financial planning too. It’s about exploring alternative ways to get to where they want to go. Because there are so many options available to people and they may not really even realize that.

Magda Doemeny:

I do think a lot of it is about being creative and meeting them where they are. You do have to recognize maybe where your living situation is could impact their ability to execute on something that we’re suggesting. I might say, “Hey, your rent is too high.” And they may say, “Yep, that’s as cheap as it’s going to get here.” And so you have to find a way to, is there something else we can do to have the same result, which is increase your overall savings.

Sean Pyles:

Another common theme in our conversations was the idea of external pressure that people feel about the things that they quote should be doing with their money. One listener knew that she was spending too much on discretionary purchases, but felt like it was what she should be doing to have a certain lifestyle, even though it was causing trouble for her financially.

And she could fully acknowledge that, which was so fascinating to see. How can people cut through the noise and the shoulds and find out what they really want from their money and make sure that it’s a goal that they personally truly care about, not what other people expect of them?

Magda Doemeny:

It’s hard. I think in the environment that we have today with easy ways to spend your money and seeing easy ways to know how much everyone else has and/or not has, but how they spend their money doesn’t mean they have it, I do think that is a very big challenge for a lot of people. But I think giving yourself the space a couple of times a year, maybe every six months, you could call it new and you can call it over summer. It’s something you can work with a financial planner on to sit down and really ask those questions. What are you trying to accomplish?

Because I’ve noticed when folks come in here, they have these goals, but when you sit down and you ask them, does that thing that you bought or that thing that you said you wanted, is it more important than your retirement? Most of the time, they say no. Right? And so working with somebody to help you put your goals into context can be really helpful.

But I do think it’s hard to do that alone, but you should spend every six months or at least every year thinking about, “Okay, what’s changed in my life? What are the things that I’m trying to accomplish? Do I want to get married now? Has that changed from the year before? Do I want to buy a house?” I have folks all the time say they’ve been wanting to buy a house for years, and all of a sudden they said, “You know what? I don’t want to do that anymore.”

And that’s great. If that’s the decision that you’ve come to, we can adjust your finances to move, shift your money to do something different, travel more expensively now. So I think it’s tough, but-

Sean Pyles:

I think having the dialogue with a financial planner can be really helpful, especially in the beginning because I try to keep a running almost meta-narrative of my financial decisions where I ask myself, why did I do that? Why did I buy whatever? Why did I want to go on this specific trip? Why am I saving so much for retirement when all my friends are like the world’s burning? Why bother? And getting really clear on what it means for me to be making these decisions helps me feel more confident that I’m doing the right thing for myself. But it’s hard to get to that place of having that sort of higher level conversation without some guidance, at least initially.

Magda Doemeny:

Yeah, and I do think it’s really important to not spend too much of your time comparing yourself directly to the people, whether you know them or not, because what you don’t know is what’s behind the curtain. Somebody could be living a very lavish lifestyle and be in debt up to their eyebrows, and you would have no idea. That’s not how it looks, but that could be the reality.

And so I think that’s why it’s so important to talk to somebody about it, because we can pull you out of that world and look at your world and where your income is and where your expenses are, and ask you what lifestyle you truly want to lead and figure out how we can bridge the gap between all of those things.

Sean Pyles:

All right. Well, I want to go a little bit deeper into your personal financial philosophy. From our conversations, I know that you’re really into what you call behavioral budgeting. Can you describe what that is for us?

Magda Doemeny:

Behavioral budgeting is something that’s done in conjunction with exact budgeting or traditional budgeting, as you may have it. Traditional budgeting is putting down all your expenses with the dollar amounts and setting a goal that is dollar-based. You only want to spend $500 a month eating out. That type of budgeting is really important because you do need to know the dollars in and dollars out. But I have found that sometimes if you don’t incorporate behavioral budgeting in addition to that, you tend to fall off after a period of time, because it can be a lot of work to pay attention to every dollar that’s coming in and out every month for the rest of your life. Even just saying that out loud seems daunting.

So instead, I found that behavioral budgeting can help in that you can actually create a behavior in your life that could be more permanent and acts as a budgeting tool. That would be something like you only eat out twice a week. I’m not putting a restriction on the dollar amount that you can purchase when you eat out, but I’m taking somebody whose lifestyle was three or four or who knows, and asking them to check every week that they pick just two days. It’s a short timeline.

It’s usually a lot of the behavioral goals are weekly, so you can do it in your head. You don’t need a tool, you don’t need to write it down. You can say by Sunday or Monday, I did it or I didn’t do it. And it will naturally bring down how much you’re spending, and in theory, can be permanent. You get in the habit in order to execute on dining out only twice a week. It’s not just, “Oh, I can do that.” You actually have to learn how to plan. So every Sunday, you have to figure out what you want to eat for the week.

You have to make your grocery list, you have to go to the store, and maybe you have to do some meal prep, because if you don’t do those things, you will end up eating out more than twice a week. And so eventually, it becomes a habit. Sundays are my, do not bother me from three to five P.M. because I’m executing on my plan for the week.

Sean Pyles:

I think habit is such a key word here. You have to build up the routine of doing certain things in a certain way and being more intentional about it, especially in the beginning.

Magda Doemeny:

Absolutely.

Sean Pyles:

Okay, so Magda, as you know, despite many people’s best efforts, folks can really struggle to change their financial behaviors, like overspending or not setting aside money for retirement. What do you think it really takes to change financial behaviors?

Magda Doemeny:

I do think it does take a level of, I don’t know if discipline is the right word, motivation might be it. It’s not too dissimilar from other types of goals that I think many people can relate to, whether it’s health and nutrition goals. You’re thinking you’re not healthy, so you commit to finally going to the doctor for them to decide what is it? Or you buy a gym membership or you start working with a nutritionist.

All of those are the first steps in the process, but if you’re not able to actually be determined enough to learn and execute on the step-by-step of that process, which is for the gym, you got to come every three days and you got to do these workouts or the doctor’s going to say, “Okay, well, we need you to start eating these types of foods and we need you to adjust this,” and you have to actually execute on that. Your finances are the same thing, right? Coming to a financial planner helps be the person that tells you, here are some of the next steps you need to take.

But you do have to come into it with a mentality that it might not be easy, right? It’s not you’re going to come in here and somebody’s going to say, “Just do these two things. They’re all ten-minute exercises and voila, you’re a millionaire.” It’s not like that. It’s a slowly, but surely, you’re learning more about your finances, you are learning some techniques of things you can do differently, and you’re checking in somewhat regularly to make sure that we’re still on track for those things. And so I do think the fix it quickly is just not the mentality that you can have to be successful.

Sean Pyles:

Yeah. Have realistic expectations about what it means to change.

Magda Doemeny:

Sean Pyles:

And why you’re changing.

Magda Doemeny:

Sean Pyles:

Okay. Well, I want to talk about who might not need to work with a financial planner, because as we know, CFPs typically outside of platforms like NerdWallet Advisors can be quite expensive to work with. So who do you think is fine doing it on their own, maybe working with a financial coach or someone else?

Magda Doemeny:

I do think that it will depend on what they’re looking for. CFPs, in particular, do specialize in looking at very specific aspects of financial planning. And so I do think that folks who might be in very severe debt could benefit from working with a financial coach first. That could be somebody who is helping them just really hone in on their budget and potentially looking at some alternatives to their debt management, like credit counseling or something like that.

But I do think that it’s all, in general, access to a financial planner is usually cost prohibitive, which is what’s so great about NerdWallet Advisors is that it’s a low monthly fee, and so it does give you access to, gives financial planning access to the masses really. And I do think that there are some folks who might want something a little bit more robust on investing their assets and so that, you would want to have an investment manager look at your assets.

Sean Pyles:

Okay. Well, Magda, if you could give one piece of advice, and only one, to our listeners, what would that be?

Magda Doemeny:

I think it would be to give yourself a break from the exhaustion of trying to be perfect as it relates to your finances, but also not to give up on finding a path to success for yourself. Whatever that first step might be, whether that’s reaching out to a financial planner or at minimum, getting your expenses in order so you can really look at it in the mirror and figure out where your spending is, I think you should take that next step.

Sean Pyles:

Give yourself some grace, do the work.

Magda Doemeny:

Sean Pyles:

Great. Well, Magda Doemeny from NerdWallet Advisors, thank you so much for talking with me.

Magda Doemeny:

Thank you.

Sean Pyles:

And that’s all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-N-E-R-D. You can also email us at [email protected]. Also, visit nerdwallet.com/podcast for more info on this episode. And remember that you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio, to automatically download new episodes.

Here’s our brief disclaimer. I am not a financial or investment advisor. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

This episode was produced by Tess Vigeland and myself. A special thanks to Magda Doemeny, Georgia McIntyre, and Emily Canedo. And a big thank you to NerdWallet’s editors for all their help. And with that said, until next time, turn to the Nerds.

NerdWallet Advisory LLC, dba NerdWallet Advisors, is an SEC-registered investment advisor, and wholly owned subsidiary of NerdWallet, Inc. The advice provided in this episode of Smart Money was for illustrative purposes only and not intended as financial or investment advice specific to your personal facts or circumstances.

Source: nerdwallet.com

Apache is functioning normally

October 6, 2024 by Brett Tams

Credit reports contain financial records of debts you owe and ones you’ve paid off. Positive information can remain on your credit reports indefinitely. Most negative information falls off your credit after seven years, though certain types of bankruptcy filings can remain longer.

Here’s a closer look at how financial records impact your credit reports.

How Long Do Inquiries Stay on a Credit Report?

When you apply for a loan, credit card, or line of credit the lender can perform what’s called a hard inquiry. This simply means that they pull copies of your credit reports, which they’ll use to make an approval decision.

Hard inquiries show up on a credit report and they’re included in your FICO® credit score calculations. Each new inquiry remains on your credit report for two years, according to FICO. However, they’re only considered in credit score calculations for the first 12 months.
Soft inquiries occur when you check your credit reports yourself or a company pulls your credit for the purposes of prequalifying or preapproving you for a loan. These inquiries won’t show up on a credit report, and they don’t have any impact on your credit score.

That distinction is important if you’re learning how to build credit.

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Recommended: How Long Does It Take to Build Credit?

How Long Does Negative Information Remain on Your Credit Report?

Negative information on a credit report is any information that’s harmful to your credit score. What affects your credit score negatively? The list includes:

• Late payments

• Missed payments

• Collection accounts

• Charge-offs

• Judgments

• Foreclosures

• Bankruptcies

Generally, negative information can stay on your credit report for up to seven years. Chapter 7 and Chapter 11 bankruptcy, however, can stick around on your credit report for 10 years.

In terms of how negative items impact your credit score, age matters, according to FICO. Newer negative items, such as collections or late payments, have a more immediate impact on your scores than negative items that are several years old. A money tracker app makes it easy to track your credit and your money in real time so you can get ahead financially.

How Long Does Positive Information Remain on Your Credit Report?

Positive information can remain on credit reports indefinitely. Credit bureaus are not required to remove this information, though they may do so at the seven-year mark. Examples of positive information that can stay on a credit report, regardless of time, include:

• On-time payments

• Open accounts that have a $0 balance or a low balance, relative to your credit limit

• Closed accounts that you’ve paid in full

Positive items on a credit report are a good thing, since they help your credit scores. On-time payments and low balances on credit accounts have the biggest impact overall. Making biweekly payments or increasing your credit limits are two helpful ideas for how to lower credit utilization. Using a spending app to manage your budget and expenses can also help keep credit card balances low.

How to Remove Negative Information From Your Credit Report

Negative information that’s accurate cannot be removed from a credit report. For example, if you miss several payments on a loan but get caught up later, those late payments will stay on your credit reports until you hit the seven-year mark.

Inaccurate information, on the other hand, can be removed through the dispute process. Examples of inaccurate or incorrect items you could dispute on a credit report include:

• On-time payments that were not properly attributed to your account

• Credit accounts that don’t belong to you

• Paid-in-full accounts that still show a balance on your credit reports

• Account activity relating to fraudulent activity or identity theft

You’ll need to dispute the inaccurate information with the credit bureau that reports it. All three credit bureaus — Equifax, Experian, and TransUnion — allow you to initiate credit report disputes online. You’ll need to fill out a dispute form and provide some details about the dispute.

Once the credit bureau receives the dispute, it’s required to investigate your claim and return a decision to you promptly. If the credit bureau finds that there’s an error on your reports, it’s legally required to remove or update the information.

Your credit score updates monthly for the most part. Enrolling in credit score monitoring can make it easier to track changes, including changes to your score following a dispute.

Recommended: Why Did My Credit Score Drop After a Dispute?

Do You Still Have to Pay a Debt If It Fell Off Your Credit Report?

A debt can fall off your credit report if enough time passes. However, the amount owed doesn’t go away. Creditors and debt collectors could still attempt to get you to pay if the statute of limitations hasn’t passed.

The statute of limitations on debt allows creditors and debt collectors a set window of time in which to sue you for an unpaid balance. Each state determines how long the statute of limitations applies but in all states, its expiration doesn’t remove your legal obligation to pay what you owe.

Should you pay old debts? Ethically, yes. But if a debt falls off your credit report and the statute of limitations has expired, it would be very difficult for a creditor to force you to pay via a lawsuit.

The Takeaway

Reviewing your credit reports regularly is a good way to see what’s helping or hurting your score at any given time. If you have negative items on your credit report, you might see your score drop, but those points can come back with the passage of time.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What stays on a credit report forever?

Positive information can stay on a credit report forever, as credit bureaus are not required to remove any items that help your credit score. However, credit bureaus can choose to remove positive information after seven years.

Can credit information stay on my credit report for over 7 years?

Credit information can stay on your credit report for over seven years if it’s positive. Generally, negative information cannot stay on your report for more than seven years, unless you file for Chapter 7 or Chapter 11 bankruptcy. In that case, the bankruptcy filing could stay on your report for 10 years.

Do old accounts fall off a credit report?

Old accounts can fall off your credit report after seven years if they have negative information. Positive information from old accounts or newer ones can stay on your credit reports indefinitely.

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Apache is functioning normally

October 5, 2024 by Brett Tams

Medical debt can be a heavy burden for individuals and families. And knowing unpaid medical bills could impact your credit can make the worry even worse.
In an effort designed to relieve some of the stress on U.S. consumers, the way medical debt is treated by credit bureaus has changed in recent years. The timeline for unpaid health-care bills appearing on your credit reports is longer than it used to be. And some of those debts may not end up affecting your credit at all.

But make no mistake: There still can be consequences if a medical bill goes unpaid for too long.

Read on for a look at when unpaid medical debt can go on your credit reports and some steps you can take to protect and improve your financial health.

Key Points

• Unpaid medical bills can appear on credit reports, but there is a 365-day grace period before they do.

• Medical debts under $500 don’t show up on credit reports.

• Medical collections can stay on credit reports for seven years if unpaid.

• Medical debts paid after they appear on credit reports are removed from the reports, improving credit scores.

• Disputing errors on credit reports can help remove incorrect medical debt information.

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Do Medical Bills Affect Your Credit?

Your medical bills shouldn’t have any effect on your credit, as long as they don’t go unpaid for too long. Most health-care providers don’t report payment activity to the credit bureaus. So unless your account goes unpaid for so long that your provider gives up and sells the debt to a debt collector, it’s unlikely your delinquent account will appear on your credit reports.

Even if the account goes to collections, it can take a year or longer to impact your credit. That’s because the three major credit bureaus (Equifax, Experian, and TransUnion) now give consumers a full 365 days to clear up a medical debt that’s gone to collections before it goes on their credit reports. This year-long grace period allows more time for medical bills to make their way through the insurance approval and payment process, and it gives consumers more time to report billing issues to their provider or the debt collector, negotiate a smaller payment, or set up a payment plan.

More good news: If the initial balance that’s gone to collections is less than $500, the debt won’t ever become part of your credit report, so it won’t affect your credit score.

How Does Medical Debt Impact Your Credit Scores?

Medical bills that you’ve paid shouldn’t appear on your credit reports at all or affect your credit scores — even if you paid the bill after it went to collections. Existing paid medical collections were erased from credit reports in 2022, and the credit bureaus no longer include this information on their reports.

If your bill in collections goes unpaid past the 365-day grace period, however, it could turn up on your credit reports, and possibly have a negative effect on your credit scores. The amount of damage can vary, depending on what scoring model you — or a potential lender — is looking at. But it’s important to note that failing to pay a bill can affect the most significant factor in determining your credit scores — your payment history. So if a medical bill with a starting balance of $500 or more lands on your credit report, you could see a serious dip in your credit scores.

How Long Do Medical Bill Collections Stay on Your Credit Report?

A typical collections account can stay on your credit reports for about seven years, whether or not you eventually pay the debt. But medical accounts are treated differently than other types of debt.

When the credit bureaus are notified that you’ve paid off a medical debt in collections, they’ll remove the account from your credit reports, and you can expect your credit scores to improve.

If you don’t pay the medical debt, however, the collections account could remain on your credit reports for a full seven years after it becomes delinquent.

Can Medical Bills Be Removed from My Credit Report?

If you believe a medical bill in collections is showing up on your credit report by mistake, you can dispute the error with the credit bureau and the debt collector who reported it. After all, it takes time to build credit, and you want to make sure your record represents you accurately.

If your debt has been in collections for less than a year, if the starting balance was less than $500, if the debt has been paid by you or your insurance company, or if you can show that the information is incorrect in some other way, you can take the necessary steps to have it removed from your credit reports.

How to Dispute a Medical Bill on Your Credit Report

To dispute a medical bill on your credit report, the Consumer Financial Protection Bureau (CFPB) recommends starting with the credit bureau that included the account. Explain in writing what you think is wrong and why — and be sure to include documentation that supports your claim. The credit bureaus can then begin an investigation. (The CFPB provides sample letters and addresses for the credit bureaus.)

You should also reach out in writing to the debt collector that furnished the information and ask that it be corrected.

Finally, if your dispute continues to go unresolved, you can submit a complaint to the CFPB.

Recommended: Why Did My Credit Score Drop After a Dispute?

How Can You Check for Medical Debt on Your Credit Reports?

There are a couple of ways you can check your credit report to see if a medical debt is showing up there.

• If you’re paying for credit monitoring, or if your financial institution or credit card company provides a free credit score and summary each month, the information you’re looking for may be available as part of this service. You may even receive an alert if your credit score updates and there’s a significant drop.

• You’re also entitled by federal law to receive free copies of your credit reports from the major credit bureaus at AnnualCreditReport.com.

Don’t panic if a debt collector tells you that your unpaid account will soon affect your credit scores. Remember that you have a year-long grace period to pay the debt or clear up any errors before the account will show up on your credit reports.

Does Paying Off Medical Collections Improve Your Credit?

The best way to keep medical debt from dragging down your credit scores is to make sure your bills are paid on time (by you or your health insurance company). Even if your account goes to collections, paying is still an option — and it can help push your credit scores back up.
Though the negative impact of having a collections account on your credit report diminishes with time, if the bill goes unpaid, it could sit on your record — where lenders can see it — for seven years.

Recommended: How to Build Credit

What If You Can’t Pay Your Medical Bills?

Even though it may be tempting, the worst thing you can do if you have medical debt is ignore it. Here are some options to consider if you’re wondering how to pay medical bills you can’t afford.

Ask About a Repayment Plan

Many hospitals and health-care providers will let you set up a payment schedule that allows you to pay over time. Best-case scenario, the option provided is fee- and interest-free. If you’re asked to sign up for a financing plan that will cost extra, make sure the terms work for you and that it’s still manageable within your budget.

Try Negotiating with Your Provider to Lower Your Bill

Sometimes, a health-care provider may be willing to accept a lower amount to avoid writing off the bill and selling the account to a debt buyer. (Even if the account has gone to collections, you may be able to settle for a lower payment. At that point, though, you’ll likely be negotiating with the debt collector, not the original creditor.)

See If You Qualify for Financial Assistance

Grants and other types of financial assistance are sometimes available for patients who are eligible based on their income, age, or other factors. A Google search may turn up some options, or your health-care provider or a support group may be able to pass along information.

Consider an Unsecured Personal Loan

If you can get manageable monthly payments and other terms that fit your needs, you may want to consider taking out a low-interest personal loan. Try to stay away from a loan that’s secured by your home or other assets, which could end up putting your financial well-being at greater risk if you default.

How Can You Keep Your Credit Scores Healthy Despite Challenging Medical Bills?

Small fluctuations in your credit scores are normal, but if you’re worried that an unpaid medical bill could cause a drastic drop, it’s important to keep your financial guard up. Here are some steps you can take to protect your scores:

Keep Paying Your Bills on Time

Your payment history is a big factor in determining your credit score, so do your best to stay on top of all your bills. If making timely payments is a struggle for you, you may find a spending app can help with budgeting, keeping track of billing due dates, and prioritizing payments.

Watch Your Credit Utilization

Lowering your credit card utilization ratio — the percentage of available credit that you’re using on your credit cards and other lines of credit — can help you get and keep your credit scores where you want them. If you’re relying heavily on credit to get by, and you’re close to maxing out your credit cards, you may need to reevaluate your spending and change up your budget. A money tracker app could help you stick to healthy financial habits.

Monitoring Your Credit Scores

Even if you’re on your best behavior, if an unpaid medical bill ends up on your credit report, it may take months before you see some improvement to your damaged credit scores. Credit score monitoring can help you better understand how certain actions can affect your creditworthiness.

The Takeaway

Watching your medical expenses pile up can be stressful — especially if you’re worried that your unpaid medical bills can go on your credit reports and lower your credit scores. Fortunately, the credit bureaus and credit score models have begun treating medical debt with a little more patience and consideration than other types of debt.
But an unpaid medical account still can be a problem if you let it go for too long. So it’s important to stay on top of your medical bills, along with all your other financial obligations.

See exactly how your money comes and goes at a glance.

FAQ

Can unpaid medical bills affect your credit?

A medical bill will likely only affect your credit if it’s been unpaid for so long that it ends up going to collections. Even then, consumers have a full year to clear up a medical collections account before it goes on their credit reports. But if the bill goes unpaid after that grace period is up, it could affect your credit scores.

How do I remove a medical collection from my credit report?

To have a medical collection removed from your credit report, you can either pay the amount you owe or — if you think it’s in error — you can try disputing the bill with the credit bureau and the debt collector that reported it.

Is it a HIPAA violation to send medical bills to collections?

Not necessarily. The Health Insurance Portability and Accountability Act (HIPAA) has strict standards for how health-care providers and their business associates, including third-party debt collectors, handle sensitive personal health information. Debt collectors can receive and disclose information but only to the extent that it is absolutely necessary to perform their job.

Photo credit: iStock/Pekic
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Source: sofi.com

Apache is functioning normally

October 5, 2024 by Brett Tams

For a limited time, the Chase Sapphire Preferred® Card has increased its sign-up bonus, its biggest offer since June 2021. If the card has been on your wish list, now may be an opportune time to apply.

Starting Oct. 3, 2024, new Chase Sapphire Preferred® Card holders can earn the following two-part welcome offer:

A one-time $300 credit that can be used to book travel through Chase’s travel portal. The credit expires 12 months after account opening.
60,000 bonus points worth $750 in travel after spending $4,000 within the first three months of account opening.

If you hit the $4,000 spending requirement for the bonus, the total value of the welcome offer is $1,050 in travel. That’s because one Chase Ultimate Rewards® point is worth 1.25 cents when redeemed through Chase’s travel portal.

Note that you’re ineligible for this offer if you already have a Sapphire credit card or have received a sign-up bonus on a Sapphire credit card within the past 48 months.

Full list of Chase transfer partners

Aer Lingus (1:1 ratio).
Air Canada (1:1 ratio).
Air France-KLM (1:1 ratio).
British Airways (1:1 ratio).
Emirates (1:1 ratio).
Iberia (1:1 ratio).
JetBlue (1:1 ratio).
Singapore (1:1 ratio).
Southwest (1:1 ratio).
United (1:1 ratio).
Virgin Atlantic (1:1 ratio).

Hyatt (1:1 ratio).
InterContinental Hotels Group (1:1 ratio).
Marriott (1:1 ratio).

Chase is also offering a temporary promotion through January 2025 that can add even more points to your Ultimate Rewards® stash. You can get:

20,000 points for hotel bookings of at least $500 made in Chase’s travel portal, or 10,000 points for non-hotel bookings of at least $500. This promotion is only available to cardholders who haven’t used the travel portal since Aug. 15, 2022.
10,000 points or a $100 statement credit for hotel bookings of at least $400 made in Chase’s travel portal. This promotion is only available to cardholders who are repeat bookers in the portal.

Cardholders must activate this offer online or in the Chase app to receive the bonus points. Points will be credited to the account after the travel has been completed.

Source: nerdwallet.com

Apache is functioning normally

October 5, 2024 by Brett Tams

Online and mobile banking are growing in popularity, thanks to how they can make transactions faster, easier, and more secure. Indeed, the number of Americans who are going all in on managing their finances this way continues to grow. Recent research shows that about 27% of Americans use online-only banks.

Not only that, those who use any type of online banking, whether through a traditional or online-only bank, tend to use it frequently. In SoFi’s April 2024 Banking Survey, which looked at the banking usage of 500 U.S. adults, 48% of respondents said they use online banking daily, and another 26% reported using it several times a week.

Whether you are among the online-only banking crowd or are using your traditional bank’s website or app, online and mobile banking have many advantages. And as with most financial services, there are also downsides to consider. Here, take a closer look at this important facet of your personal finances, so you can decide which banking style suits you best.

Online banking, most generally, refers to the ability to conduct transactions through a financial institution’s web page or app, making it unnecessary to go to a branch. Most banks today offer some form of online banking, and most members, in turn, are accustomed to having that option.

For instance, 63% of respondents in SoFi’s survey said they frequently use online banking to transfer funds between accounts, and 43% said they frequently do mobile check deposits.

Check account balances	77%
Transfer funds	63%
Mobile check deposit	43%
Automatic bill payment	40%
View or download account statements	38%
Chat online with customer service	17%

Source: SoFi’s April 2024 Banking Survey of 500 U.S. adults

Often, however, the term “online banking” is used to refer to online-only banking vs. traditional banking, meaning you manage your personal finances completely online.

Since online banks typically have no physical locations and therefore lower overhead, they can usually offer consumers a higher annual percentage yield (APY) on deposit accounts and other perks.

Pros of Online Banking

To better understand online-only banking, consider these upsides:

Higher Interest Rates and Lower Fees

As mentioned, online-only banks tend to offer a higher interest rate on savings accounts and possibly checking accounts, too. As of July 2024, the national interest rate on savings accounts is 0.45%. At some online-only banks, however, you can find an APY of 4.00% or higher.

In addition, these banks may offer lower or no fees. Stashing your cash in one of these banks can be a way to avoid bank fees, such as account maintenance charges and the like.

Recommended: APY vs. Interest Rate: What’s the Difference?

No Minimum Balance

Many traditional banks still require you to maintain a minimum balance or else be charged a monthly fee. In terms of how much money you need to open an account online and keep it in good standing, you may be in for a pleasant surprise. A number of digital financial institutions allow a balance of just a few dollars, and you still won’t be hit with charges on your statement.

Convenience

Online banks are open 24 hours a day, 7 days a week, which means you can take care of transactions after normal bank hours. You can manage your money whenever and wherever.

ATM Access

Most online banks are part of an online network of ATMs, such as MoneyPass or Allpoint. What’s more, there is generally no fee for using these ATMs. If the financial institution doesn’t partner with an ATM network, they will typically offer to refund ATM fees up to a certain number of withdrawals.

Enhanced Online Experience

As digital innovators, online-only banks may provide a better user experience when online or in the app. Expect to get the latest tools and access to a wealth of features such as round-up savings programs or a dashboard that helps you track your earnings, spending, and savings.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.50% APY on your cash!

Cons of Online Banking

There are, however, some potential downsides to managing money this way. Consider these potential issues with online banking:

No In-Person Assistance

While most online banks provide a customer service line or chat function, they generally do not offer personal bankers. This means that there is no one available face-to-face to help you with your banking needs, such as setting up accounts, applying for loans, and getting a document notarized. If you are a person who wants and appreciates this kind of personal connection, you may not be well-suited to digital banking.

Limited Services

There may be some services that you aren’t able to enjoy with an online-only bank. It may or may not offer credit cards, car loans, and mortgages; you may not be able to deposit cash easily, as you can at a brick-and-mortar bank branch. Every online bank is different, so do your research to see what services they offer.

Limited ATM Access

Although many online banks will have a network of tens of thousands of ATMs that customers can access, others may offer less robust options vs. traditional retail banks. It’s worthwhile to see exactly where a digital bank has allied ATMs near your usual haunts, like your home and office, before signing up.

Is Online Banking Safe?

People may worry about whether online banking is safe. In the SoFi survey, 21% of respondents said they were very concerned about the security of their online bank accounts, and another 21% said they were somewhat concerned. The truth is, traditional banks are no more or less secure than online-only banks, and vice-versa. All are at a very minimal risk of a hack.

Recommended: What Do You Need to Open a Bank Account Online?

The Takeaway

Whether you call it online banking, mobile banking, or digital banking, keeping your funds with an online-only bank can offer many rewards. You’re likely to earn a higher interest rate and pay fewer fees, for instance. But those who like banking in person at a branch may choose to stick with a traditional bank. Think carefully about what suits your financial style and needs best.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

4.50% APY
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1890351-V1

Source: sofi.com

Apache is functioning normally

October 4, 2024 by Brett Tams

The trade-in value of a truck is the amount a dealer is willing to give you to put toward the purchase of a new vehicle. Cars depreciate in value the moment you drive them off the lot, so over time, trade-in values tend to decrease as well. They are also impacted by a variety of factors, such as make and model, age, condition, and mileage.

Here’s a look at what your truck might be worth over the first five years of ownership, and the factors that impact that value.

Average Trade-In Value of a Truck After 5 Years of Ownership

The trade-in value of a truck is based on its market value, which is the amount a person is willing to pay based on the truck’s make, model, age, condition, etc. However, when saving up for a new car, it’s important to realize that what a dealer might offer for a trade-in is likely less than the market value. That’s because when the dealer eventually sells your vehicle, they will need to turn a profit. And their profit will be the difference between market value and trade-in value.

Cars, trucks, and other vehicles depreciate, meaning their market value decreases each year. Luckily for truck owners, trucks tend to depreciate more slowly than cars and SUVs.

For example, the average five-year depreciation of Toyota Tacoma, a midsize pick-up truck, is 20.4%, according to a 2024 study by iSeeCars. Average five-year depreciation for Ford F-150, a full-size pick-up truck, is 36.0%. Compare that to an average five-year depreciation rate of 38.8% for cars, 42.9% for midsize SUVs, and 49.1% for electric vehicles.

Depreciation is also an important factor to understand when leasing a vehicle, as your lease payment will cover the cost of depreciation to the lessor.

Supply chain issues, component shortgages, and increased demand for vehicles has driven up the price of new and used cars and trucks in recent years. This has had an impact on how fast vehicles depreciate. In 2024, the average five-year depreciation was 38.8%, compared to 49.1% in 2020.

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Factors That Impact Truck Value Over Time

As we mentioned above, the moment your car leaves the lot, it starts to lose value. (For that reason, savvy consumers often believe it’s better to buy a used car over a new one.) What happens to the car will have a big impact on value as well, from wear and tear to how much it’s driven and its accident history. As a result, depreciation and trade-in values will vary from vehicle to vehicle.

Age and Condition

Age and condition are two of the biggest factors that will affect your truck’s trade-in value. The older a vehicle is, the less value it tends to maintain (unless it’s a desirable vintage vehicle). The reason: It’s assumed that the older a car is, the more it will have been driven and the more wear and tear it will have experienced.

All sorts of factors big and small can go into determining condition, from dents and scratches to major repairs made after an accident. Only cars in pristine condition will fetch top market values and trade-in prices.

Mileage

How much a truck has been driven will also have an impact on trade-in value. The more you drive your truck, the more wear and tear you may be putting on the engine and other parts. As a result, trucks with lower numbers on their odometers tend to command.

Make and Model

A truck’s make and model refer to the company that makes the vehicle and the specific product, respectively. For example, Ford is a make while the F-150 is a model of truck. Some makes and models are more popular than others, which can increase trade-in value. This may be for a variety of reasons. For example, some may get better gas mileage or have roomier interiors that make them more appealing to used truck buyers.

Recommended: What Should Your Average Car Payment Be?

Trim Level

The trim level of a vehicle refers to the optional features it has. For example, higher trim levels may offer more equipment or luxury materials, such as leather seats. Automotive technology, such as back-up cameras and navigation systems, are in high demand. Higher trim levels can translate into higher trade-in values.

Accident History

Even if a car shows no outward signs of damage after an accident, vehicles that have been involved in a major accident or a natural disaster, such as a flood, will usually fetch lower trade-in values.

According to Carfax, any accident will remove $500 from the value of a car, on average, while a major accident can cost as much as $2,100 in lost value.

Local Market Demand

Where you resell your truck can have an affect on its market value. For example, if you live in an urban area, there may be less local demand for trucks than if you live in a suburban or rural location.

Geography can have other impacts on the value of your truck. For example, a truck that’s been through a number of harsh Northeast winters might be in worse condition than one from a warmer, dryer climate.

Increase Your Truck’s Trade-In Value

Bring your truck up to the best condition to increase its trade-in value. Fix whatever damage you can, such as scratches, chips in the windshield, or minor engine repairs. Have your truck cleaned and detailed before an appraisal by a dealer. A money tracker app can help you carve out room in your budget for any repairs.

It’s worth noting that your credit score will also impact the deal you get on your new car. That’s because a higher credit score gets buyers a lower interest rate on car loans.

Recommended: Does Net Worth Include Home Equity?

The Takeaway

How much a truck is worth is calculated based on many factors, including make, model, age, mileage, and condition. The trade-in value will be less than the market value. Understanding your vehicle’s potential trade-in value is an important consideration when budgeting and saving for the purchase of a new or used truck. If you think you may trade it in for a newer model in the future, research vehicles that are likely to hold their value better.

See exactly how your money comes and goes at a glance.

FAQ

What is the trade-in value of a truck?

The trade-in value of a truck is how much money a dealer is willing to give you toward the purchase of a new vehicle in exchange for your old one. Because dealers want to turn a profit when they resell your vehicle, trade-in values tend to be lower than fair market values.

How is trade-in value calculated?

Your truck’s trade-in value is based on a variety of factors, including make, model, age, mileage, and condition of the vehicle. Your truck’s value will depreciate every year, until it no longer has a resale value.

How do I find the fair trade value of my car?

A number of online tools can help you find the fair trade-in value of your car. For example, Kelley Blue Book and Edmunds offer very good online tools. Enter your vehicle identification number, license plate number, or the year, make, model, and mileage of your truck to get an idea of what it may be worth.

Photo credit: iStock/freemixer

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

SORL-Q324-020

Source: sofi.com

Apache is functioning normally

October 3, 2024 by Brett Tams

Editor’s Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

While most investors are familiar with buying and selling shares of stock directly, investing in options is another way to put money behind stock price movements.

Options are a type of derivative contract that allows the investor to buy (or sell) a stock, or some other asset, at a certain price within a specific time period. The two basic types of options are known as “puts” and “calls.”

Options trading is a popular strategy for day traders, because it offers the potential to make profits within a shorter time frame, as opposed to owning shares of stock outright, and waiting for the price to move in the desired direction. Options trading can potentially generate returns, but it can also amplify losses, making it a risky strategy.

Key Points

• Buying a call option gives an investor the right, but not the obligation, to buy shares of an underlying asset at a specific price and by a specific date, to potentially profit from a price increase.

• Buying a put option gives an investor the right, but not the obligation, to sell shares of an underlying asset at a specific price and by a specific date, to potentially profit from a price decrease.

• The buyer of a call or put option must pay the seller a premium for the options contract, assessed per share.

• The price at which an option can be exercised, as specified in the option contract, is called the strike price.

• Options trading involves risks, including potentially substantial losses.

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Overview: What Are Options?

In options trading, an option contract is a derivative instrument that’s based on an underlying asset: e.g., stocks, bonds, commodities, or other securities. Thus, the buyer of an options contract doesn’t purchase the asset directly, but a contract with an option to buy or sell that security. For example, with stocks, also called equity options, one contract represents 100 shares.

Options come in two flavors, as noted above: calls and puts. For the sake of simplicity, this article will refer primarily to stock or equity options.

Options Buyers vs. Options Sellers

An options buyer, also called the holder, has the right, but not the obligation, to buy or sell the underlying asset at the agreed-upon price (the strike price) by a specific date (the expiration). Buyers pay a premium for each option contract, which is assessed per share. If there is a $1 premium per share, at 100 shares, the total cost of the option is $100.

The potential upside for an options buyer could be unlimited, depending on their strategy. And since an options buyer is not obligated to exercise their option — meaning to actually buy or sell the underlying stock at the price agreed to in the option contract — the most they stand to lose is the premium paid for the option.

An options seller, also called the options writer, is on the other side of the trade. In this case, if the options holder exercises the contract, the option seller has an obligation to buy or sell the underlying asset at the strike price.

The potential upside for an options seller is the option’s premium. Their potential downside depends on whether they’re selling a put option or a call option. More on this below.

Trading options requires familiarity with options terminology, since these strategies can be complex and come with the potential risk of steep losses, depending on the strategy.
💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

What Is a Call Option?

When purchased, a call option gives the options buyer the right, but not the obligation, to buy 100 shares of the underlying asset at the strike price, by the expiration of the contract.

Buying a call option can be appealing because it gives a buyer a way of profiting from a stock’s increase in price without having to pay what could be the current market price for 100 shares.

If the price of the underlying asset rises above the strike price, then the buyer may choose to exercise their option, paying less than what it’s worth on the market and potentially selling shares for a profit.

For a call option buyer, the profit is determined by the premium they pay and if, and by how much, the price of the security rises above the option’s strike price before it expires. The maximum potential upside is unlimited since, theoretically, the price of the underlying asset could continue to rise. The maximum potential downside is limited to the premium paid for the option.

Conversely, the seller, or writer, of the call option has the obligation to sell the underlying shares to the buyer, if the buyer exercises the option. The seller’s maximum potential gain is limited to the option’s premium. Their potential downside is unlimited, since they must sell shares at the option’s lower strike price, no matter how high the market price has risen.

Example of Buying a Call Option

If an investor buys an option with a strike price of $50 for a stock that’s currently worth $40, the option will be “out-of-the-money” until the stock rises to $50. If the premium is $1/share — meaning they only pay $1 up front — then the investor will only be risking $100, not $4,000.

If the stock is trading at $55 on or before the expiration date, it would make sense to “exercise” the option and buy the stock for $50, thus giving the investor shares with built-in profit thanks to the difference between the strike price of $50 and the value of $55. In this case the profit would be $4/ per share (or $400), minus the premium paid: a strike price of $50 gives the investor the right to buy 100 shares of a stock worth $55, with a premium of $1 per share.

On the other hand, if the stock has not risen enough in price, the investor can just let the option expire, having only lost the price of the premium, rather than being saddled with shares they can’t profit from.

Recommended: A Beginner’s Guide to Options Trading

What Is a Put Option?

A put option gives the investor buying the contract the right, but not the obligation, to sell the underlying security at the agreed-upon strike price, by the expiration date of the option.

If buying call options are a way to profit when the price of a stock or other underlying asset moves in the right direction, buying put options can be a way to profit from the fall of a stock’s price, without having to short the stock (i.e. borrow the shares and then buy them back at a lower price).

Purchasing a put option contract gives its buyer the right, but not the obligation, to sell shares at a certain price, at or by a specified time in the future. The key difference between buying a put vs. a call option is that the put option becomes increasingly valuable as the price of the underlying asset decreases. A put option buyer is hoping they can sell the underlying asset at a strike price that’s higher than the market price.

For the put option buyer, the maximum potential upside is the difference between the option’s higher strike price and the price at which the option is exercised (minus the premium), while the maximum potential downside is limited to the premium paid.

Again, the put option seller is on the other side of the trade, and is obligated to buy the shares from the put buyer, if the buyer decides to exercise the put option. The put option seller’s maximum upside is the option’s premium. Their potential downside extends to the difference between the option’s higher strike price and the lower market price at the time the option is exercised.

Example of Buying a Put Option

As an example, let’s say a stock is worth $50 today. If an investor thought the stock’s value could go down, they might buy a put option with a strike price of $40. Let’s say the premium for the option is $1, and they buy a contract that gives them the right to sell 100 shares at $40. The premium, then, is $100.

At the time the investor buys the put option, it’s out-of-the-money. If the price remains above $40 until it expires, the investor will not be able to exercise the option and they will lose the premium.

But if the stock has dropped from, say, $50 to $35, the option is in-the-money and if they were to exercise the option, they’d profit from being able to sell shares for $40 that are worth $35, pocketing $5 per share or $500, minus the $100 premium, leaving them with $400, minus any brokerage fees.

Risks of Options Trading

Option trading can be a useful way to manage risks in a volatile market and potentially profit from movements in stocks one doesn’t own. Again, an investor buying options only stands to lose the premium they pay for an options contract, though the cost of premiums can accrue if purchasing multiple options contracts over time.

However, an investor selling call options or put options, who is obligated to either buy or sell an option’s underlying assets per the terms of the options contract, could potentially see substantial losses. This is especially true if they don’t understand the potential downside to the trades they’re executing.

The Takeaway

Option trades may appeal to individual investors because they offer a way to potentially see a gain from movements in a stock price, without having to own the underlying shares. If an investor isn’t able to exercise the call or put option they purchased, they’ll lose the premium they paid for that contract. However, selling a call or put option can be high risk, potentially leading to significant losses.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button. Currently, investors can not sell options on SoFi Invest®.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.

Explore user-friendly options trading with SoFi.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.

1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.

2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.

For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.

Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN-Q324-061

Source: sofi.com

Apache is functioning normally

October 3, 2024 by Brett Tams

It’s been a long day at work or a totally fun night out, and you’re finally home to your Chicago apartment. You reach into your purse or pocket to find your keys, only to find out they’re not there. You desperately search for a few more seconds, but come up empty-handed. Time to face the facts — you’re locked out of your apartment. No need to panic, though. There are plenty of things you can do to get yourself out of this pickle.

What do I do if I get locked out of my apartment?

Locking yourself out of your house is one of the most discouraging feelings, especially when you can envision exactly where your keys are — inside the apartment. The best reaction is to already have a plan in place, but since not all of us think about it beforehand, here’s how you can handle the situation when you’re in the moment.

1. Get in touch with management or maintenance

If you’re locked out of your apartment during your management or leasing office’s business hours — and there’s an office on the premises — walk over and ask for help. Property managers or your landlord will always have a spare key on hand for things like maintenance emergencies, so it’s a pretty safe bet they can let you into your place within a few minutes. If they don’t have a key, they’ll likely have the number of a local locksmith they can call for an emergency visit. If it’s after business hours and your complex has an emergency maintenance number, try that.

Going this route is sure to produce quick results since you know they already have a copy of your key, but it may come with a fee. Asking the leasing office or maintenance staff to help you when you’re stuck outside of your apartment can cost you anywhere from $25 to several hundred dollars depending on the terms of your lease.

2. Reach out to your roommate

One of the perks of having a roommate is getting help in situations like these. Even if you have to wait for them to get home, at least you won’t have to take more dramatic measures to gain entry. Contact them to let them know what happened and see when you can expect them home.

If you have to wait a while, ask if you can come to them and grab their key. Make sure to promise to return the favor if ever needed. If you have to wait, try to relocate to a coffee shop or restaurant where you can hang out safely for a few hours until help arrives.

3. Look for another way in

You may have locked the front door, but what about the windows? Or, if the apartments in your building have back doors, do you have one you can use? If you want to avoid tracking down a spare key, you can always try to find another way to get into your apartment. This won’t work if you live in a high-rise or otherwise difficult-to-access unit, but some have the right design to give you a chance. For example, if you live on the first floor and have a balcony, you might be able to get in through that door if it’s unlocked.

4. Call a locksmith to unlock the door

When all else fails, you may want to call a locksmith. Make this your last resort because you’re going to have to pay for professional locksmith service. You might also be charged a fee if the lock gets damaged or needs replacing after you’re inside.

In theory, locksmiths can unlock apartments without doing any damage, but there’s no guarantee it will happen seamlessly. They may even have to install a new lock to let you in, resulting in an inconvenience for your property manager or landlord. They’ll most likely charge you for that.

How to avoid getting locked out of your apartment

Locking yourself out of your apartment the first time is one time too many. It can be incredibly inconvenient and a little embarrassing. The best solution is to prevent the problem from happening in the first place.

1. Upgrade to a smart lock for your front door

One way to prevent yourself from getting locked out is to upgrade your lock or doorknob that allows for keyless entry. There are a variety of smart locks that guarantee entry into your home with just an app — you pretty much can unlock the door by just getting near it.

By downloading the appropriate app and logging in, you can remotely control your lock. Smart locks let you control the doors from wherever you are, which is especially handy if you have young children that may try to escape. This even allows you to let in the pet sitter or overnight guest without you being at home. Most have monitors, too, so you can see who’s at your door and a logging system that lets you track each time someone locks or unlocks the door. It’s added security coupled with convenience. It’s also a significant upgrade.

Adding smart locks isn’t something you can do without the landlord or property manager’s permission. Make sure to check with them before purchasing the technology. They may even like your idea so much that they’ll pay for the installation and offer the upgrade to the rest of the tenants in your complex.

2. Give a spare key to a friend

If you don’t have a roommate, never underestimate the power of giving a spare key to someone else. This can save you on more than one occasion. It will not only be there waiting if you lock yourself out, but if you ever need someone to come into your apartment when you’re not there, you’re set. The trick is finding the right person to hold on to your spare, so when you give them a call, they’ll be available to hand it over.

3. Do a double-check for your apartment key

Another way to prevent getting locked out of your apartment is to work a key check into your routine before you even leave. Everyone has a routine before walking out the door. You may check that your stove is off, set the thermostat and turn off all the lights. This routine can include a check that you’ve got your wallet, cell phone and house keys.

If routines aren’t your thing, try giving yourself a permanent reminder. A sign on or near your door in a bright, bold color telling you to grab them is sure to catch your eye on your way out. Having a designated spot for your keys can also help.

4. Carry spare keys

This is only a helpful strategy if you can put a spare key in something you always carry. If you change out your wallet or purse often or forgo them altogether, it’s harder to keep a spare with you. The best trick is to make a spare and store it between your cell phone and the case. It’s one way to ensure you always have a key with you, unless you lose your phone.

Locked out of your apartment? It’s not the end of the world

It might feel like the absolute worst at the moment, but getting locked out of your apartment is only a minor inconvenience. Thankfully, there are people out there who are able to help and ways to make sure you don’t make this same mistake again.

Source: rent.com

Apache is functioning normally

October 2, 2024 by Brett Tams

Short for “you need a budget,” YNAB is a budgeting app that uses the zero-based budgeting system to help you make a plan for every dollar of your monthly income. The budgeting process is involved, but YNAB’s website offers articles and videos to help users get with the program.

YNAB is a popular app with thousands of reviews and high user ratings (4.8 on the App Store and 4.7 on Google Play). The r/ynab subreddit has 193,000 members. We downloaded and tested the iOS app and used the web-based version of YNAB to find out how it works and who could benefit from it.

What is YNAB?

More than an app, YNAB is a hands-on money management method based on the following four rules:

Give every dollar a job. This is zero-based budgeting in a nutshell. You make a plan for how you’re going to use each dollar of your income. An old-school way to do this is to put cash in envelopes marked for specific expenses.
Embrace your true expenses. The idea is to take larger, less frequent expenses (like an upcoming vacation) and break them into smaller chunks so you can budget for them each month.
Roll with the punches. This rule encourages flexibility; if you’re struggling to pay a bill one month, you can look for other areas to pull back.
Age your money. This rule emphasizes watching your spending so you can build savings and increase the time between when you earn money and when you spend it.

It’s hard to argue with the philosophy. These are sound rules that promote better financial habits.

Before you build a budget

NerdWallet breaks down your spending and shows you ways to save.

How much does YNAB cost?

YNAB is a paid budgeting app with no free version, although new users can start with a free trial for 34 days. After that, it costs $14.99 per month or $109 per year. College students get YNAB free for a year.

YNAB may be worth the cost if it helps you spend less and save more money over time.

How does YNAB work?

YNAB is not a set-it-and-forget-it budgeting app. Rather, it encourages you to play an active role in managing your money by defining budgeting categories, allocating money to those categories and then closely monitoring transactions as they occur.

Define expense categories

Initial setup is the most tedious part, but YNAB asks a few questions up front — about debt and what you like to spend money on — to help you define spending categories. Think of these spending categories as line items in a budgeting spreadsheet (like rent, groceries and meals out), but with a fancier design.

It’s important to include every spending category you can think of in your YNAB budget, and you may need to consult bill receipts, credit card transactions and bank statements at first. Don’t forget to add categories for debt payments, saving and investing if applicable.

🤓Nerdy Tip

Do yourself a favor and use YNAB’s desktop site on a laptop to set up your budget. The larger layout makes it easy to be thorough when defining and organizing spending categories.

Complete the setup process by setting spending targets for recurring expenses — like a monthly rent payment that remains relatively constant at $1,500 per month — and add your current bank balance. You can connect your bank or add the balance manually.

Fund expenses (only with money you have)

YNAB wants you to be intentional and honest with yourself about your money, which means only assigning money you have to your budgeting categories. Your bank balance displays at the top of the app and goes down as you allocate funds to each expense category.

YNAB doesn’t restrict you from funding categories with money not yet there (for example, the second paycheck you know is coming later in the month), but you’ll see a negative balance in bright red that shows you’ve assigned more than you have. Here’s how one user put it on a r/YNAB Reddit thread:

“Imagine you have actual cash and you’re trying to put it in envelopes. The red bubble is there because you’re trying to put cash you don’t have yet in the envelopes,” wrote u/HLef in response to a question from a YNAB newbie who was seeing red.

Record and categorize transactions

Funding your expense categories is the planning part of YNAB. Recording transactions is how you monitor actual spending. The hands-on nature of YNAB means you’ll need to record and categorize transactions for a real-time look at how actual spending aligns with how much you’ve allocated to each category. You can manually enter every purchase yourself, or link supported bank and credit card accounts within the app to make importing transactions more automatic.

YNAB is likely to work best when you’re faithful about funding categories and recording transactions in the app.

What are the pros and cons of YNAB?

The big benefit of YNAB — its super hands-on approach that encourages saving — may be a drawback that keeps others away. Also, it costs money.

Pros

YNAB is a sound money management philosophy within an app.
The app is well-designed and also accessible on desktop.
There are lots of resources available to help you learn the YNAB way.

Cons

This money management method is really involved, which may make it hard to stick with it.
It’s pricey and there is no free version; at $14.99 per month, you’ll spend nearly $900 in five years (or $545 at $109 per year).

What are some YNAB alternatives?

Budgeting apps are all the rage, and there’s no shortage of options to choose from in 2024.

EveryDollar is an app (like YNAB) that makes our best budget apps list and offers a zero-based budgeting framework. Some users may find it simpler to manage than YNAB. EveryDollar has a free and paid version.

PocketGuard is an alternative that’s big on simplifying the budgeting process. Essentially, you can link your bank accounts, credit cards, loans and investments, plus use the app to track net worth and monitor spending. PocketGuard also has a free and paid version.

Who is YNAB for?

YNAB may be for you if you’re serious about optimizing your finances and have the discipline to stick with it. To be effective and get your money’s worth, you’ll need to be in the app adjusting your categories, forecasting where your funds will go and recording transactions on a regular basis. If you can do that, you’ll probably be better with money for it.

Methodology

We chose to review this app because of its popularity and high ratings in both major app stores. We signed up for the free trial and conducted hands-on testing using both the desktop and mobile app versions of YNAB to understand the budgeting process and explore key features.

Before you build a budget

NerdWallet breaks down your spending and shows you ways to save.

Source: nerdwallet.com

Apache is functioning normally

October 2, 2024 by Brett Tams

At the end of the year, when holiday celebrations and expressions of gratitude are in full swing, many people think about making a charitable donation. If you donate to a qualifying organization, not only can your funds do good, they may also be deductible when you pay your taxes.

Maybe it’s the animal shelter around the corner from your home, or perhaps it’s a scholarship fund at your alma mater that does amazing work. Whatever pulls at your heart and makes you feel like you’re doing the right thing can be a good cause for donations. The organization you give your money to benefits. Read on to learn if your contribution could also lower your tax bill.

What Qualifies as Charitable Giving?

In the eyes of the Internal Revenue Service (IRS), a charitable donation is a gift of money, property, or other asset that you give to a qualifying organization, known as a 501(c)(3).

To find out if an organization you’d like to support is eligible to receive tax-deductible contributions, you can search for it on the IRS’s database .

You may want to keep in mind that money or assets given to political campaigns or political parties do not qualify as tax-deductible donations. In fact, no organization that qualifies as a 501(c)(3) can participate in political campaigns or activities.

Organizations that engage in political activities without bias, however, can still sometimes qualify. So, a group can educate about the electoral process and remain within guidelines. They just have to go about it in a nonpartisan way.

Can I Deduct My Year-End Charitable Donation?

Currently, charitable donations could only be deducted by tax filers who itemized their deductions. That means that rather than take the standard deduction on their income tax return, they chose the more complicated path of listing all of their eligible expenses.

Recommended: 26 Tax Deductions for College Students and Other Young Adults

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Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.50% APY on your cash!

How Much of a Charitable Donation Is Tax-Deductible?

The IRS sets limits on how much of a charitable contribution you can deduct from your taxes, and these are frequently updated. The amount is typically expressed in terms of the percentage of your adjusted gross income (AGI) that you may claim.

In 2024, this limit for cash contributions (say, money debited from your checking account) is 60% of a person’s AGI. The top figure is 20%-50% of AGI if you make a non-cash contribution, such as stock shares or a vehicle. The exact figure will vary with both the type of organization to which you are making the donation as well as the kind of item you are donating.

Of course, you are welcome to donate as much as you like. Just keep in mind that any charitable giving above those figures is not eligible for a deduction at tax time.

Recommended: How to Reduce Taxable Income for High Earners

Tips for Making End-of-Year Donations

To ramp up both the impact and benefit of a charitable donation, here are some strategies you may want to keep in mind:

Making a Timely Donation

Don’t lose track of your timing: The deadline for charitable donations is December 31. If you’re looking to deduct the donation in the current tax year, you will want to make sure your charity has ownership of whatever asset you are donating by the close of business on the 31.

You may also want to make sure that your preferred payment method is accepted by the charity so it doesn’t get kicked back and cause delays. Putting a reminder in your calendar for, say, mid-December can be a good way to make sure you don’t run late with your giving. (Of course, you also want to make sure you don’t miss the tax-filing deadline come April, either.)

Taking Advantage of Company Matching Programs

Your place of employment might have a matching program for charitable giving. They might, for example, match your donation amount dollar for dollar up to a certain amount. If so, it could significantly bump up the amount you could otherwise afford to give.

If you’re unsure about whether your company has a program, it can be worth reaching out to your HR department for further information.

Giving Rewards on Your Credit Card

If you are making a contribution on a budget, you might consider donating credit card rewards you earn, such as hotel points or airline miles. This can be a great way to use points or other rewards that would otherwise just expire. Many credit card companies, hotels, and airlines will make it easy to give your rewards to nonprofit organizations.

Donating Assets from Your Brokerage Account

If you’re looking to lower your taxes, you may want to consider donating assets from your brokerage account to a nonprofit. This may take some time and planning, but the benefits of donating an over-allocated position that’s outperforming can be worth it.

You may be able to receive tax advantages and rebalance your portfolio, while also helping an organization increase its assets.

Recommended: What Tax Bracket Am I In?

Setting up a Recurring Donation

You can get a headstart on next year by creating a recurring contribution now. Many organizations allow you to donate monthly through their websites using a credit card, so you might be able to earn rewards at the same time. By establishing your donation plans now, you won’t have to even think about end-of-the-year giving next year.

Keeping Good Records

If you want to deduct your donation on your taxes, you’ll want to make sure you have the right receipts to back up the transaction.

You’ll want to keep records of your donations. For cash donations under $250, you’ll either need a bank record (like a canceled check or bank statement) or a written acknowledgment from the charity which includes the date and amount of your contribution. (The exception is goods dropped off at, say, a clothing donation bin.)

For cash donations over $250, a bank record isn’t insufficient. Instead, you’ll need something in writing from the charity which includes the date and amount of your donation.

If you are making noncash donations valued at $500 or more, you’ll need to fill out one or more of the IRS Form 8283 . If the donation exceeds $5,000 in value (say, if you gift a car you no longer need to a favorite local organization), you’ll also need to get a written appraisal from a qualified appraiser. In addition, know that donations of $250 or more will also require what is known as a “contemporaneous written acknowledgment.” This is a document that describes the property, states whether the organization provided the donor with goods or services as a result of the contribution,and share an estimate of the value of any such goods or services provided.

Speaking with a Professional

Working with a personal accountant can help answer any questions you may have about how tax laws will impact your tax contribution, as well as help you make the most strategic and efficient charitable donation.

Recommended: Are 401(k) Contributions Tax Deductible? Limits Explained

The Takeaway

Giving can be a good idea for a number of reasons. In addition to helping a nonprofit organization meet its operating costs for the year, you can feel good about what you are doing with your money, and you may also benefit from tax deductions.

Giving can also help you get the new year started on the right foot. If you’re looking for other ways to get your financial life in order, consider a new bank account.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

Should donations be deductible?

Charitable contributions are usually tax-deductible, but there can be limitations as well as exceptions, so it can be wise to inquire in advance. Contributions can often take the form of cash, artwork, cars, and other items of value.

Are charitable contributions no longer tax-deductible?

Charitable contributions can be tax-deductible. However, they must be claimed as itemized deductions; you would do so on Schedule A of IRS Form 1040. Keep in mind that there’s a limit on charitable cash contributions: For 2024, it’s 60% of the taxpayer’s adjusted gross income.

Can you deduct $300 in charitable contributions without itemizing?

The short answer is no. Currently, you must itemize charitable contributions in order to claim them as deductions.

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SOBNK-Q324-060

Source: sofi.com