Managing Your Money All-in-One For Dummies

Ted Benna and Brenda Watson Newmann are coauthors of 401(k)s & IRAs For Dummies. John Ventura was the coauthor of Managing Debt For Dummies with Mary Reed. Eric Tyson is coauthor with Robert S. Griswold on Mortgage Management For Dummies. Jack Hungelmann is author of Insurance For Dummies. Melyssa Barrett, Steve Bucci, Rod Griffin are coauthors of Credit Repair Kit For Dummies. Other authors include Matt Krantz, Deborah Taylor-Hough, James P. Caher, John M. Caher, Kathleen Sindell, Margaret Atkins Munro, N. Brian Caverly, and Jordan S. Simon.

• Introduction 1About This Book 1Foolish Assumptions 2Icons Used in This Book 3Beyond the Book 3Where to Go from Here 3Book 1: Taking Charge of Your Finances 5Chapter 1: Assessing Where You Are Financially 7Asking Some Preliminary Questions 8Evaluating Your Relationship with Money 9Recognizing emotional spending 9Living for the moment 9Checking Out Your Credit Reports 10Getting copies of your credit reports 10Knowing why your reports matter 11Finding Out Your FICO Score 11Comparing Spending and Income 12Gathering the necessary materials 12Categorizing your expenses 13Figuring out the fritter factor 17Totaling spending and earnings 17Calculating your financial bottom line 18Assessing Your Spending Habits 18Cataloging What You Own 20Adding Up What You Owe 22Chapter 2: Improving Your Relationship with Money 25Working with Your Partner to Achieve Financial Goals 26Recognizing your financial strengths and weaknesses 26Identifying long-term goals 28Establishing savings goals 29Finding peaceful solutions to differences 29Pulling together with your spouse or partner 30Talking money with your children 31Believing in Yourself 33Handling Setbacks 35Asking for Help 37Digging Out of Debt 38Step 1: Acknowledge the problem 38Step 2: Cut the cards 38Step 3: Set a good budget and live within it 39Step 4: Contact your creditors 39Budgeting for the Future 39Step 1: Categorize your expenses 40Step 2: Estimate what you spend 41Step 3: Calculate and adjust 41Chapter 3: Building and Sticking to a Budget 43Comparing Monthly Spending and Income 44Tackling a Budget Deficit 49Cutting expenses 49Reducing debt before saving 49Using other strategies 50Paying the Important Stuff If You Can’t Pay Everything 52Distinguishing between secured and unsecured debt 52Knowing when to prioritize an unsecured debt 53Examining a Budget Surplus 54Finalizing and Sticking to Your Budget 54Steeling your resolve 55Checking your progress each month 55Chapter 4: Cutting Spending and Boosting Income 59Finding Ways to Spend Less 60Looking for good deals 60Spending less on your housing 60Lowering your utility bills 61Eating for less 62Paying less for transportation 64Having fun for less 65Looking good for less 66Dressing for less 66Reducing your phone costs 67Saving on prescription drugs 67Inching down your insurance costs 68Bringing in More Bucks 70Earning more at your current job 71Looking for a new job 71Getting (and surviving) a second job 74Considering freelancing 75Chapter 5: Cleaning Up Your Credit Reports 77Understanding the True Value of Good Credit 78Reviewing Your Reports for Problems 81Using the Law to Get Your Credit Record Clean and Keep It That Way 84Identifying and Disputing Inaccurate Information 87Understanding the dispute process 87Correcting all your credit reports 88Contacting the creditor 93Adding Positive Information to Your Credit Report 94Asking your landlord to report your rent payments 94Adding your utility and cell-phone payments to your report 94Opening new credit accounts 95Adding a 100-word statement 95Book 2: Managing Home and Personal Finances 97Chapter 1: Running a Money-Smart Household 99Reaching Out to Touch Someone 99Saving on phone bills 100Using email and texting to stay in touch 100Rediscovering the joys of letter writing 100Saving on Climate Control 101Dressing for the weather 101Keeping your cool when the weather’s not 101Warming the house 104Cutting Back on Electricity and Gas Use 106Improving your appliance efficiency 107Shedding some light on the subject 107Trash Talk: Controlling Garbage Costs 108Reducing what you throw away 108Reusing household items in creative ways 109Cutting Down on Water Use 110Keeping a Ceiling on Housing Budgets 111Saving money on rent 111Saving money on home ownership 112Cutting Transportation Costs 115Finding a deal on a set of wheels 115Using public transportation 117Biking and walking 117Finding bargains on airfare and rental cars 118Opting to travel by train or bus 119Purchasing Appliances 119Keeping energy efficiency in mind 119Shopping for scratch-and-dent and secondhand 120Thinking twice about renting-to-own 120Chapter 2: Selecting the Best Home Purchase Loan 121Three Questions to Help You Pick the Right Mortgage 122How long do you plan to keep your mortgage? 122How much financial risk can you accept? 123How much money do you need? 124Fixed-Rate Mortgages: No Surprises 125Adjustable-Rate Mortgages (ARMs) 127How an ARM’s interest rate is determined 129How often does the interest rate adjust? 132What are the limits on rate adjustments? 132Does the loan have negative amortization? 133Fine-Tuning Your Thought Process 135Finding funds 136Making the 30-year versus 15-year mortgage decision 136Getting a Loan When Rates Are High 137Chapter 3: Handling a Mortgage Meltdown 139Assessing the Damage from a Mortgage Meltdown 140Understanding How Mortgages Differ from Other Loans 141Spotting a foreclosure on the horizon 142Counting to 90 142Knowing Where to Turn for Help 143Finding good help for free 143Working with your mortgage servicer 144Avoiding help that hurts 145Considering Alternatives to Going Down with the Ship 146What to do first 146What to do for more serious problems 147What to do to end matters 147Managing a foreclosure 148Strategic default: Stopping payments 149Dealing with Deficiencies 151Preparing for “Credit Winter” 152Chapter 4: Keeping a Lid on Medical Costs 155Saving on Medical Expenses 155Keeping a close eye on bills 155Looking into payment plans 156Coordinating insurance benefits 156Finding less-expensive prescriptions 156Discovering What Makes a Great Health Insurance Plan 157Deciding Between Individual and Group 158Pricing 158Underwriting 158Benefit levels 159Renewability 159Coverage flexibility 159Saving Money on Individual Coverage 160Saving directly 160Saving indirectly with self-care 163Coping with Health Insurance Problems 164Insuring the uninsurable 164Staying insured through hard times 165Insuring your kids when your policy no longer covers them 165Evaluating insurance available through college 166Understanding temporary health insurance 167Continuing coverage following a divorce 168Deciding on a conversion policy 169Considering HIPAA instead 170Taking Decisive Action 174Reviewing bills with a fine-tooth comb 175Making your plan pay what it should 175Taking advantage of hospital discounts 176Reducing your medical debt 177Chapter 5: Using the Internet to Help Manage Your Finances 179Giving Yourself an Online Financial Makeover 180Using the Internet to Budget 181Finding Online Resources to Track Your Income and Expenses 184Using the Internet to Get Free Financial Advice 185Finding Out What You’re Worth 186Book 3: Dealing with Debt 189Chapter 1: Tackling What You Owe 191Taking Stock of Your Finances 192Using a Budget to Get Out of Debt 193Taking the Right Steps When You Have Too Much Debt 194Handling Debt Collectors 195Realizing your rights 196Understanding why debt collectors behave as they do 197Getting a Financial Education 198The difference between good debt and bad debt 198Distinguishing between types of credit 199Seeing yourself through a creditor’s eyes 200Building a better credit history 201Chapter 2: Starting or Restarting Your Credit in Real Life 203Debunking Misinformation about Banking and Credit 204Why you need credit 205Why credit is safe 206Obtaining Credit: Starting Out on the Right Foot 207Establishing a credit file without a Social Security number 208Setting goals before you set out 209Establishing a relationship with a financial institution 210Using prepaid and reloadable cards 212Fattening up your credit file 212Avoiding high interest, fees, and scams 214Overcoming Credit Fears and Mistakes 215Qualifying for First-Time Cards and Lending 217Getting a credit card 217Using savings for credit 219Considering Credit for Students and Military Members 220Giving credit to students 220Following military credit rules 222Chapter 3: Consolidating Your Debts 225Knowing When Debt Consolidation Makes Sense 225Considering Your Options 226Transferring balances 227Getting a bank loan 229Borrowing against your life insurance policy 233Borrowing from your 401(k) retirement plan 234Avoiding Dangerous Debt-Consolidation Possibilities 236Chapter 4: Negotiating with Creditors and Getting Help 237Getting Ready to Negotiate 238Listing all your debts 239Zeroing in on certain debts first 239Reviewing your budget 240Pulling together your financial information 241Getting Down to Business: Contacting Creditors 243Making the Agreement Official: Putting It in Writing 244Knowing the Deal with Credit Counseling 246Finding a Reputable Credit Counseling Agency 246Differentiating the good from the bad 247Locating agencies in your area 248Knowing what to ask and what to expect 249Working with a Credit Counselor 250Sharing your financial situation 251Whittling down your debt with a debt management plan 251Avoiding Debt Settlement Firms 254Being wary of false promises 254Preventing worse financial problems 255Getting Relief If You Get Ripped Off 255Chapter 5: Considering Bankruptcy 257Viewing Bankruptcy in a Historical Context 258Debunking Bankruptcy Myths 260“People who go bankrupt are sleazy deadbeats” 260“Bankruptcy is the easy way out for folks who can pay their bills” 262“Bankruptcy threatens the ethical foundations of our society” 262“Honest folks pay a ‘tax’ to support people who are bankrupt” 263Understanding What You Can Gain Through Bankruptcy 263Stopping creditors in their tracks 265Wiping out most of your debts 266Catching up on back mortgage and car payments 267Filing bankruptcy to pay some debts over time 267Using bankruptcy to pay all your debts 267Knowing What You Can Lose in Bankruptcy 268Considering Alternatives to Bankruptcy 269Introducing the Different Types of Personal Bankruptcy 270Liquidations (Chapter 7) 271Consumer reorganizations (Chapter 13) 271Weighing the Consequences of Not Filing Bankruptcy 272Claims secured by your car 272Claims secured by your home 273Student loans 273Support obligations 273Fines and restitution 273Taxes 274Lawsuits 274Using the Statute of Limitations 274Book 4: Saving and Investing 275Chapter 1: Becoming a Saver 277Eliminating Most of the Fat 278Making lists of where you are now 278Carving away the truly wasteful 279Lowering Your Debt 280Trimming Other Costs 282Changing Your Perspective and Watching Your Savings Grow 283Paying yourself first 283Educating yourself about investing 284Taking advantage of giveaways 287Saving While in Debt 289Chapter 2: Investing in Stocks, Bonds, and Mutual Funds 291Stock: Owning a Piece of the Rock 292Understanding stock 292Conducting business in stock exchanges 293Brushing up: A quick stock glossary 294Picking a stock investment strategy 296Buying Bonds for Fixed Income 297Understanding bonds 297Sorting out different kinds of bonds 298Interpreting bond ratings 299Mutual Funds: The Power of Many 301Understanding mutual funds 301Defining different kinds of mutual funds 302Doing It Your Way versus Using a Broker 302Full-service brokers 303Discount brokers 304Online brokers 304Avoiding Five Common Investing Mistakes 304Investing before you’re ready 305Investing without goals 305Believing those “hot” tips 306Not diversifying your portfolio 307Selling too soon (or too late) 307Chapter 3: Saving for Retirement 309Targeting Your Retirement Date 310Getting Your Hands on Your Money 311Drawing on your Social Security 311Tapping into other sources 316Living the retirement life 317Testing the waters in your gene pool 318Developing Your Retirement Savings Plan 318Cutting down on your expenses 318Picturing your progress 320Counting on compounding 324Chapter 4: Saving for College 327Doing the Numbers 328Exploring Section 529 Plans 329Checking Out Coverdell Accounts 329But Wait! There’s More! 330Maximizing Your Savings, Minimizing Your Tax 332Checking Out the Cost of College 332Tackling tuition 333Accounting for housing 333Factoring in books and supplies 335Looking into the Costs of Various Types of Schools 336Exploring career and vocational training schools 336Taking community college and continuing education classes 336Going for a four-year public education 337Getting your education in private 337Chapter 5: Working with an Online Broker 339Finding the Best Broker for You 340The nine main factors to consider 340Gotchas to watch out for 342Separating the Types of Brokerages 342Paying the minimum with a deep discounter 343Get more with a discounter 344Full-service traditional 348Avoiding Hidden Fees 350Finding Out What Reviewers Think 351Is Your Money Safe? Checking Out Your Broker 352Cutting the Cord: Mobile Trading 354Opening and Setting Up Your Account 355The checklist of what you need to know 356The checklist of what you need to have 356Book 5: Protecting Your Money and Assets 357Chapter 1: Combating Identity Theft 359Keeping Thieves at Bay 360Getting on the technology train 361Looking out for phishing scams 361Safeguarding your computer data 363Keeping passwords secret 364Protecting your mail 365Storing financial data in your home 366Putting your credit information on ice 366Shielding your credit card number 367Catching Identity Thieves in the Act 369Watching for early-warning notices 370Getting early warnings from the IRS 371Handling a collections call 372Detecting unauthorized charges 372Being denied credit or account access 373Noticing missing account statements 373Taking Fast Action When Identity Theft Occurs 374Communicating with the right people 374Protecting your identity through the FACT Act 377Sending out a fraud alert 379Blocking fraudulent credit lines 380Getting and Using Credit After Identity Theft 380Closing and reopening your accounts 380Altering your PINs and passwords 381Changing your Social Security number and driver’s license number 382Chapter 2: Online Banking 383Online and Traditional Banks 383Advantages of online banking 384Online bank access 384Accounting for Your Accounts 385Savings account 385Basic checking account 386Interest-bearing checking account 386MMDA or MMA 386cd 386Choosing an Online Bank That’s Right for You 387Identifying your user profile 387Noting the fees when you shop 388Opening Your Online Bank Account 390Chapter 3: Homeowner’s Insurance: Protecting Your Stuff 393Introducing the Six Parts of a Homeowner’s Policy 394Insuring your residence (Coverage A) 394Insuring detached structures (Coverage B) 396Insuring your belongings (Coverage C) 397Insuring additional living expenses (Coverage D) 398Insuring your personal liability (Coverage E) 399Insuring guests’ medical bills (Coverage F) 401Choosing the Right Homeowner’s Property Coverages 401Understanding the causes-of-loss options 402Introducing the six most common homeowner’s policies 403Establishing Property Coverage Limits 404Determining the replacement cost of your home 405Guaranteeing you’ll have enough insurance to rebuild 407Estimating the cost to replace belongings 408Choosing your deductible 409Documenting Your Claim 411Chapter 4: Auto Insurance Basics 413Managing Your Lawsuit Risks 413Reviewing noninsurance strategies 414Buying liability insurance 414Insuring Your Personal Injuries 419Understanding how uninsured and underinsured motorist coverage works 420Saving money on medical coverage 423Dealing with Damage to Your Vehicle 424Choosing cost-effective deductibles 425Knowing when to drop collision and comprehensive coverage 428Evaluating Road Service and Car Rental Coverages 429Chapter 5: Insuring Yourself: Life Insurance 431Assessing the Need 431Who doesn’t need life insurance 432Who does need life insurance 432Determining How Much Coverage You Need 433Looking at a hypothetical family 433Using the multiple of income method 434Using the web to estimate needs 434Speaking the Language 436Understanding the Types of Life Insurance 437Ideal use 437Pricing 438Agent commissions 438Understanding the Variations of Permanent Life Insurance 439Whole life 440Universal life 441Variable life 442Cash value options when dropping permanent insurance 443Understanding the Variations of Term Life Insurance 445Annual renewable term (ART) 445Fixed-rate level term 445Decreasing term 447Insurance from your mortgage company 447Making Your Choice 448Evaluating Life Insurance Sources 449Considering an agent 450Buying without an agent 452Debunking Myths and Mistakes 454Mistake: Trading cash value for death protection needs 454Myth: Supplemental group life is cheaper 455Mistake: Buying life insurance in pieces 455Mistake: Accidental death/travel coverage 456Mistake: Covering only one income 456Mistake: Ignoring a stay-at-home parent’s value 456Mistake: Covering children, not parents 457Mistake: Decreasing term insurance 457Mistake: Being unrealistic about how much life insurance you can afford 457Mistake: Buying before you need it 458Myth: It’s cheaper when you’re young 458Book 6: Dealing with the Tax Man 459Chapter 1: Tax Return Preparation Options and Tools 461Preparing Your Own Return 462Taking Advantage of IRS Publications 463Perusing Tax-Preparation and Advice Guides 464Using Software 464Accessing Internet Tax Resources 465Internal Revenue Service 466Research 467Tax preparation sites 468Hiring Help 468Deciding whether you really need a preparer 469Unenrolled preparers 469Enrolled agents (EAs) 470Certified public accountants (CPAs) 470Tax attorneys 471Finding Tax Preparers and Advisors 473Chapter 2: Getting and Staying Organized 475Maintaining the Burden of Proof 476Keeping Good Records 477Ensuring a complete and accurate tax return 477Setting up a record-keeping system 479Tracking tax information on your computer 480Deciding when to stash and when to trash 481Reconstructing Missing Tax Records 481Property received by inheritance or gift 482Securities received by inheritance or gift 485Improvements to a residence 485Casualty losses 486Business records 487Using duplicate account statements 487Understanding the Cohan Rule 488Chapter 3: No Form Fits All (Or, What Kind of Taxpayer Are You?) 491What Rendition of 1040 Shall You Play? 492Form 1040 492Form 1040-SR 493Form 1040-NR 494Choosing a Filing Status 494Single 495Married filing jointly 495Married filing separately 496Head of household 500Qualifying widow(er) with dependent child 502Counting your dependents 502Deciding who is your dependent 503Securing Social Security numbers for dependents 506Filing for Children and Other Dependents 508Defining Who Is a Qualifying Child 509Age test 509Relationship test 510Residency test 510Support test 510Must You File? 511When to file 513If you don’t file 513Where to file 514How to file 514Book 7: Retiring Comfortably 517Chapter 1: Checking the Benefits of a 401(k) 519Realizing What a 401(k) Does for You 520Lowers how much tax you pay 520Gets you matching funds from your employer 525Makes room for a little something extra: Employer non-matching contribution 526Allows you to save without tears 527Vesting: When Your Employer’s Contribution Is Yours to Keep 527Vesting of employer contributions 528Making exceptions 529Letting the Pros Work for You 530Protecting Your Money 530Meeting minimum standards 531Avoiding losses in bankruptcy 532Watching Out for Potential Pitfalls 532Earning more may mean contributing less 532Being at the mercy of your plan 533Chapter 2: Retiring Your Way: IRAs 535Looking at the Basics of Your IRA 535Staying traditional 536Touching on Roth IRAs 537Benefiting from a spousal IRA 538Starting an IRA for a child 538Setting Up Your IRA 539Deciding where to invest your money 540Opening your account 541Maintaining Your IRA 542Moving Your IRA 542Chapter 3: Paychecks from Your House: Reverse Mortgages 545Grasping the Reverse Mortgage Basics 546Considering common objections 547Who can get a reverse mortgage? 548How much money can you get and when? 549When do you pay the money back? 551What do you owe? 551How is the loan repaid? 552What’s the out-of-pocket cost of getting a reverse mortgage? 552What are the other reverse mortgage costs? 553What’s the total annual rate? 554How do reverse mortgages affect your government-sponsored benefits? 555Shopping for a Reverse Mortgage 555Making major choices 556Counseling 557Deciding Whether You Want a Reverse Mortgage 557Chapter 4: Determining How Much You Need for Retirement 559Improving Your Chances of an Ideal Retirement 559Deciding How Much of Your Salary to Put Aside 560Making use of your salary deferral agreement 560Measuring your plan’s maximums 561Being highly paid means different rules 562Estimating what your budget can afford 564Building Your Nest (Egg) 566If you’re retiring in the near future 566If your retirement is farther off 569Using a retirement calculator 570Chapter 5: Managing Money in Retirement 573Looking Forward to Retirement 574Decisions, Decisions: What to Do with Your 401(k) Money 574Being older can save you money 576Foiling the dreaded early withdrawal penalty 577Leaving money with your former employer 578Making Withdrawals from Your IRA 579Paying Uncle Sam His Due: Required Withdrawals 580Developing a Strategy to Deal with the Tax Man 583Which comes first: Plucking the chicken or emptying the nest egg? 583Dealing with that darned company stock 584Managing Your Investments in Retirement 585Live long and prosper 585Stay practical 586Managing Risk 587Balancing investments 587Buying an annuity 588Consolidating Your Accounts 590Tending to Your Nest Egg 591Row, Row, Row Your Boat, Gently Down the Income Stream 592Treating Your Home Like the Asset It Is 594Adding up the expenses 594Making use of your equity 595Book 8: Planning Your Estate and Will 597Chapter 1: The Fundamentals of Estate Planning 599What Is an Estate? 600The basics: Definitions and terminology 600Property types 603Types of property interest 604Why You Need to Plan Your Estate 607Why Your Estate-Planning Goals Differ from Your Neighbors’ 608The Critical Path Method to Planning Your Estate 610Getting Help with Your Estate Planning 613Making sure that your team of advisors is “FAIL” safe 614Working with Certified Financial Planners (CFPs) and other professionals 615Knowing what to expect from your accountant for your estate planning 616Working with your insurance agent 617Working with your attorney 617Chapter 2: Where There’s a Will 619Planning for Your Will 620Knowing the Different Types of Wills 621Simple wills 621Other types of wills 622Choosing Your Will’s Contents 623Opening clauses 624Giving clauses 625Ending clauses 627Safeguarding Your Will 628Changing, Amending, and Revoking Your Will 629Why you may need to change your will 630Ways to change your will 631Protecting Your Loved Ones from Your Unloved Ones 632Figuring Out Your Will Status 633Testacy: You’ve nailed everything down 633Intestacy: You die with zero “will power” 633Partial intestacy: The vultures start circling 634Chapter 3: The Limitations of Wills: What You Can and Can’t Do 635Making Your Peace with Statutes That Affect Your Will 636Identifying Statutes That Your Will Can Change 636Abatement: There’s not enough in the cupboard for everyone 637Ademption: Some property is missing 639Antilapse: Someone dies before you do 640Divorce: High noon in Splitsville 640Simultaneous death: Sorry, but we have to talk about it 641Living (And Dying) with the Laws That Your Will Can’t Change 642Community property 642Spousal elective shares 644Homestead allowance: Keeping a house for kiddies and spouse 645Homestead exemption: How the law protects your house from your creditors 645Exempt property: How the law protects your personal property from creditors 646Family allowance: Drawing from your estate to protect your family 646Oops! Taking care of VIPs who aren’t in the will 647Chapter 4: Estate Planning with Online Resources 649Understanding Wills and Trusts 650Where there’s an online will, there’s a way 650Avoiding probate 651Getting the Basics of Trusts 652Trusting in Living Trust to Avoid Probate 654Joint Tenancy and Beneficiary Arrangements 655Not all heirs are created equal 656Don’t keep your estate plans hush-hush 657Customizing Estate Planning for All Ages 657Under 30 and loving it 658Grooving in your midlife 659Retired and enjoying the good life 660Selecting an Estate Planner 661Preparing to Meet Your Estate Planner 662Index 663