MONEY everyday money

The New College Grad’s Guide to Money

So long, college! Hello, adult life! Here's a quick and painless lesson in real-world finances for the class of 2015.

Person putting coin in mortarboard
John Kuczala—Getty Images

Graduates of the class of 2015, it’s time to further your education. Yes, you just spent four years amassing a crazy amount of knowledge. But despite all you’ve learned, you possibly still have an incomplete in one subject: money. Suddenly you’re at a financial turning point, facing challenges like finding a place to live and starting a new job. At the same time, your college friends have scattered across the country, the clock is ticking on your student loan grace period, and you are feeling broke, really broke.

Don’t worry. The basic money skills you need to get on your feet are easy to master. And by doing so right out of the college gates, you’ll have more opportunities off in the future—and greater peace of mind right away. So, drawing from the advice of recent graduates and experts familiar with your challenge, MONEY offers you this cheat sheet for launching your post-college financial life.



    Make Technology Your Friend

    Remember life before college? Seasonal wardrobe updates, lots of dinners out, new cellphones on a regular basis? Well, Mom and Dad worked a good 20 years or so before they could afford that lifestyle, so don’t expect to carry on as you did when you lived at home.

    If you play it right, though, you can enjoy a taste of what’s important to you, with enough left over to start building a cushier future.

    The plan: Automate. Direct deposit and auto-deduction make it easy to set aside money before you can spend it. To make sure you have enough for large, regular monthly outlays like rent, savings, and student loans—more about those expenses later—set up your pay-check for split deposits. Put money for big necessities in one account, cash for everything else in another.

    Then it’s just a question of making those remaining funds last until your next paycheck. To do that, you don’t need a life of self-denial; just think about spending in terms of tradeoffs: Would I rather buy x now or y later?

    Handy tool: The Mint app tracks your cash and can build a budget from your past spending.

    One grad’s story: When Sean Starling, a 2013 Morehouse College graduate, started his first job out of school, he thought he was set. “I was like, ‘I’m making money now, and I can spend whatever I want,'” says Starling, 25. Repeatedly running out of cash—and failing to save enough—changed his mind. He used Mint to track his spending, then moved to Excel for more detail. With his budget now under control, Starling, a cost analyst, is repaying student debt and saving up for his September wedding. “Whether you use a piggy bank or Mint or an Excel spreadsheet,” he says, “find a way to make the savings process your own.”



    Share and Save

    Most likely, you’ll share your first home post-college with a roommate or two. And there’s a good chance their names will be Mom and Dad. Whomever you’re living with, make it a time for saving money.

    The plan: Moving out of your childhood home? Aim to spend no more than one-quarter of your income on rent, advises Ben Barzideh, a financial planner with Piershale Financial Group in Crystal Lake, Ill.

    Moving back in with the folks? Be sure to wash your dishes. But you’ll really warm their hearts if you take advantage of your rent-free digs and set aside at least 25% of your salary—the money you might have paid for rent—to start a getaway fund.

    Handy tools: Splitwise makes it easy for roommates to figure out who owes whom for different housing expenses. “It’s super-fast and streamlined,” says Zach Feldman, a 24-year-old New York University graduate living in Brooklyn. “It takes maybe 10 minutes out of the month to get my bills done.” The Venmo payment app makes it simple to settle up and verify that everyone has paid up.

    One grad’s story: Kristine Nicolaysen-Dowhan, 24, moved in with her mom and stepdad in Grosse Ile, Mich., after graduating from the University of Michigan in 2012. Her first paycheck went toward clothes for work; her second paid off debt. Within four months Dowhan was saving a whopping 75% of her salary. “The rest I just had as fun money,” she says.



    Handle With Care

    Credit cards are great—in moderation. They’re useful as backup in emergencies, and paying on time helps build your credit score—good for lower rates on future home and car loans. (Employers and landlords also use your score to gauge your reliability.) The downside: Plastic makes it easy to spend money you don’t have, at a high cost.

    The plan: Get a card—just one—and use it sparingly. (Starling reserves his card for emergencies and online purchases.) Activate text alerts in your account for upcoming bills. To help your score, pay on time and keep charges to one-fourth of your credit limit. And pay each month’s bill in full; if your card charges interest of, say, 20%, keeping a balance for a year means that every $100 you spend will cost you an extra $20.

    Handy tool: MONEY’s credit card guide points you to the best available cash-back credit cards—good if you pay your full bill each month—and the best card for first-time card users.



    Pick a Plan

    You can’t wriggle out of repaying student debt, but you can choose how you pay. Instead of a standard 10-year plan, you have other options: lower initial payments or more time to repay, in return for higher interest costs. You have six months after graduation to choose a plan (which you can change later).

    The plan: Run numbers to see what you can manage. On the average federal loan balance of $27,000 for a four-year public college, you’d pay $272 monthly under the standard plan; under another one that bases payments on your income, a person making $35,000 would begin paying just $146 but owe $3,100 more in total interest. Automatically deduct payments from your bank account; paying on time helps your credit score. At tax time, deduct your interest payments, up to $2,500, on your return (the deduction is phased out for singles making more than $80,000). Tax savings: up to $625.

    Handy tools: Get a list of your federal loans at Use the government’s Repayment Estimator to ballpark payments under different plans.



    Don’t Say Yes So Soon

    Relax. Based on horror stories of recent years, maybe you’ve decided you’re lucky to get a job, any job, at any salary. But you may have more bargaining power than you think. In the best market for new grads since the financial crisis, nearly two-thirds of employers—an all-time high—plan to raise starting salaries over last year, reports the National Association of Colleges and Employers.

    That positions you well for a salary negotiation, which can pay big dividends over time. A bump in pay of $5,000 by the time you’re 25 years old translates into a $634,000 boost in lifetime earnings, according to a study out of Temple and George Mason universities.

    The plan: Don’t accept an offer right away. says 84% of employers expect applicants to negotiate their salary. And compensation data provider PayScale found that 75% of workers asking for more money got at least some of their request.

    When you do ask, tie your case (politely) to other offers you may have or to experience you bring—say, a previous internship—that will help you hit the ground running.

    Handy tools: PayScale,, and Glassdoor will give you a realistic sense of salary ranges, taking into account factors such as company size and location.

    One grad’s story: When Kirk Leonard, 24, a 2013 graduate of Lamar University in Beaumont, Texas, was offered a job as an office manager at a local dialysis facility, he laid out the case for his future boss as to why he deserved higher pay: Having worked for the company before, he knew its operations. And he could start right away—saving the company the time and hassle of a job search. The payoff: a salary 10% higher than the original offer.



    Get Covered

    Another reason to worry less this year: Thanks to Obamacare, it’s easier and cheaper than ever to get health insurance to cover major medical expenses. Any plan you sign up for should include a free annual checkup and access to prescriptions for birth control.

    The plan: The cheapest route is probably to stay on (or return to) a parent’s plan—open to you until you turn 26. You may not want to, though, if you live far from your parents; finding in-network doctors and hospitals might be difficult, says Carrie McLean of

    Insured through work? Since being young means you’re (probably) healthy, you might pick the company plan you’re offered with the lowest upfront cost and highest deductible (the amount you pay before insurance starts kicking in). But, warns Karen Pollitz of the Kaiser Family Foundation, be sure you can quickly scare up the deductible, which can be as much as $6,600 this year; a broken leg, for example, can easily cost thousands.

    On your own? Hit the government exchange. Plan labels range from Bronze to Platinum, based on premiums and out-of-pocket contributions. You’re likely eligible for subsidies if you make less than $46,680 in 2015. The silver plan is a good pick, since a break on out-of-pocket costs (if you earn less than $29,175 this year) is available only with that choice.

    Handy tools: To buy through the government exchange, start at and see if you qualify for discounts. Making less than $16,105 this year? Check the map at to see if your state offers a free plan.




    Stash a Little Cash

    Stuff happens—stuff that costs money. Your car might break down… or a friend might invite you to his spur-of-the-moment Vegas wedding. Be ready without having to fall back on a credit card you can’t pay off.

    The plan: An emergency fund of about $1,000 is enough for you, says Barzideh. Set a little money aside from any graduation checks you might receive, and add $50 or so a month into a bank account—one that’s separate from your day-to-day account, so you won’t be tempted to raid it for everyday needs.

    Handy tool: Keep your money in an online bank like There’s no minimum balance or monthly fee; the interest rate is now 0.99%.



    Get Richer Now

    You too can be a millionaire later in life. The earlier you start saving, the easier it is, and the more freedom you’ll have later on. “You don’t know what choices you’ll be considering in 20 or 30 years, but you do want to have choices,” says Brenda Cude, a professor of financial planning at the University of Georgia.

    The plan: The best place to save long term is in a 401(k) retirement savings plan, offered by employers of nearly 80% of workers. You aren’t taxed on the money you put in that 401(k), and it grows tax-free over the years (you’ll pay taxes on withdrawals). Most employers will match a portion of your contributions, typically 50¢ for every dollar on the first 6% of pay. Start small, putting aside $50 or $100 a month.

    If you don’t have a 401(k), you can put up to $5,500 this year in an individual retirement account called a Roth IRA, where your investments will grow tax-free. (You can open one up through any major fund company, such as Vanguard, Fidelity, or T. Rowe Price.) You get no upfront tax break, but you won’t be taxed when you take money out. And that’s good, since your tax rate will probably be higher later on than it is now.

    Wherever you save, the best starter investment is a mutual fund called a target-date fund. It will give you, in a single investment, a package of stocks and bonds that’s right for your age.


Don’t Make These 8 Classic Tax-Filing Fails

Zachary Zavislak

These common mistakes can keep you from getting the refund you're owed.

Slipping up on your taxes can exact a high price. Some of the most frequently made blunders—silly things like entering the wrong Social Security number, spelling your name incorrectly, or putting in the wrong account numbers for direct deposit—hold up processing your return and any refund you might be due. That’s bad enough.

Other common mistakes cost you more than time. They cost you real money. Just by overlooking deductions, taxpayers give up an average of about $600 at tax time, according to research by Youssef Benzarti, an economics Ph.D. candidate at the University of California at Berkeley. He found that many people don’t itemize when they should—therefore passing over breaks such as the write-off for investment-related expenses. “Or,” says Benzarti, “they take only the easy deductions like mortgage interest and state taxes” and not harder-to-prove ones, such as charitable donations and use of a home office.

With April 15 fast approaching, MONEY consulted with a slew of tax pros to find out what other savings taxpayers like you typically miss. Review your return to make sure you don’t commit any of these costly errors.

1. Taking the wrong tax write-off for college

There are two mutually exclusive breaks you can use to ease the pain of paying for higher ed. People sometimes automatically take the $4,000 tuition and fees deduction because it sounds like the most money. But the $2,500 American Opportunity Tax Credit is typically a better deal,
says Melissa Labant, director of tax advocacy for the American Institute of CPAs. Here’s why: The tuition and fees deduction lowers the portion of your income subject to tax. “But a tax credit yields a dollar-for-dollar reduction in the taxes you owe,” says Labant.

You’re eligible for the full AOTC if you spend $4,000 on tuition and fees, as you can slash your taxes by 100% of the first $2,000 and 25% of the next $2,000. Also, your adjusted gross income must be $80,000 or less if single, $160,000 or less if married and filing jointly. (Partial credit is available for incomes up to $90,000 for singles and $180,000 for couples filing jointly.)

One caveat: You can’t take the AOTC for more than four years for any one dependent. So if your kid takes longer to graduate, you’ll be glad to have the tuition and fees deduction for year five.

2. Paying too much tax on investments you sold

At its simplest, your cost basis for figuring out the tax liability on an investment you’ve sold is the original price you paid for that investment. It’s subtracted from the price at which you sell in order to calculate capital gains or losses. Where it gets thorny is when you have to adjust your shares for such things as stock splits, reinvested dividends, capital gains distributions, and sales commissions.

Brokerages and mutual fund companies have been required to track cost basis for their customers since 2011 and 2012, respectively. But you have to calculate cost basis yourself on shares bought before those dates. Unfortunately, many investors forget to do that and end up paying more capital gains than they owe when they sell, says Kris Gretzschel, CPA and manager of the tax and financial planning team for Wells Fargo Advisors.

Say you purchased 100 shares of a stock for $100 per share and paid a $20 commission; your original cost basis is $10,020. Let’s assume you then received a $3-per-share dividend each year for five years that you automatically reinvested. Your new cost basis is $10,020 plus $1,500
($300 times five years) for the dividend, or $11,520. Now say you sell the stock for $18,000. Using the original cost basis instead of the adjusted one, you’d be paying taxes on $7,980 in gains vs. $6,480.

Online calculators like the one at can help you tally up your cost basis. Or you can use a service like, which charges $25 per transaction.

3. Leaving money on the table when changing jobs

High earners who had more than one employer during the year, this one’s for you. In 2014 each employer had to withhold 6.2% in Social Security taxes on the first $117,000 in income (the limit is $118,500 in 2015). “But that could lead the employers to withhold more taxes than you’re required to pay,” says Suzanne Shier, chief wealth planning and tax strategist for Northern Trust in Chicago.

Let’s say you worked for Company A for half the year and earned $62,000, then moved to Company B and earned $70,000. Each company would withhold taxes on your total earnings, but you should have paid taxes on only $117,000, not $132,000, and you would have overpaid by $930.

Tax prep software should catch this one, but paper filers may get snagged. Luckily, it’s an easy fix: “You can claim the money as a credit on line 71 of your 1040,” says Shier.

4. Blanking on what you saved

It’s not uncommon to forget money socked away in an IRA the previous year, especially since your broker doesn’t send you paperwork confirming contributions (IRS Form 5498) until after you file your taxes.

But if you forget to report a contribution to a traditional IRA and you qualify for a deduction—see IRS Publication 590-A—you will miss a break on your current taxes. If the contribution is nondeductible, you still need to file Form 8606 so that you don’t pay income taxes on a portion
of your withdrawals during retirement, notes Gretzschel. So call your brokerage to refresh your memory about 2014 contributions.

5. Missing out on money back for your home office

Moonlighters often opt to forgo the home-office deduction, both because it’s a hassle to keep track of the paperwork and because they’re worried about putting up red flags to IRS auditors.

As of last year, however, an alternative, simplified version of the write-off allows you to deduct $5 per square foot of office space up to $1,500 with no documentation whatsoever. Unlike the old method of calculation, no depreciation is taken on your home, which means the break will not affect capital gains when you sell, says Eric Bell, a CPA with Jones & Roth in Eugene, Ore.

6. Overpaying taxes on retirement distributions

People 70 or older and retired are required to withdraw certain amounts of money from 401(k)s and IRAs each year. When you begin receiving distributions, you have the option to have income taxes withheld. Call it a senior moment, but retirees sometimes forget that they chose to have taxes taken out, says Gretzschel.

They don’t look closely enough at the 1099-R forms and therefore don’t input the taxes paid into their 1040. As a result, they could end up paying the taxes twice—and the IRS may or may not catch the mistake, Gretzschel says.

7. Overlooking online largess

There’s been a big increase in online charitable giving, but many people forget to save emailed receipts as they do ones that come in the mail. “If you don’t have an organized electronic life, it’s hard to get receipts together,” says Shier.

She recommends searching your email in-box for “gift” and “donation.” If you are in the 28% bracket and discover $250 more in donations to report, you’ll reap $70 in tax savings.

8. Ignoring the write-off that is right in your hands

Those who itemize can write off certain investing and tax expenses—including tax-prep software, financial adviser fees, and rent on a safe-deposit box where you store securities—that exceed 2% of your adjusted gross income.

Bell says that those most likely to overcome the 2% hurdle on these “miscellaneous expenses” have modest income but a fairly large taxable portfolio that they pay an adviser to manage; many retirees who super-saved fit that bill. If you have an AGI of $100,000 and you have
$5,000 in investment-adviser fees (equating to 1% on a $500,000 portfolio), you’ll have to exclude the first $2,000, but can deduct the remaining $3,000.

While calculating your costs, don’t forget that you can add subscriptions to professional publications, business magazines, and investing magazines—including the one you’re reading now.

More from the 2015 Tax Guide:
The IRS Could Audit You For Doing This
7 Ways to Keep Your Tax Refund Safe From Thieves
Where to Get Free Tax-Prep Help


MONEY retirement planning

3 Ways to Feather Your (Empty) Nest

Birds in nest throwing money in the air
Sebastien Thibault

Just because the kids are gone doesn't mean it's time to splurge. Here are some ways to treat yourself well without compromising your comfort in retirement.

The phrase “empty nest” may sound sad and lonely. But—shh!—don’t let the kids know that when they clear out, Mom and Dad have fun. Often too much fun. A study by the Center for Retirement Research at Boston College found that empty-nesters spend 51% more than they did when their children were home. “We have clients who go out to lunch and dinner every day,” notes Cincinnati financial planner John Evans.

Certainly after surviving Little League, teenage attitude, and the colossal cost of college, you ­deserve to splurge. But you also don’t want to compromise your finances as you begin the final sprint to retirement. Here are three ways to keep feathering your nest while still enjoying your freedom.

First, Keep Your Spending in Check

  • Rerun your numbers. While you can likely afford to let loose a bit, make sure your retirement plan is in order before you go wild. “You should save a bare minimum of 10% a year, really more like 15%—and if you’re behind you may need to save 20% to 30%,” says Boca Raton, Fla., financial planner Mari Adam. Use T. Rowe Price’s retirement income calculator to see what you need to put away to get your desired income.
  • Make a payoff plan. Erasing your debts before retirement will require sacrifice now—but will take pressure off your nest egg and allow you to have more fun later. Figure out how to do it with the debt calculator at
  • Plug the kid leak. One in four affluent parents ages 50 to 70 surveyed recently by Ameriprise said that supporting adult children has put them off track for retirement. Lesson: Get your priorities (retirement and debt elimination) straight first, and build gifts into your annual budget proactively vs. giving willy-nilly.

Second, Free Up Even More Cash to Stash

  • Downsize. Convert Junior’s room into a better tomorrow: Moving from a $250,000 house to a $150,000 one could boost your investment income by $3,000 a year while reducing maintenance and taxes by $3,250, the Center for Retirement Research found.
  • Cut your coverage. If your kids are working, you may not need life insurance to protect them. You may be able to take them off health and auto policies too.
  • Moonlight. Besides increasing your income and helping you establish a second act, “self-employment makes a huge difference in what you can do on your taxes,” says Tony Novak, a Philadelphia-area CPA. That’s especially valuable in these peak earning years when you’ve lost the kid write-offs.

Finally, Supercharge Tax-Efficient Savings

  • Catch up on your 401(k) and IRA. Once you hit 50, you can sock away $5,500 more in your 401(k) this year, for a total of $23,000, and an extra $1,000 in your IRA, for a total of $6,500. In 2015, you’ll be able to put an extra $6,000 in your 401(k), for a total of $24,000; IRA caps remain unchanged. If you start moonlighting, as suggested above, you can shelter more money in a SEP-IRA—the lesser of 25% of earnings or $52,000.
  • Shovel cash into that HSA. Got a high-deductible health plan? Families can contribute $6,550 ($7,550 if you’re 55-plus) to a health savings account. Contributions are pretax, money grows tax-free, and you don’t pay taxes on withdrawals for medical expenses. If you can pay your deductible from other savings, let your HSA grow for retirement, Novak says.

Sources: Employee Benefit Research Institute, PulteGroup, MONEY calculations­


How to Keep Health Emergencies from Bankrupting You

Celine Dion takes a break from touring to care for her husband, who is battling cancer.
Ryan Remiorz—AP To help care for her ailing husband, Celine Dion has stepped out of the workforce for a while.

Céline Dion cancelled her tour to care for husband René Angélil, who's been fighting cancer. She doesn't have to worry about money, but most people in a similar situation do. Here's how to contain the financial damage.

Earlier today, singer Céline Dion announced that she would be canceling her tour to take care of her husband René Angélil—who has been battling cancer.

“It’s been a very difficult and stressful time for the couple as they deal with the day-to-day challenges of fighting [Angélil’s] disease while trying to juggle a very active show business schedule, and raise their three young children,” a publicist was quoted as saying.

No amount of money can erase the worry and heartache associated with caring for a loved one who’s dealing with a critical illness. And of course Dion, with a net worth estimated at $500 million, doesn’t have to fret about how her family will cope financially at this difficult time. But for the average American, the economic consequences of a tough diagnosis can compound the stress. A study by Sun Life Financial found that even with health insurance, the average cancer patient faced $6,700 in out-of-pocket costs a year. Plus, a family illness can take you away from the office, potentially crimping your earnings.

Should something like this happen to you, a parent or a partner, follow these steps to keep the financial toll to a minimum:

First, maximize your insurance coverage

Dig into your health plan. “Find out if the treatments you need will be covered or if you’ll have to go out of network to see the best specialist,” says Donald Duncan, a Chicago financial planner. Check how much you could be on the hook for; note that your out-of-pocket max when you leave your network can be twice as high as for in-network care.

Appeal to your insurer. If you can successfully argue that no specialists in your network are experts in your care or that none have treated your condition frequently, your insurer may be willing to cover out-of-network care at in-network rates.

Negotiate with your doctor. Another cost-saving option is to see if an out-of-network practitioner will accept in-network rates. Get a sense of what prices doctors and insurers typically agree on at

Next, Get Down to Business at Work

Make the most of open enrollment. Use the annual benefits election period to switch to better health coverage, fully fund a flexible spending account ($2,500 max), and see if you can sign up for extra life and disability insurance. For most large group plans, you don’t need a physical for life insurance during this annual event.

Protect your position. If your firm has 50 or more workers and you’ve been there a year, the Family Medical Leave Act lets you take 12 weeks of unpaid leave—for your care or a family member’s.

Work out a lighter load. Your company may very well pay all or part of your salary for a leave under the firm’s short-term disability policy. If all you want is to reduce your hours, most policies will allow for that too.

Last, Guard Against Greater Financial Damage

Get your shoebox in order. Assemble all your financial statements, insurance policies, property records, and estate plans now, not later, says Philadelphia financial planner Stephen Cohn. Add to that list online IDs and passwords.

Raise cash. Prepare for big medical bills and a potential reduction in earnings by deciding which funds you’d tap in a worst-case scenario. If you must raid your assets and you’re under 59½, tap taxable accounts first to avoid the penalties you’ll pay to cash out an IRA or 401(k) (unless you can get a hardship waiver). “Sell before you need cash so you won’t have to liquidate at a bad time,” says Cohn.

Pick a point person. Draft a durable power of attorney and health care proxy. And says Tampa financial planner Keith Amburgey, “identify who will be your trusted person through your illness.”

MONEY buying a home

Countdown to Buying Your First Home: Our Checklist

Get ready for one of the biggest financial moves you'll ever make: Buying your first home.

First-time home buyers have it tough. The supply of homes for sale is tight, and lenders are tightfisted.

Student debt, at an all-time high of nearly $30,000 per grad, is getting in the way of saving for a down payment, says David Stevens, president and CEO of the Mortgage Bankers Association. But it’s a great time to get your foot in the door.

“Interest rates remain the envy of even your grandparents,” says Keith Gumbinger, vice president of mortgage publisher First, make your finances sparkle.


12 months in advance

Make sure the time is right. Use’s rent or buy calculator to see if you’d really come out ahead, based on loan rates, taxes, and where rents and prices are headed in your area. Nationwide it’s 38% cheaper buying vs. renting.

Clean up your act. Devote this year to saving money and paying down debt. You’ll need at least 3.5% down for an FHA loan, or 10% to 20% for a conventional mortgage. Lenders also like to see job stability, so settle in for now.

Learn what you like. When a home catches your eye—a listing, say, or a photo—pin it to a board on Pinterest. Or try Swipe, a new app from the site Doorsteps, which lets you browse listing photos and mark them pass or save.

Six months out

Look better to lenders. To boost your credit score, order your free credit reports at and fix any mistakes. Pay bills on time, chip away at credit card balances, avoid new debt, and don’t close any accounts or apply for new credit. The average credit score for approved mortgage applicants is 755.

Figure out what you can buy. Use an online calculator like the one at to estimate how much house you can afford based on your income, savings, and debts. That’ll help you research homes and drill down on costs.

Forecast future bills. With an idea of how big a house you can buy, you can do a more detailed budget. Scan listings for property taxes on homes you like. Get a homeowners insurance quote at Call local utility companies for the typical bills. And tack on 1% of the home’s value for yearly maintenance.

Related: Baby on the Way? Time to Make a Budget.

Three months out

Pick your loan. Fixed mortgage rates, now 4.4%, may edge up to 5% this year, forecasts If you are confident this is a starter home, you can save with a 7/1 adjustable-rate loan, now 3.5%. The risk: You end up staying longer than seven years and rates rise sharply. Most—92% of mortgage borrowers—opt for fixed-rate loans.

Prove you’re a serious shopper. Based on your income and credit, a bank will give you a mortgage pre-qualification. “It’s the No. 1 thing you want in your back pocket when you go shopping,” says Svenja Gudell, an economist with Zillow.

Even better in a hot market: Pay a few hundred to go through underwriting upfront.

Find a guide. Look for a realtor who has worked in the neighborhood where you hope to live. And in a tight market like today’s, ask candidates what their strategies are for unearthing listings and handling potential bidding wars.

MONEY turning points

Don’t Let Divorce Wreck Your Finances

Illustration: Anna Parini The breakup of your marriage doesn't have to threaten your financial security.

The average divorce today costs $15,000, according to legal guidance site Avvo, but that’s pocket change compared with what it could cost in the long term.

“The money you’d put away to fund retirement together now has to cover two separate retirements,” says New York City financial planner Dawn Brown. “This will be more expensive because it requires running two households.”

Meanwhile, for many of the newly single, living costs rise relative to income, while discretionary spending remains the same — leaving less room for the savings needed to catch up.

These steps can help you get to stable financial ground.


Well before the divorce

Know the score. Gather investment and bank statements, going back at least a year. Copy tax returns for income history. Pull your credit report to know what debts you have.

Consult a lawyer. In case you require counsel later and to learn about state laws. In nine “community property” states, assets acquired during marriage are owned fifty-fifty. In the rest, the court decides the split if it goes to litigation.

Open accounts in your name. Start stockpiling a cash stash for emergencies and legal fees. Apply for a credit card, too, while household income is higher.

Once the process is under way

Get the right help. Working out a settlement with a mediator may save money. But if your finances are complex or your relations contentious, an attorney can help you avoid mistakes or costly concessions.

Be strategic in getting your share. You may love the house, but if you give up investments of equal value, you lose the benefits of a balanced portfolio. You’re often better off selling the house. In divvying up retirement funds, specify percentages vs. amounts, in case the market soars or tanks.

Related: How to tell your kid you can’t afford her dream college

Take care of the kids. Be sure to specify in the settlement how you’ll handle big costs, like braces, summer camp, and college. If you’ll receive child support or alimony, insist that the provider get life insurance to ensure payments.

After the split is official

Stay insured. If you were on your spouse’s health plan, the next cheapest option is likely your employer’s offering. But if your ex’s job has 20-plus employees, you can also continue coverage via COBRA — so long as you notify the plan administrator within 60 days of the divorce. Or you can sign up through the Health Insurance Marketplace within 60 days.

Related: Baby on the way? Time to make a budget

Review your taxes. Usually only the custodial parent can claim kids as dependents. Give or get alimony? It’s deductible to the payer, and taxable to the payee.

Make a new financial plan. Base it on your new income and household costs. You may have to up your retirement savings, both to rebuild what you gave up and to cover continued higher living costs in retirement. Use the T. Rowe Price Retirement Income Planner to revise your savings goal.

Restate your estate. Draft a new will to prevent your ex from inheriting, and name new beneficiaries on retirement accounts, pensions, and life insurance.

Sources: Family-law attorneys Jennifer Brandt of Philadelphia, Kelly Chang Rickert of Los Angeles, and Mark Chinn of Jackson, Miss.; Cheryl Jamison of the Association for Conflict Resolution;; divorce financial adviser Jeff Landers of New York City


Baby on the Way? Time to Make a Budget

Making a budget can help you understand and plan for the expenses of baby's first year.

Congratulations! There is nothing quite as exciting as having your first child — or as expensive.

Assuming your household earnings exceed $105,000, your precious bambino will set you back nearly $400,000 by the time he reaches age 18, the U.S. Department of Agriculture reports.

Then you’ll probably end up paying big, big bucks — gulp! — for baby’s BA.

Fortunately, while you can’t prepare for the sleepless nights ahead, there’s a lot you can do to get ready financially for the newest member of your family.



First Trimester

Make a post-baby budget. Disposable diapers alone can run $900 the first 12 months. Figure out what other costs to expect with the First-Year Baby Costs Calculator at
Investigate child care. It’s often the biggest line item, with day care averaging $4,900 to $16,400 a year depending on location. One of you planning to stay home? Account not just for loss of pay but also for perks like 401(k) match.
Sew up a cash cushion. Start knocking away credit card debt and aim to bank at least three months’ living expenses — more if only one of you will work.
Estimate health bills. In a typical employer-sponsored health plan, prenatal care and delivery cost a patient $2,244. Contact your insurer to see what it will cost you so that you can plan for the outlay.

Second Trimester

Protect your paycheck. Use the tools at to estimate your life and disability insurance needs. Term life will be most affordable. See if you get disability through work before buying.
Make a will. You’ll need one to appoint a guardian. Get it made now — you can DIY with software like Quicken WillMaker Plus ($43) — while you have time. No need to know the name of your offspring.
Check your benefits. Only 16% of companies offer paid maternity leave. Want to take time off without pay? Be sure you have savings to cover expenses.

Related: How to Tell Your Kid You Can’t Afford Her Dream College

Last Trimester and Beyond

Get the gear. Talk to other parents about what you need — and don’t (e.g., a wipes warmer). Ask your BFF to throw you a shower. Register to avoid repeat gifts.
Set up a 529 …and deposit any cash gifts. All 529 plans offer tax-free growth and withdrawals for college, and many states let you deduct a portion of contributions.
Enroll baby. You have 30 days after the little one’s birthday to put your child on your health plan and to sign up for flexible spending accounts that let you save pretax for health care and dependent care.
Celebrate your tax break. In 2014, the exemption you get for having a child is $3,950. Use the Withholding Calculator at to see if you can reduce what you’re paying to Uncle Sam each paycheck.

Related: Ace Your Annual Review

MONEY Kids and Money

3 Money Skills to Teach Your Teen

Illustration: Mikey Burton To become captains of their financial destiny, your kids need to master these three skills.

To become captain of his or her financial destiny, your child needs to master these three skills.

As they regularly remind us, teens know everything. Money is no exception.

In a recent Capital One 360 poll, 87% of 12- to 17-year-olds reported knowing at least an average amount about managing finances. Or not. That study also found that 24% of them think a debit card is used to borrow cash.

And a Charles Schwab poll found that fewer than a third of teens understand how credit card interest works and four in 10 can’t budget.

Parents’ money talks with high schoolers tend to start and end with “How much do you need?”

“The more you teach your kids before they go off on their own, the better prepared they are,” says Daniel Hebert of Jump$tart, a coalition promoting financial literacy.

The most critical skills to impart:

Managing on a limited budget

The key word is limited. “Teens need to know that money is finite,” says Anton Simunovic, founder of, a money-management site for kids.

How to build the skill. Figure out what you’re spending for junior’s clothing, entertainment, and gifts for friends. “Then give that amount to your kid and let him pay for those things,” says Jayne Pearl, author of a series of books on kids and money.

Set teens up with a checking account and debit card, and when they mess up, resist the urge to bail them out.

“It is important to make them responsible for their financial actions while the consequences are not serious,” says Jeffrey Arnett, a psychology professor at Clark University and co-author of When Will My Grown-Up Kid Grow Up?

Paying yourself first

“You want to get your child in the habit of putting something aside,” says Stephanie Bell, spokesperson for Junior Achievement USA.

A good goal is to stash 10% of every allowance, paycheck, and birthday check. And nothing provides better motivation than an understanding of how money makes money — a.k.a. compound interest.

How to build the skill. Use an online calculator to show your teen how compounding works, says Beth Kobliner, author of Get a Financial Life. (Try the Simple Savings Calculator at You might also sweeten the pot by offering to match her with, say, $25 for every $100 she banks.

Steering clear of credit debt

Just 9% of college kids pay their credit cards off every month, a study in the International Journal of Business and Social Science found. Help your child understand the value of being in that minority.

How to build the skill. The next time you pay with plastic in your child’s presence, point out that it’s borrowed money and that compounding works against you when you carry a balance. Later, show her your bill, specifically the box illustrating how long it will take to pay off and how much it will cost if you fork over only the minimum.

Make sure she understands, too, that you’re “graded” on your use of credit; regularly paying late, for example, could result in a higher rate on a car loan. When she’s ready for her own card — around age 21 — “ask for a $500 limit,” says Hebert. Well prepared as your child may be, it never hurts to use training wheels the first time out.

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