As featured in The Wall Street Journal, Money Magazine, and more!

avatar You are viewing an archive of articles by Aliyyah Camp.

Aliyyah Camp

Getting your first credit card is a significant financial milestone. Maybe you’re a college student jumping into personal finance for the first time. Or maybe you’ve just never had a reason to get a credit card before. Regardless, you may be overwhelmed with all the options that are out there.

When it comes to getting your first credit card, I recommend first looking at your spending habits. Then, choose a card that offers the most rewards based on those spending habits. Here are three recommendations for first credit cards: one for general cash back, one for travel rewards, and one for gas rewards. I also discuss secured credit cards and student credit cards for your reference.

First Cash Back Credit Card: Discover it®

Discover it® is a no-fee card that offers plenty of attractive perks. It’s an excellent choice for your first credit card if you’re looking to maximize your cash back rewards right off the bat.

You’ll earn 1% cash back on all credit card purchases and 5% cash back on new bonus categories each quarter. Currently, through December, the bonus categories are for purchases at Amazon.com, select department stores, and Sam’s Club — perfect for holiday shopping! What’s more is that new cardholders will get a “dollar-for-dollar match of all the cash back you’ve earned at the end of your first year.” This makes it the perfect time to sign up for Discover it if you’re looking for your first cash back credit card.

discover-q1

Other perks include the ability to view your FICO®  score for free each month on your statements. You’ll also have the ability to immediately freeze your account with an on/off switch (online or via the mobile app), should you suspect fraud.

Resource: How to Get Your Credit Report for Free

There’s no annual fee, no fee for your first late payment, no overlimit fee, and no foreign transaction fee. You’ll also pay no interest on purchases made during the first 12 months after opening this credit card.

Learn more about Discover it® in our review of the card.

First Travel Rewards Credit Card: Capital One® Venture® Rewards

The Capital One® Venture® Rewards card is an excellent choice for first-time cardholders who plan to travel a lot. You’ll earn 2 miles for every dollar you spend, regardless of category. One hundred miles is equal to $1 in travel rewards. There’s also a one-time bonus of 40,000 miles (equal to $400 in travel rewards) once you spend $3,000 on the credit card within the first three months of opening it.

In addition to having no foreign transaction fees, this credit card also offers the many perks that come with being a Visa Signature card. These include:

  • Complimentary travel upgrades
  • Complimentary concierge service
  • 24-hour travel assistance services
  • Special access to premier sporting events and concerts
  • Shopping discounts at select online merchants
  • Extended warranty on purchases

There’s an annual fee of $59, which is waived the first year. If you use this card often and take advantage of all the travel rewards, it should easily make up for the annual fee.

The Capital ® Venture® Rewards card is great for young adventurers looking to get the most perks to accompany their travel experiences.

Best First Gas Rewards Credit Card: Barclay Rewards MasterCard®

If you’re a frequent driver, you may be looking for a credit card that offers good gas rewards. The Barclay Rewards MasterCard® is the perfect credit card in this instance. You’ll receive two points for every dollar spent on gas, utility, and grocery store purchases (excluding Target and Walmart). Plus, you’ll receive one point for every dollar spent on everything else.

There’s no limit on the amount of points you earn, and they never expire. You can redeem your points to your bank account, as statement credit, in the form of gift cards, or as cash. There’s also no annual fee.

Another perk of the Barclay Rewards MasterCard® is that you’ll get online access to view your FICO®  score for free. This comes in handy for monitoring your activity, especially if you’re new to building a credit history

If you’re looking for a card that offers general rewards and a higher rewards rate for gas purchases, the Barclay Rewards MasterCard is a good choice for your first credit card.

A Note About Secured Credit Cards

Secured credit cards require you to put down a refundable deposit as collateral. This deposit becomes the credit line for your card. Secured credit cards can help you establish or rebuild your credit history, and are useful if you have no credit or bad credit.

If you’ve been paying off a loan in your name or otherwise have some credit history, you may not need to get a secured credit card before applying for a regular credit card. Regular credit cards tend to offer more attractive perks than secured credit cards.

A Note About Student Credit Cards

Student credit cards are a great option for young people to get their feet wet with credit. I got my first credit card while I was in college and still have that credit card to this day. It’s a Wells Fargo cash back credit card.

Related: Best Credit Cards for College Students

Most credit card issuers offer at least one student credit card. These credit cards are often comparable to their other rewards credit cards but come with a low initial limit. As you establish your creditworthiness by making on-time payments, you’ll likely see your limit increase over time. If you’re in college, I highly recommend starting to build your credit now by getting a student credit card.

Final Thoughts

Getting your first credit card is an exciting time and the process shouldn’t be taken lightly. Which credit card you choose as your first can have a huge impact on your finances. If you choose correctly based on your spending habits, you can reap some great benefits such as travel rewards or cash back.

Once you receive your first credit card, remember to use it wisely. Only make purchases that you can afford to pay in full when the bill comes. Try to keep your credit utilization ratio low by not using more 30% of your credit card balance at any given time. Above all, enjoy the many perks that come with being a cardholder.

{ 0 comments }

If you plan to retire early, you may be wondering whether it makes sense to invest in traditional retirement accounts, such as employer-sponsored 401(k)s/403(b)s and IRAs/Roth IRAs. The speculation comes into play because there’s an early withdrawal penalty when you take money out of these accounts before age 59 ½.

I argue that it’s still a good idea to invest in traditional retirement accounts if you plan to retire early. This is because there are tax benefits that come with these retirement plans. Money contributed to employer sponsored 401(k)s/403(b)s are pre-tax and reduce your taxable income for the year. Money contributed to Roth IRAs isn’t pre-tax but the money grows tax-free.

The best scenario is to have enough money outside of these retirement accounts so that you can live off other investments before age 59 ½ and then tap into your retirement accounts after turning 59 ½. Here are a few tips to aid you in your early retirement planning.

Avoid Early Withdrawal Penalties

Generally, the money withdrawn from a retirement plan before the age of 59 ½ is considered “early” or “premature.” When this happens, you must pay an additional 10% early withdrawal tax. For most, that 10% penalty is a big deal. It will likely result in enough money lost that you’ll want to avoid making early withdrawals.

One thing you can do to avoid early withdrawal penalties from retirement plans is to have other investments. We’ll get to that in a moment.

Another way to avoid early withdrawal penalties is via the IRS rule 72(t). This rule permits penalty-free withdrawals from an individual retirement account (IRA), provided that you take “substantially equal periodic payments (SEPPs)” for at least five years or until you reach 59 ½, whichever period of time is longer. The payment amount will depend on your life expectancy as calculated by IRS-approved methods.

The withdrawals will still be taxed at your normal income tax rate. You can roll over a portion of your 401(k) into an IRA to take advantage of this rule as well. A good guide for IRA conversion can be found here on Dough Roller.

The IRS rule 72(t) is a bit complicated. You may want to work with a financial advisor to make sure you are complying by the rule’s stipulations. If you stop payments too early, you’ll have to pay the early withdrawal penalty on the previously withdrawn amounts.

It’s good to know there’s a way to access your retirement plan funds without the early withdrawal penalty. But, that doesn’t have to be the only option if you plan to retire early. Another option is to have other investments that you can liquidate before you turn 59 ½.

Plan on Other Investments

The best thing you can do is not touch your retirement plan funds until you reach age 59 ½. It’s best to have other investments that you can use as income until you reach IRS retirement age. This means you’ll have to do even more saving during your early years. But it’s worth it for the sake of early retirement.

Here are some options for where to save the rest of your money:

  • Savings accounts and certificates of deposit (CDs) – These accounts offer lower interest rates but guaranteed returns. Your money is also FDIC insured up to at least $250,000.
  • Peer to peer lending – Companies like LendingClub and Prosper let you build an investment portfolio of personal loans. This gives you monthly cash flow.
  • Rental properties – This investment takes some time and skill. But it also offers monthly cash flow as long as you have tenants.
  • Dividend stocks – You’ll gain money in two ways. First, you’ll earn as the value of the stocks appreciate. Second, you’ll gain money from distributions paid out to shareholders by the dividend-paying companies.

You can use these investments to fund your lifestyle until you reach IRS retirement age. Depending on the age you plan to retire, you may not even need that much to sustain you until you reach 59 ½. It’s all about planning ahead of time.

Consider Phased Retirement

Most people work a long career and then jump right into retirement and stop working altogether. If you plan to retire early, though, that doesn’t necessarily have to be the path for you. Consider phased retirement as an alternative, in order to make early retirement work for you.

For example, if you work an office job now and want to retire at age 40, you can leave that day job and then start another career. You could start an online business that doesn’t require you to go into an office. Use the time between when you leave your first career and when you reach age 59 ½ to explore another one of your interests. Have you always wanted to write books? Do you have a passion for working with animals? The possibilities are endless.

Finding a new career to embark on during the first few years of early retirement will not only give you extra money to live on, but it’ll also keep you mobile and energized. Make sure it’s something you enjoy so you can still consider yourself “retired.”

Final Thoughts

Yes, you should invest in traditional retirement accounts if you plan to retire early. They have many tax benefits that make them good investments. What you want to avoid is early withdrawal penalties. You can avoid this by taking advantage of the IRS rule 72(t) as explained above. Or, you could have other investments that fund your lifestyle until you reach age 59 ½ and can withdraw money from your retirement plans penalty-free.

Another consideration to keep in mind is phased retirement. Although you retire from your day job at an early age, that doesn’t mean you don’t have to work at all. Consider starting a new career based on another one of your interests or passions. This way, you’ll keep some money coming in until you reach age 59 ½ — and can withdraw from the traditional accounts — but you’ll still enjoy your early retirement.

{ 0 comments }

Retirement is a huge financial undertaking, as we all know. It requires plenty of planning to ensure that all of your needs will be met once your career, and working income, ends. It needs to be able to cover your costs of living, some fun money to actually enjoy your years, and expenses such as healthcare. Of course, the latter become becomes even more important as we age, but many seem to overlook the magnitude of this expense in their planning.

The average person between the ages of 55 and 74 with retirement savings has only $104,000 to $148,000 tucked away in a defined benefit account. What’s even more concerning is that this statistic only reflects 48% of American households. The rest of them have no retirement savings at all.

Those with retirement savings tend to also have other resources to depend on, such as non-retirement investment accounts. On the other hand, those without retirement savings tend to have less of those resource, too.

What does this mean for costs associated with retirement? It means that many Americans will struggle to afford to retire at the standard age of 65. And those who do will have trouble meeting their monthly expenses, including health care.

In fact, 74% of married partners said they worry about unexpected medical costs in retirement. With the cost of health care in retirement being such a big concern, it’s important to consider the actual numbers and plan accordingly.

How Much Does Health Care Cost In Retirement?

According to a 2015 study conducted by Fidelity, a couple, both aged 65, can expect to spend about $245,000 on health care during their retirement. That’s over $12,000 a year — or $1,000 a month — based on average life expectancy!

Why is this so expensive? When you factor in copays, out-of-pocket costs, and dental and vision care, you’ll easily see how the numbers add up quickly. That’s exclusive of any insurance premiums, too.

Speaking of health insurance, here’s a breakdown of how insurance provided by the government works:

Medicare Part A

Hospital Insurance

As long as you or your spouse paid Medicare taxes while working, you won’t have to pay a premium for this coverage.
It mainly covers hospital inpatient care, skilled nursing facility care, hospice care, and home health care.
Medicare Part B

Medical Insurance

Most people will pay $104.90 per month.
It mainly covers services from doctors, outpatient care, durable medical equipment, and some preventive services.
Medicare Part C

Medicare Advantage Plus

Monthly premium varies greatly, but can be up to $200 per month.
It mainly covers everything in Parts A and B and is run by Medicare-approved private insurance companies.
Medicare Part D

Prescription Drug Coverage

Monthly premium varies greatly, but can be up to $100 per month.
It mainly helps cover the cost of prescription drugs.

As you can see, if you opt for all parts of government-provided medical insurance, you can pay up to $400 in monthly premiums per person. This is exclusive of the other costs associated with health care as mentioned above: copays, out-of-pocket expenses, and auxiliary care.

There are ways plan for these expenses, however. The main thing you can do is start saving early.

How To Plan For Health Care Costs In Retirement

Your first plan of attack should be your employer’s retirement account, if one is offered. According to the American Benefits Council, nearly 80% of full-time workers have access to an employer-sponsored defined benefit account, such as a 401(k)/403(b). So if you’re one of many offered this benefit, make sure you take advantage.

Saving even just a small percentage of your salary will make a big difference if you start early. You can begin by saving a mere 3% of your salary, then gradually increase your contributions until you reach 10%. This is generally considered the target amount to save.

This is just a recommendation though. If you can contribute even more, by all means do so.

If you max out your 401(k)/403(b) by contributing $18,000 in 2016 ($24,000, if over the age of 50), investing in an individual retirement account (IRA) is a great next step. Although the annual contribution limit for IRA’s and Roth IRA’s is much lower than that of 401(k)s/403(b)s, the extra savings will help you cover cost of your future health care.

Lastly, saving money in a Health Savings Account (HSA) is a great way to plan for covering medical expenses in retirement. If you are currently enrolled in a high-deductible health insurance plan, you are eligible to contribute to an HSA.

HSAs offer a triple tax benefit. First, HSA contributions are tax deductible. Second, the interest earned on money in an HSA is tax-free. Third, you can withdraw money from your HSA for qualified medical expenses tax-free, as well.

HSAs can be considered retirement funds because there is no carry-over limit, unlike Flexible Spending Accounts. So, the money you contribute today can be used for health care costs in retirement years later.

How To Offset Health Care Costs Once In Retirement

In today’s economic environment, retirement doesn’t necessarily meaning relaxing on sandy beaches. The unfortunate reality is that many people must continue to work in order to supplement Social Security and their minimal retirement savings.

Working a part-time job during the early years of retirement can greatly offset the cost of health care. In fact, you could even save some of your earnings from your part-time job and put it into a retirement savings account to use in future years.

Here are a few ideas of part-time jobs you can take up that won’t be taxing on your health:

  • Consultant: Transfer all the skills you accumulated from your day job over the years and use those expertise to help other companies accomplish their goals.
  • Freelancer: Use your talents to do one-off assignments for businesses. This could include graphic design, writing, proofreading, and much more.
  • Blogging: It can take a while to make money from a blog. But once you get the ball rolling, this gig can bring in a lot of income.

Other Things To Consider

Aside from Medicare, Social Security, and your retirement savings, there may be other ways to cover the cost of health care in retirement.

One thing to consider is COBRA. Under the Consolidated Omnibus Budget Reconciliation Act, federal law requires that companies with more than 20 employees give them the option to continue receiving coverage under the employer’s health plan for at least 18 months.

With COBRA, however, you’ll be responsible for the entire cost of the health plan. While working, your employer likely paid for a large percentage of the premium. This expense will be wholly your responsibility with COBRA.

You may want to consider continuing your employer’s health plan before enrolling in Medicare. Your employer’s health plan will likely cover more medical expenses.

On that note, if you want a more comprehensive health insurance plan after your COBRA benefits end, you can consider enrolling in a Marketplace health insurance plan. If you don’t enroll in Medicare, you may qualify for lower out-of-pocket costs and premium tax credits. You could also use the two in combination; but you won’t receive the same tax credits for the Marketplace health insurance plan.

Wrapping Up

There is a lot to consider on the topic of health care costs in retirement. If you’re young, the lesson here is to start saving early, because the cost of health insurance and medical care is only increasing. If you’re approaching retirement age, you may want to consider working part-time during your early retirement years, in order to offset the costs of health care. And if you’re already retired, it wouldn’t hurt to tuck away any extra money each month, in case unexpected health concerns pop up.

How are you planning to cover your health care expenses in retirement? Is it a big concern to you yet?

{ 1 comment }

On September 7, 2016, Apple unveiled the new iPhone 7 and iPhone 7 Plus. Trendsetters will have been eagerly awaiting today, the 16th, when the new iPhones start being shipped; preorders started on the 9th.

There is no doubt that this launch will be successful. Apple occupies 40% of the smartphone market share — the largest majority. This market control coupled with Apple’s customer-brand loyalty makes it easy to expect the iPhone 7 phones to be a big hit.

iPhone 7 Features

Let’s take a look at the key features of the iPhone 7 — some of which are standard among all iPhones and some of which are new and upgraded.

Design:

  • The sleek design is standard among iPhones in general.
  • What’s new is the water and dust resistance. The water resistance, especially, should give you peace of mind when in wet environments such as the rain or bath.
  • Colors include: jet black, matte black, silver, rose gold, gold, and space gray. The jet black and matte black are new.

Headphone Jack:

  • It’s gone! Apple nixed the headphone jack in the iPhone 7 edition
  • Instead, customers will receive “Lightning EarPods” that fit in the same port as the charger. Customers can also opt to purchase wireless Bluetooth headphones. Apple has released its own wireless Bluetooth headphones, called AirPods.

Camera:

  • Apple has overhauled its camera technology for the iPhone 7. The rear camera is 12 megapixels; and the front camera is 7 megapixels.
  • The rear camera is touted to let in 50% more light than the iPhone 6 did. It is also 30% more energy efficient and 60% faster.

Battery:

  • Apple claims that the iPhone 7 will have the longest-lasting battery ever. It will generate two more hours of battery life than the iPhone 6.
  • Apple claims the iPhone 7 can offer 13 hours of wireless audio, which is pretty nice.

Display:

  • The iPhone 7 has the same screen size as the iPhone 6: 4.7 inches.
  • The iPhone 7 has a brighter display than the iPhone 6 with a resolution of 1334×750.

iPhone 7 Price

The retail prices for the iPhone 7 phones are as follows:

iPhone 7 32GB $649
128GB $749
256GB $849
iPhone 7 Plus 32GB $769
128GB $869
256GB $969

 

There are ways to offset these large price tags, however. First, if you have an older model iPhone, you can trade it in for an Apple gift card and then use that gift card towards the purchase of the iPhone 7. Here are the estimated trade-in values (information from Apple’s website):

  • iPhone 4s: $50
  • iPhone 5, 5c: $75
  • iPhone 5s: $125
  • iPhone 6: $225
  • iPhone 6 Plus: $250

Another way to offset the cost of the new iPhone 7 is pay for it in monthly installments through one of the large cell phone service providers. For example, Verizon is offering a monthly installment plan of $27.08 per month for 24 months.

Wrapping Up

Is the new iPhone 7 worth the large price tag? For technology trendsetters, the answer is a surefire “yes”. For most of us, the answer may not be that clear.

The features are definitely attractive. But when you take a closer look at just the new features, you may realize that the iPhone 7 isn’t that much different from the iPhone 6 to justify shelling out another $600 to $900. If you have an older model iPhone, trading it may work out to be a good deal for you.

Ultimately, the decision to purchase the new iPhone 7 will come down to your wants versus your needs. Do you have the room in your budget right now for the phone? Are you willing to sacrifice additional savings to have the newest technology? These are just a couple of questions you’ll want to consider before making the purchase.

{ 0 comments }