For its Insider Tips From the Pros packages in the February 2014 and May 2014 issues, Kiplinger’s spoke with dozens of experts in fields ranging from college aid to travel to glean insights they apply to their own financial lives and share with their own family and friends. Here we provide actionable advice to manage some of life’s biggest ongoing expenses.
A smart plan to juggle saving for retirement and college
Tim Maurer, certified financial planner and a vice-president at the Financial Consulate in Hunt Valley, Md.
It’s not easy. As parents, we overestimate the degree to which our efforts on our children’s behalf determine their success. If we deliver the best education that money can buy for our children and fail to save enough for our future, our children could be hampered with a seemingly limitless financial “obligation” to support us in our retirement (See our Rethinking Retirement column: Close the Bank of Mom and Dad).
My wife and I have chosen to cap the cost that we’re willing to bear to the equivalent of an in-state public university. If our children choose that path, they’ll get a free ride. If our children choose to double the cost by going to an out-of-state public school—or triple the cost at an elite private school—they’ll be on the hook for the balance.
We’re saving in the Maryland College Investment 529 plan. As Maryland residents, we get a state tax deduction on our contributions. We chose a fund that becomes more conservative as students get closer to college age. But we aim to have only half of our college savings in the 529 plan. I plan to increase cash allocations outside the plan as college gets closer.
Maria Bruno, Vanguard retirement-planning specialist
Faced with this situation, you need to save more or invest more aggressively. But if you have, say, a six-year time horizon before college, you don’t want to take too many risks with the college money. So then the strategy would be to save more.
You could reduce retirement contributions, but don’t give up the company match. If you ratchet the amount down to pay for college, make sure that later you get back to saving 12% to 15% of salary, or even more.
Apply for college financial aid – again
Mark Kantrowitz, senior vice-president and publisher of Edvisors.com
I’d tell them to file the Free Application for Federal Student Aid (FAFSA) every year, even if you got nothing last year. The financial aid formula is complicated enough that even small changes can have a big impact on the amount and types of financial aid a student will receive. Examples of what can change: the number of children enrolled in college, the amount of the child’s assets and the amount of your income.
Save hundreds by shopping your car insurance
Robert Hunter, director of insurance for the Consumer Federation of America
People do not shop. When I was Texas insurance commissioner 20 years ago, I invited 25 people to our office with their auto insurance policies, and I gave each of them our buyer’s guide and a phone. I asked them to make some calls and report back in one hour. The average savings was $125.
I suggest you get your state insurance department’s auto insurance buyer’s guide, find the example closest to your situation, and look at the premiums. Select the six lowest-priced insurers in your area. Then go to the Web site of the National Association of Insurance Commissioners and get the complaint ratio for the insurers. Drop the two with the highest ratios and get quotes from the remaining four.
Get the lowest rate on a mortgage
Guy Cecala, CEO and publisher of Inside Mortgage Finance
If you’re buying a home, start with your real estate agent’s referral to a lender known to get deals done reliably. Also call your bank or credit union, another local lender or mortgage broker, or an online lender, such as Quicken Loans or Loan Depot.
Apply with at least two lenders simultaneously. You’ll find out what the lenders are offering, and you’ll gain the leverage necessary to get them to bid against each other on the rate and points [interest that you prepay at closing; one point equals 1% of the loan amount]. That’s especially true in the eleventh hour, when both lenders have incurred costs to assess your qualifications as a borrower and have presold the loan to investors in the secondary market. They’ll lose money if you go away. This process isn’t for the faint of heart, because once lenders know you’re working with someone else (and they will as soon as the other lender pulls your credit report), they’ll try to make you feel guilty.
Find the best deals on tech products
Louis Ramirez, senior features writer at Dealnews.com
You’d be amazed at how much money you can save by doing a Google search. When you’re out shopping, get out your smart phone and compare prices. Find out whether the store you’re visiting will match prices from other stores. And never buy accessories—a cable for your TV, a case for your phone, a memory card for your camera—in a brick-and-mortar store. Accessories are always cheaper online, at sites such as Amazon.com, Monoprice.com and Rakuten.com.
If you’re not a tech fiend, buy last year’s model to save money. A product will often fall in price when a new version comes out, and the differences are usually so subtle that you won’t miss them. Early adopters can sell gadgets to Amazon.com or Gazelle.com to get some extra cash before a new product comes out. If you’re going to pay full price for something, look for bundles to sweeten the deal. You may be able to get a video game or a gift card included when you buy a new Xbox One or PS4 gaming console.
Don’t buy a new device directly from Apple—you’ll pay full retail price. A lot of other retailers have deals on Apple products. Walmart sold the 16GB iPad Air at a $20 discount the minute it came out. But consider buying refurbished items from Apple. They come with a one-year warranty.
Save on your smart-phone plan
Maggie Reardon, author of CNET.com’s “Ask Maggie” column
My husband and I have separate phone plans with unlimited data usage—his plan is with Verizon, and mine is with AT&T. When we looked at our budget, we saw that we were spending too much on phone plans. We’re each paying more than $100 a month, and we realized that we use our phones mostly at home or at the office, where we have access to Wi-Fi and don’t need to use our data plans. To save money, we’re probably going to join Verizon’s Share Everything plan. My husband gets a discount on Verizon plans through his company, and Verizon’s network seems more reliable than AT&T’s in the New York area, where we live. We’ll each get unlimited talking and text messaging, and we plan to share 4 gigabytes of data. We expect to save about $30 a month on our phone bill.
Check up on your credit
Gerri Detweiler, director of consumer education for Credit.com
I get my credit reports from each of the three big agencies once a year free through AnnualCreditReport.com. I usually check all of my reports at the same time. The first time you check your credit reports, I highly recommend pulling all three because the agencies don’t share information with each other, and you’ll want to spot any problems right away. After that, it’s fine to wait a year until your reports become free again and then check a different report every four months or so. I recently found a mistake on my TransUnion report, which I’m disputing.
John Ulzheimer, credit expert with CreditSesame.com
I wouldn’t pay for one. There are more than 50 versions of the FICO score available from the three big credit bureaus. It’s a crapshoot whether you’ll get the exact score that your lender is going to use.
A lot of free scores consider the same information from your credit report as your FICO score does. I get free scores from CreditSesame.com, Credit.com and CreditKarma.com, which are all updated monthly. They’re a great proxy for what’s happening on my credit report.
How to manage a financial windfall
Sheryl Garrett, founder, the Garrett Planning Network
First, make sure money has been set aside to pay income taxes. Then pay off all consumer debt.
With the remainder, invest in your ability to earn money—for example, tuition and possibly time off to get an education. Once you have adequate cash reserves, invest the balance for retirement in low-cost, tax-efficient index funds and exchange-traded funds, and leave it alone. Investments in yourself and your retirement last a lifetime.
Avoid marital money fights
Sheryl Garrett, founder, the Garrett Planning Network
I’m personally a fan of having both individual and joint accounts: yours, mine and ours. I think that retaining some independence can be very healthy for most couples. Couples should maintain their own bank accounts and have paychecks automatically deposited into their respective personal accounts. Individual expenses, such as for hobbies or personal debts, could be paid from the individual accounts. They should also have a joint checking account for shared monthly household expenses, such as housing, groceries and utilities. Each person could contribute the same amount to the joint account or a different amount if there’s a significant gap in earnings or obligations.