Personal Finance

Can You Claim Money From a Dormant Account?

July 19, 2021 By Vicky Monroe Leave a Comment

Although no one wants to lose track of their money, it happens to most of us at some point or another. We forget about an old checking or savings account and don’t realize until years later. If you have an inactive account that’s been closed, you may be wondering if there’s a way to claim the remaining balance.

Luckily that money isn’t gone forever and can be retrieved by following a few simple steps. Here’s everything you need to know about how to claim money from a dormant account.

What Is a Dormant Account?

A dormant account is one that hasn’t been active for a long period of time, usually three to five years. To keep an account open, you need to use it every now and then by withdrawing or depositing money. If you haven’t touched one of your bank or brokerage accounts in a while, another way to make sure it stays active is to contact the financial institution and let them know you still want to keep the account open.

But sometimes we forget to stay on top of our accounts, which may cause them to become dormant. Your bank is required to try to contact you to discuss your account status. However, if you’ve moved around a lot or haven’t updated your contact information, they may not be able to get ahold of you.

In that case, any money that’s left in the account will be sent to the state treasury department for safekeeping. But luckily you can still get it back at any time as there’s typically no statute of limitations on claiming money from a dormant account. Here’s how to retrieve your funds.

How to Claim Money From a Dormant Account

To get money from a dormant account, you’ll have to contact your state’s treasury department, not the bank. You can find their contact information on a website called MissingMoney.com. It’s a database that helps you find unclaimed money from dormant accounts, insurance policies, CDs that have matured, uncashed checks, and more.

You can use MissingMoney.com to search and find out if you have any unclaimed funds from inactive accounts. However, the database isn’t 100% complete, so you’ll get the most accurate results by contacting your state’s treasury department.

To claim your funds, you may need to prove the money is yours by providing identification. Once you show you’re the rightful owner of the account, your money will usually be sent to you in the form of a check in the mail.

Tips On Avoiding Dormant Accounts

If you let your bank account become dormant, some financial institutions will charge you a monthly inactivity fee until your cash is turned over to the state. The fee is usually $5 or $10 per month. Although that seems small, it can really add up and drain your funds over time.

Your bank may even charge you a fee for sending the money to the treasury department after a few years have elapsed. This is called an escheatment fee and typically ranges from $20 to $50.

These two charges can cause you to lose a lot of the money in your account. So it’s important to keep track of your bank accounts and never let them lapse. One app that may be helpful is Mint. It allows you to manage all of your accounts on a single platform so you don’t forget about them.

You can also set up automatic payments so your account always has some activity. That way you don’t need to remember to use it to keep it from going dormant.

It’s also important to keep the contact information on all of your accounts updated. That way if the account does lapse, the bank will be able to get in touch with you before the money gets sent to the state.

Wrapping Up

If you have multiple bank and brokerage accounts, it can be hard to keep track of them all. But it’s definitely worth it to stay on top of your finances so you don’t have to go through the hassle of retrieving your money from the state.

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You May Qualify for a Child Tax Credit Monthly Payment

July 13, 2021 By Vicky Monroe Leave a Comment

In just a few days on July 15th, millions of families will receive their first monthly payment as part of the enhanced child tax credit program. Although the payments are coming soon, nearly half of Americans surveyed by Ally Bank still don’t know if they qualify, and a quarter don’t know how to claim their payment.

If you’re wondering if you qualify for a child tax credit, read on to learn everything you need to know about the program and how to claim the money you’re entitled to.

Do You Qualify for a Child Tax Credit?

As part of the American Rescue Plan, President Biden increased the max child tax credit to help families during the pandemic.

The credit used to be $2,000 per child. But now eligible families can receive up to $3,600 for each child under 6 and $3,000 for each child under the age of 17.

There are no limits on the number of children who can receive the credit, so large families will get a bigger payout. You can also choose how to receive the payment.

You can get half of the credit in monthly installments from July to December and get the rest in your next tax refund. Or you can opt out of the monthly payments and receive the whole credit as a lump sum in your tax return.

But does your family qualify for the child tax credit? Married couples who earn an adjusted gross income of less than $150,000 are eligible for the full credit. Individuals who have an adjusted income less than $75,000 can also receive the maximum benefit.

In June, the IRS sent 36 million letters to families who qualify for a child tax credit to let them know how much money they’ll receive. But even if you didn’t get that notice, you may still be eligible. You can check to see if you qualify using this tool on the IRS website.

What If I Don’t Qualify?

Even if you don’t qualify for the enhanced child tax credit, you may still be able to receive the regular credit of $2,000 per child under the age of 17. Individuals who earn less than $200,000 and married couples who make less than $400,000 are eligible for this smaller benefit.

You’ll also be able to choose how you get this payment. You can get half of the credit in installments of $167 per month for six months and get the other half in your tax return. Or you can choose to get the full amount at tax refund time.

How To Get Your Payment

Most families don’t have to do anything to get their payment. The IRS will use your 2020 tax return to determine your eligibility and send your monthly payments via direct deposit, just like the stimulus checks.

If you want to change the bank account the money will go to, you can do so by going to the IRS Child Credit Update Portal. You can also sign up for direct deposit in the portal if you’re not registered already.

Families who don’t register for direct deposit will receive their credit as a paper check. Debit cards may also be available in the future.

What If I Don’t Want Monthly Payments?

The IRS is giving every family half of their child tax credit in monthly installments from July to December. So if the credit you’re entitled to is $3,600, you’ll receive $300 per month for the next six months.

If you don’t want to receive half of your credit in monthly installments, you’ll have to let the IRS know. It’s too late to opt out of the first monthly payment that’s coming on July 15th.

However, you can still stop the next five installments from being sent to you and get them at tax time instead. To opt out of the next round of monthly payments coming on August 13th, you’ll have to notify the IRS by August 2nd.

Receiving Your Payment as a Tax Non-Filer

The child tax credit used to be limited to families earning at least $2,500. However, President Biden removed that requirement. So if you don’t earn enough income to have a tax filing obligation, you may still be able to get the full credit.

If you used the non-filer tool to register for the stimulus payments, then you should be all set up to receive the tax credit. But if you’re not currently registered, you’ll need to use to IRS non-filers tool to sign up so you can get the money you’re entitled to.

The child tax credit has lots of ins and outs, so it can be confusing to navigate. But rest assured that most families don’t have to do anything to receive their credit and will start seeing the money roll in on July 15th.

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Pay Off a 30 Year Mortgage in 15 Years Without Refinancing

June 21, 2021 By Vicky Monroe Leave a Comment

Although refinancing can help you pay off your mortgage early and save money, it comes with significant downsides. Switching from a 30-year mortgage to a 15-year home loan locks you into higher monthly payments. This may make it harder to afford your mortgage if you lose your job or face financial difficulties.

You’ll also have to pay closing costs if you refinance. They usually equal 2% to 5% of the loan amount, which is a pretty big chunk of change. But luckily there are ways to pay off your mortgage early without refinancing and incurring closing costs.

How to Pay Mortgage Without Refinancing

Make Sure Your Finances Are in Order

Before you think about paying off your mortgage early, you should make sure your finances are in order.

If you have student loan or credit card debt, you may want to prioritize paying that off first. Credit cards and student loans usually have higher interest rates than home loans. So getting rid of that debt will save you more money than overpaying your mortgage.

You should also have a solid emergency fund in place in case you lose your job or need to make a major home repair. And if you’re not saving for retirement, financial experts agree that you should put any extra income into your 401k, not your mortgage.

Although having a paid off house will make it easier to live on a fixed income in retirement, you’ll still need a nest egg to cover your expenses. So don’t neglect saving for retirement in order to overpay your mortgage.

Check the Terms of Your Loan

Another thing to look into before you start overpaying your mortgage is the terms of your loan. Some lenders don’t allow you to make extra payments or put a limit on the amount you can overpay each year. Others may charge a penalty if you pay off your mortgage early. So review the terms of your loan and speak to your lender to see if it’s possible to pay off your mortgage early without refinancing.

Calculate How Much You Need to Pay

To pay off your mortgage in half the time, you’ll need to make a monthly principal payment in addition to your regular mortgage payment. How much you’ll need to overpay depends on the size of your loan and the interest rate. You can use a mortgage calculator to run the numbers and figure it out.

For example, say you have a $300,000 mortgage with a 4.5% interest rate. Your regular monthly payment would be about $1,520. To pay off the loan in 15 years instead of 30, you’ll need to contribute an extra $800 per month toward the principal.

That would bring your total housing payment up to $2,320 per month, which is pretty expensive. But the good news is that you don’t have to pay that much every month. Because you’ve chosen not to refinance, you can make your overpayments on your schedule.

If an emergency expense comes up and you can’t afford to make an extra payment one month, you can skip it without facing any real financial consequences. You’ll just take slightly longer to pay off your loan.

But if you can stick to the schedule and pay an extra $800 every month, you’ll save a whopping $136,000 in interest and cut your loan term in half. So if you can afford to do it, making extra mortgage payments without refinancing is a great way to save money and get ahead financially.

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10 Investment Tips for Beginners

June 15, 2021 By Vicky Monroe Leave a Comment

The stock market is currently booming and is on track to reach record highs. If you’re not an investor yet, you may feel like you’re missing out. Here are 10 investment tips for beginners to help you get started with the stock market so you can build your wealth.

10 Investment Tips for Beginners

1. Evaluate Your Finances

Investing is one of the best pathways to wealth. But if you don’t have your financial basics covered, it might not be the right time to start.

Before you invest, you should make sure you have an emergency fund in place. You should also have a plan to pay down any debt you have like student loans or car notes.

2. Ask For Help If You Need It

Investing for the first time can be scary. You might feel like you don’t know what you’re doing. You may even worry that you’ll invest in the wrong assets and lose all your money.

If you need some help to overcome these fears and get started, there are lots of resources available to you. For one, this website has lots of great investing articles you can use to educate yourself. You can even reach out to a financial advisor for extra support.

There are also investment apps like Wealthfront and Ellevest that will select securities for you based on your timeline, goals, and risk tolerance. They can help take the guesswork out of investing for a reasonable fee.

3. Don’t Try to Time the Market

You’ve probably heard stories of investors who have gotten rich from purchasing bitcoin or GameStop stock at the right time. But for every person who made serious money by timing the market, there are hundreds who lost their shirts.

That’s why financial experts don’t recommend making short-term trades, especially as a beginner investor. Buying and holding is a lower risk strategy that provides consistent returns over time.

4. Nail Down Your Financial Goals

Before you start investing, it’s important to determine what your financial goals are, as they’ll help guide your decisions. If you’re saving up for a down payment you plan to use soon, your investment strategy will be different than if you’re working towards retirement.

Experts recommend investing money you’ll need in the near future in safer investments like bonds and certificates of deposits. For goals that are further off, a mix of stocks and bonds will help you reach your goals.

5. Set an Investing Target

Now that you’ve nailed down your financial goals, the next step is to figure out how much money you need to invest to achieve them. Experts recommend that you invest at least 10% to 15% of your income. But if you have big plans like starting a business or traveling the world in retirement, you may need to set aside more money than that.

If you don’t have enough room in your budget to invest 15% of your income, start with the amount of money you have. It’s better to invest $50 or $100 per month than nothing at all.

6. Diversify Your Investments

One word you’ll hear a lot if you read investing articles is diversification. It means varying your investments so your money isn’t tied up in a single asset class or one company’s stock. This can help prevent you from losing lots of money when the stock market dips.

The easiest way for beginner investors to diversify their portfolios is to invest in exchange traded funds or mutual funds. ETFs are basically a basket of different assets that you can purchase a share of. This helps spread out your risk more than buying individual stocks.

7. Automate Your Investments

We all have busy lives, which can make it hard to remember to invest. That’s why it may be helpful to automate your investments so they automatically come out of your bank account. You can do this with your 401k, Roth IRA, and even your brokerage account so you never miss a contribution.

8. Take Full Advantage of Your Retirement Accounts

Retirement accounts have tax benefits that brokerage accounts don’t. If you invest in a 401k, for example, you’ll be able to deduct the amount you contribute from your taxable income. This will lower the amount of taxes you need to pay, which is a big bonus.

Many employers will also match the money you put into your 401k up to a certain amount. This is essentially free money, so you should definitely take advantage of this program if your workplace offers it.

9. Don’t Sell When the Market Is Down

When the stock market crashes, many inexperienced investors panic and sell their investments to avoid losing money. But you’ll lose more of your hard-earned cash in the long run if you sell when the market is down.

Historically, the stock market has always bounced back from crashes. If you hang onto your assets and stick to your investment plan, your portfolio will likely return to its previous levels and continue to grow from there.

Some financial experts even recommend ramping up your contributions during recessions if you can swing it financially. This allows you to buy stock for a deeply discounted price.

10. Start Now

The last item on this list of 10 investment tips for beginners is to start now. You may not feel totally ready to put your money in the market. But the longer you wait, the more returns you’ll lose out on.

The stock market yields an average annual return of 7%. And as your portfolio grows, those returns will compound, allowing you to earn much more money than you put in.

For example, if you invest just $100 a month for 30 years, your money could grow to over $113,000. And the best part is, you only had to invest $36,000 to get there, which illustrates the power of compound interest.

If you invest early and often, you’ll be able to reach your financial goals and have a comfortable retirement. The hardest part is getting started, but trust us—it’s worth it to take that leap!

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The Pros and Cons of Refinancing Your Student Loan Debt

June 8, 2021 By Vicky Monroe Leave a Comment

With interest rates at all-time lows, now may be a good time to refinance your student loan debt. Securing a lower interest rate could save you thousands over the life of your loan, allowing you to make progress toward your other financial goals. But before you start comparing lenders, it’s important to consider the pros and cons of refinancing your student loan debt to decide if this is the right move for you.

Pros and Cons of Refinancing Student Loan Debt

There are lots of benefits to refinancing your student loan debt. You may be able to get a lower interest rate, pay off your debt early, and consolidate multiple loans into a single one to streamline your finances. But if you’re trading in your federal loans for private ones, you’ll lose some loan forgiveness options and repayment protections.

So before you take the plunge, it’s important to consider all of the pros and cons of refinancing student loan debt. Here’s a more detailed overview of the benefits and drawbacks to help you make an informed choice.

Pro: Lower Interest Rate

One of the biggest pros of refinancing your student loan debt is the chance to get a lower interest rate. Even reducing your rate by 1% to 2% could save you thousands over the term of your loan.

Say you have a student loan balance of $28,950 at a rate of 8% that you’ll be done paying off in a decade. If you refinance into a loan with the same term but a 2% lower interest rate, you’ll save $3,581 over the life of the loan.

Pro: Change Your Repayment Period

Another benefit of refinancing is the ability to change your repayment period. If you choose a shorter loan term, you’ll be able to pay off your loan early and save on interest. Going back to the example above, if you refinance into a loan with a 5 year repayment period instead of a 10 year term, you’ll save $8,568 total.

If you’d rather have lower monthly payments, you can extend your loan term instead. Keep in mind that you’ll usually end up paying more interest in the long run. But it may be worth it to have more financial breathing room.

Pro: Consolidate Your Loans

If you have both federal and private student loans, you may have multiple payments to manage every month. Having several loans from different servicers can make it hard to remember to make your payments on time.

If you want to streamline your finances, refinancing your loans through a private lender is a great way to do it. Instead of juggling multiple loans, you’ll have just one monthly payment you’ll need to budget for.

Con: Strict Eligibility Requirements

Although refinancing your student loans can get you a lower interest rate, you’ll need solid credit to qualify. Lenders want to see good credit scores of 660 and above. If you haven’t had a chance to build up your credit history yet, you might miss the cutoff.

Most lenders will allow you to boost your application by getting a cosigner. But if you don’t know someone with good credit who’s willing to vouch for you, you may not qualify for refinancing.

Con: Lose Federal Loan Protections

If you refinance your federal student loans with a private lender, you’ll lose the protections that come with them. For example, you’ll no longer be eligible for public service loan forgiveness. You’ll also miss out on the student loan interest freeze that Biden extended until September 30, 2021.

Another con of refinancing is losing out on federal repayment protections. Although private lenders usually have deferment and forbearance options, they may not be as generous as the ones offered by the government.

The government does offer its own direct consolidation loans. This allows you to combine multiple federal loans into a single loan to streamline your finances and retain your repayment protections.

But you can’t include any private loans in your federal consolidation loan. You won’t be able to get a lower interest rate either, which is one of the main reasons people refinance.

Now that you know more about student loan refinancing, do you think it’s the right choice for you? Let us know in the comments section below.

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How I Bought a Car for Cash

May 19, 2021 By Rachel Slifka Leave a Comment

It’s no secret that vehicles are depreciating assets. The second you buy a new car and drive it off the lot, its value plummets. Even though everyone knows this, it doesn’t stop most Americans from overspending on their vehicles. After all, we all want the nicest things so we can keep up with the Joneses! Well, I was in the market recently for a new (used) car, and made a promise to myself that I would pay for this vehicle outright in cash. And I’m proud to say, here’s how I bought a car for cash.

I Set a Budget

First thing’s first: I set a firm budget.

For some reason, large purchases make it especially tempting to disregard your budget. After all, you are only going to buy a car once every few years, making it easier to mentally justify additional costs. But by setting a firm budget, I was able to ensure I had enough in savings to pay the car in cash. If I went above my budget, I would have needed to pull money from my other savings accounts, such as my emergency fund, to pay for it (or take out a loan for the difference!)

I Set a Monthly Savings Goal

Once I set a realistic budget, I determined how much I needed to save per month. I calculated how much I needed to save per month by taking my budget and dividing it by the number of months I had to save. Obviously, the longer you give yourself to save, the less you will need to save per month. If you have a tight monthly budget, you’ll want to make sure you give yourself plenty of time to save!

I Cut Back and Saved Even More

Buying a car for cash has always been a goal of mine. So, I was super motivated to accomplish it. Because I was motivated, I found it easy to cut back and save more money each month.

When your eye is on the prize, you can really reevaluate your spending decisions. When I was saving for a car, I knew my desire to pay for a car in cash was strong. I realized I would truly rather save money instead of buying things that didn’t mean as much to me.

Keeping connected to my goal helped me purchase a vehicle months ahead of schedule, because I was willing to sacrifice.

I Found the Car with the Best Value

Lastly, and perhaps most importantly, I shopped around for the best value. I asked family and friends if they had a dealership they recommended. Upon doing so, I eventually found a family member who was looking to sell their own car. It was exactly the type of car I was looking for, and I knew it was well-maintained. In the end, I skipped the dealership and wrote my family member a check for fair market value. We both got more bang for our buck versus going through a dealership, so it was a win-win overall!