May 27, 2020
If your Memorial Day travel plans involve staying home, you can make the most of the long holiday weekend by cleaning up your finances. The federal holiday is a great opportunity to tackle some basic financial housekeeping duties as you prepare to come out of the Covid-19 quarantine and head into the second half of 2020.
Need some ideas for how to clean up your finances? Here are seven that can help.
1. Refinance private student loans
Getting a new loan at a low-interest rate to pay off your existing loans is a money-saving measure to consider this Memorial Day.
Before you apply for a student loan refinance, make sure you do your homework. There are several online resources that allows you to compare prequalified student loan refinancing rates from multiple lenders at once without any impact on your credit score.
If you decide to refinance your student loan debt, it’s wise to use a student loan refinancing calculator, which takes into account your loan balance and new loan interest rate, to determine how much you could save.
Don’t forget: The actual refinancing of private student loans typically means lenders will check your credit score and you may need to bring a cosigner on board to get approved for a new loan.
2. Refinance your mortgage
A mortgage refinance could lower your interest rate and potentially reduce your monthly payments.
Here are a few tips to prepare for mortgage refinancing:
– Review your credit report and credit score to gauge your approval odds.
– Calculate how much you may save in interest charges by refinancing.
– Estimate what you’ll need to pay for closing costs.
– Shop around to find the best mortgage rates.
Mortgage rates are at record lows, thanks in part to the coronavirus crisis. Before committing to a mortgage refinance, however, make sure you crunch the numbers through any one of a number of free online tools to see how much you could save.
3. Consolidate credit cards
Consolidating credit cards using a low-interest personal loan could save you money on interest and ensure that more of your monthly payment goes toward the principal.
“Now is definitely the time to consider consolidating debt into a low rate loan or even negotiating with your credit card companies over the interest rate they’re charging you,” said Wendy Terrill, founder of Assurance & Guarantee in Burlington, N.C. “We’re at the lowest interest rate since money was invented.”
If you’re planning to consolidate credit cards, be sure to compare rates with different lenders first. And check the loan fees before applying.
4. Take a closer look at your credit report
If you don’t check your credit report regularly, Memorial Day weekend is a good time to do it. You can get your report for free on a variety of sites.
Once you have, check for any suspicious activity that could hint at identity theft, such as accounts you don’t recognize. Then review it again to spot errors or inaccuracies.
“Often companies mix up accounts because the names are the same or the account numbers are very similar,” Terrill said. “Make sure the things on your credit report are actually all yours.”
And if you see an error, reach out to the credit bureau that’s reporting the information to dispute it.
If you believe you’re ready for a new credit card, keep an eye out for rewards. Make sure you understand the differences between the various types of cards — such as balance transfer or low-interest — to find the one that best fits your needs. Do your homework to compare cards in order to maximize rewards every time you swipe.
5. Retool your budget
Despite the impact of Covid-19, for those who are able to spend, summer can bring new expenses to your budget, especially if you’re planning a getaway or working on home improvement projects. Consider blocking off time over the Memorial Day weekend to review your budget, specifically checking for:
– Expenses that have increased.
– Expenses that have decreased.
– New expenses you may pay temporarily over the summer or heading into the fall.
– Changes to your income.
Getting in tune with your budget now can help you come up with a plan for smarter spending (and hopefully, savings) over the summer months.
For example, if you have a child that’s headed off to college in August or September, provided they are able to, you should be thinking now about what you may need to pay or pre-pay ahead of time to get them ready for school.
6. Shop around for new rates
If you haven’t updated your cell phone, cable or car insurance coverage lately, Memorial Day could be a good time to shop around for a better deal.
“If you have multiple choices, always make them compete for your business,” said Terrill.
For example, you may be able to save on car insurance by bundling it with your homeowner’s insurance or moving to another insurer. Switching from a contract cell phone service to a prepaid option could also add to your monthly savings.
It’s also worth taking a closer look at your bank to see if a switch makes sense. If the APY on your savings account has dropped, for instance, or your bank has increased checking account fees then moving to a different bank could put money back in your pocket.
7. Check your investments
If you have a 401(k) plan or individual retirement account, check those this Memorial Day weekend to see how much money you’ve contributed for the year so far, especially considering your account might have been affected by the financial fallout from Covid-19.
With your employer’s retirement plan, you should be on track to at least fully max out the company matching contribution, if one is offered. Review your IRA contributions to see how much you’ve contributed toward the annual limit and what you may need to save during the second part of the year to max out your account.
While checking investment accounts, keep taxes in mind. Contributions to a traditional 401(k) or IRA are tax-deductible, so pouring as much money as possible into those accounts could work in your favor at tax time.
If you have money in a taxable brokerage account, you may need to think about harvesting losses to avoid getting hit with a large capital gains tax bill. Talking to a financial advisor or a Louis Mamo & Company tax professional can help you figure out how to minimize investment taxes.
If you’re reluctant to spend the Memorial Day weekend sifting through bank statements or shopping for interest rates, consider the long-term payoff.
“It will help you ensure that your financial plan is working, that you’re sticking to it and that it still meets your needs,” Terrill said. “Things change in life, so should your financial plan.”
With regards to any potential tax liablity, we advise you speak with a Louis Mamo & Company representative to discuss your specific situation.
(Sources: Fox Business News and Credible)