Equifax has agreed to create a $100 million settlement fund over allegations that a coding error caused it to send inaccurate credit scores to lenders in 2022. Roughly 4 million people could be covered by the settlement.

Claims aren't open yet. The proposed settlement still needs final court approval, with a hearing scheduled for January 22, 2027. If approved, eligible consumers will receive information about how to submit a claim for payment.

Equifax has denied wrongdoing, and the settlement does not constitute an admission of liability. Here's what to know about the proposed settlement, who may qualify and what happens next.

What happened with Equifax credit scores?

According to DiCello Levitt, one of the law firms representing consumers in the case, Equifax misreported lower credit scores for about 4 million people who applied for mortgages, auto loans or credit cards between March 17 and April 6, 2022. The coding error resulted in some lenders receiving inaccurate credit scores.

That matters because lenders use credit scores when deciding whether to approve applications and what interest rates and terms to offer. The lawsuit alleges that some applicants were denied credit, charged higher interest rates or otherwise received less favorable terms because of the incorrect scores.

Equifax has maintained that most scores didn't change substantially. The company previously said fewer than 300,000 people experienced a score change of 25 points or more, according to ConsumerAffairs.

Who could qualify for the Equifax settlement?

About 4 million people are estimated to be included in the settlement class. The settlement covers consumers whose credit scores were inaccurately reported because of the coding error.

You may want to pay particular attention to the settlement if you applied for credit during the affected period, including a:

• Mortgage
• Auto loan
• Credit card
• Other credit product

This may be especially relevant if you were unexpectedly denied credit, received a higher interest rate or were offered less favorable terms. However, simply applying for credit during the affected period doesn't necessarily mean you're eligible for a payment.

More information about eligibility and the claims process is expected as the settlement moves toward final approval. We’ll update this story as new details, including how to file a claim, become available.

How much money could you receive?

The proposed settlement creates a $100 million fund that will be used to make payments to people who submit valid claims. However, no individual payment amount has been announced.

How much each person receives will depend on factors including the number of valid claims submitted and how much money remains after court-approved legal fees, administrative costs and other expenses are deducted.

The settlement fund is non-reversionary, meaning money left over from the claims process won't be returned to Equifax.

Can you file an Equifax settlement claim yet?

No. Those affected can't file a claim for the Equifax settlement yet. The proposed settlement has received preliminary approval. This means the case can move forward, but claims aren't open and no payments are being distributed yet.

Once the court approves the settlement notice, people covered by the settlement are expected to have 90 days to submit a valid claim. More information about how to file, eligibility requirements and important deadlines should be provided as the settlement moves forward.

A final fairness hearing is scheduled for Jan. 22, 2027. At that hearing, the court will consider whether to grant final approval to the settlement.

In the meantime, be cautious of emails, texts or websites claiming they can get you an Equifax settlement payment now. Don't pay anyone to file, secure or expedite a claim on your behalf.

What should you do now?

Since claims aren't open yet, there's nothing you need to file right now. However, if you applied for credit during the affected period, it's worth holding on to any records you still have from that application, particularly documents showing a denial, interest rate or other terms you were offered.

Keep an eye out for an official settlement notice with information about eligibility, deadlines and how to submit a claim. Be cautious of unexpected emails or texts promising an immediate payment, especially if you're asked to pay a fee or provide sensitive financial information.

A credit score is only one part of your financial picture

Your credit score can influence the rates and terms you're offered when you borrow, but it's only one piece of your overall financial health. A financial adviser can help you look at the bigger picture, from managing debt and building savings to planning for retirement and other long-term goals.

Use the tool below to connect with a vetted financial professional and get started today:

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By now, the fall tuition bill has landed, and for a lot of families the numbers don't close the way they used to. That isn't your imagination.

The federal borrowing caps that took effect on July 1 set a ceiling on Parent PLUS for the first time at $20,000 a year and $65,000 over the life of a student.

They also ended Grad PLUS for new borrowers. The loan that quietly filled whatever grants and federal aid left behind now runs out sooner.

Private lending is already a $140 billion market, about 8% of all student debt, according to industry data from Enterval. Analysts expect private loan volume to climb sharply this year as families move to cover the difference.

So here you are, maybe taking out a private loan for the first time, with a payment deadline days away. The textbook advice was to shop these loans back in May or June. That window has closed, but the situation isn't an emergency yet. Private loans have no fixed federal deadline and can still disburse into the fall term.

What you can't afford is to let the clock stampede you into the first offer that clears the bill. A little thought now will save you years of paying for a rushed choice.

First, make sure you have hit the federal ceiling

Before you sign anything private, confirm you have used every available federal dollar, because federal loans offer protections, such as income-driven repayment, forgiveness programs and deferment options, that private lenders rarely match.

Understanding these benefits helps families weigh the true cost and safety of each option.

Review each step deliberately. Make sure the student has accepted their full federal loan amount first. Then look at what Parent PLUS still allows under the new caps, because even a capped PLUS loan keeps federal features that a private loan might not offer.

A private loan should only fill the gap that remains. Borrow that figure, not a dollar more. A federal-versus-private loan comparison (like the one on CollegeLens, the website that I founded) can help you confirm you're filling a real gap rather than replacing cheaper, safer money.

Get a fixed rate unless you have a specific reason not to

A variable rate will almost always look cheaper on the day you apply. That is the point of it, and it is also the trap. A rate advertised at 3.99% variable can climb to 8% or 9% if benchmark rates rise, and this is a loan you may be repaying for a decade or more.

A fixed rate locks in your cost for the life of the loan. For a bill you're financing over many years, the certainty is worth more than a low teaser number. Unless you plan to pay the loan off fast and can absorb a jump, fixed is the safer call.

Understand what a cosigner really signs up for

Most students need a cosigner to qualify, and most cosigners don't fully register what they're agreeing to. If you cosign for your child, you're not vouching for them. You're equally on the hook. The debt shows up on your credit report; a missed payment is a missed payment, and it can sit on your record for years.

You're also not unusual in needing one. Cosigners are the norm in this market, not the exception. Industry data from Enterval shows cosigner rates have remained above 85% every year since 2009.

In the most recently reported quarter, more than 94% of newly originated private loans carried a cosigner, including almost 97% of undergraduate loans. If a lender is willing to lend to your student at all, it is usually because someone with established credit is standing behind the loan.

This is where the fine print earns its keep. Look for a cosigner release — the provision that lets you come off the loan once the student has made a stretch of on-time payments, often around 12 months, and can qualify on their own.

Some lenders offer it, and others don't; the terms vary widely. If two offers are close on rate, the one with a clean, achievable cosigner release is the better loan.

The trade you are actually making

It is helpful to understand what you give up when moving from federal to private loans, especially since private loans typically lack income-driven repayment options. Payments do not flex with income drops, and deferment or forbearance are limited and lender-specific.

Knowing these limitations can make you feel more cautious and prepared to weigh the risks involved.

None of that makes a private loan a bad choice. For a family with strong credit, it can be a perfectly reasonable way to close a real gap, and the rate can even beat a federal loan in some cases.

The point is to go in knowing the trade rather than discovering it later. If you have read my earlier columns, you will recognize the theme: The mistake is rarely the loan itself. It is borrowing on autopilot because you were busy.

Here's a short checklist for before you sign:

• Confirm the student has accepted all federal loans first, then measure the true remaining gap.
• Borrow only that gap. Resist rounding up for a cushion you will pay interest on for years.
• Choose a fixed rate unless you have a concrete plan to pay it off quickly.
• Compare at least two or three lenders on rate, fees and cosigner release, not just the first approval.
• Read the deferment and forbearance terms so you know your options if income drops.

The bigger picture

The federal safety net for college borrowing shrank this summer, and the private market is stepping into the gap it left. That isn't automatically bad news, but it does shift more of the responsibility onto you to shop well.

The deadline on your desk is real. It is also the exact moment a lender's job gets easier, and yours gets harder.

So slow down by one notch, even now. Fill the gap you actually have, lock in a rate you can live with, protect whoever is cosigning, and know the protections you are trading away.

Do that and a private loan becomes a deliberate piece of a plan instead of the thing you grabbed because the bill was due on Friday.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Homeowners age 62 and older hold almost $15 trillion in home equity, nearly double the total of early 2020, according to data from the National Reverse Mortgage Lenders Association. If you own your home or another property, you have another financial resource for renovations, debt consolidation, extra income or even a business investment. But accessing that value is not as simple as withdrawing cash from the bank or selling shares in a retirement account.

"Using home equity is a puzzle," says Ashley Morgan, a debt attorney in Chantilly, Va. "It goes beyond whether you can afford to take the money out. You also need to consider how that decision fits with your future financial and housing goals."

Whether you need extra money now or simply want to understand the possibilities, here's what you should know about using home equity in retirement.

1. There are multiple ways to tap home equity.

Home equity is the portion of a property's value that you own outright. In other words, it's what you would receive if you sold, after paying any remaining mortgage debt and transaction costs.

Selling is the simplest way to cash out your equity, but there are other ways to access that value while staying in your home, each with its own tradeoffs.

The right option depends on what you need the money for, whether you can afford ongoing loan payments and whether the property still fits how and where you want to live in retirement.

2. A HELOC provides borrowing flexibility.

With a home equity line of credit (HELOC), you receive a borrowing limit based on the value of your property. You decide when and how much to draw, and typically owe interest only on the amount borrowed. After you repay the balance, that credit generally becomes available to borrow again.

"A HELOC gives you the ability to prepare for future expenses or cover projects that happen in multiple stages," says Fabien Thierry, head of home equity lending at Citizens Bank. However, HELOCs typically charge adjustable interest rates, so the monthly payment can change.

3. A home equity loan makes sense for a specific need.

A home equity loan provides a lump sum of cash upfront, which you repay on a set schedule, usually with a fixed interest rate and monthly payments.

Interest begins accruing on the full amount immediately, and some loans charge a prepayment penalty if you repay early. Home equity loans can work well for a specific expense, such as a major renovation or accessibility upgrade.

In a 2026 Citizens Bank survey of homeowners, 44% said renovating their property to fit their needs better was their most realistic housing option. Just 13% said buying another home felt achievable.

4. Borrowing against your home equity is affordable, but carries extra risk.

Home equity loans and HELOCs use your house as collateral. Interest rates for home equity loans and HELOCs averaged about 8%, compared with 12% for unsecured personal loans and nearly 20% for credit cards, according to a national Bankrate survey of lenders in June 2026.

The tradeoff is that if you fail to make the scheduled payments, the lender could eventually foreclose on your home.

5. A reverse mortgage lets you stay in the home without monthly loan payments.

A federally insured Home Equity Conversion Mortgage is available starting at age 62. You can receive the money as a lump sum, installment payments or as a line of credit.

Interest and fees are added to the loan balance over time. The balance becomes due when you sell the property, move out permanently or pass away. However, your heirs will not owe more than the property's value if the loan balance grows beyond it.

You must continue to cover property taxes and insurance, and keep the home in good condition. Otherwise, the lender could foreclose on the home.

6. Home equity investments offer cash, but at a high price.

With a home equity investment (HEIs), also known as a home equity sharing agreement, you sell a percentage of your equity to an investor. You get cash upfront and don't owe ongoing loan payments. Instead, the investor collects when you sell or refinance the home later.

These deals have grown more popular as homeowners look for ways to tap their equity without adding another monthly bill. Because the cost is deferred and tied to the home's future value, they can feel far less expensive than they are.

Here's an example: A homeowner receives $50,000, equal to 10% of a $500,000 home's value. They would owe $110,000 after 10 years if the property appreciates at 1.5% annually, or $187,000 if it appreciates at 5.5% annually, based on estimates from Point, an online provider of HEIs. Processing and other fees can also reduce the cash you receive.

By comparison, a 10-year home equity loan for the same amount at an 8% interest rate would cost about $73,000 to repay. "The seller may not realize how much upside they are giving away," says Luca Rassenti, a financial adviser in Tucson, Ariz.

7 Compare your options.

When borrowing against the equity in your home, compare offers from several lenders before committing. "Look at the rate, the support during the application process and how quickly you can get the money," says Thierry from Citizens Bank. Many banks offer online calculators that can give you an initial estimate of the rate and monthly payment.

Shopping around also matters for reverse mortgages and home equity investments, where fees and contract terms vary considerably.

Use the Bankrate tool below to explore and compare today's top refinance offers:

8. Selling unlocks your equity, but costs can add up.

Selling is the most direct way to access all your home equity. Downsizing to a less expensive property can also free up cash and reduce future housing costs.

However, you will lose value due to transaction costs and taxes, typically running up to 10% of the property for selling and 5% for buying another one, according to Zillow. So price out the full cost of the move before counting on a large amount of extra cash.

Single homeowners can exclude up to $250,000 of profit from their taxes for the sale of a primary residence, or $500,000 for a married couple filing jointly, as long as you (or your spouse) have lived in the home for two out of the last five years. "If you've owned a house for many years, you could have a substantial taxable gain," says Morgan, the debt attorney from Virginia.

9. Saving equity prepares for future needs.

Untapped home equity can serve as a reserve for later costs, including assisted living or long-term care. About 80% of 65-year-olds will need long-term care at some point, according to the Center for Retirement Research, and costs can run over $100,000 per year.

Before tapping your equity for a less urgent expense, consider whether other savings or assets could cover it and preserve that buffer.

10. Include your heirs in the plan.

When you pass away, your real estate receives a step-up in basis to its market value at that time. That means your heirs could sell it without owing taxes on the appreciation during your ownership.

If you need cash, Rassenti suggests asking your heirs whether they would provide a loan or gift today, with the expectation that they will inherit the property later. They may also have emotional reasons for wanting to keep a longtime home in the family. "Talk to the kids about what matters to them," says Morgan.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

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You've done everything the system has asked of you.

You were automatically enrolled in your 401(k) on your first day and never opted out. Your contribution rate climbs a little each year — automatically, whether you notice or not — and your money sits in a target-date fund that quietly rebalances while you live life.

On paper, you're a retirement success story — the exact "participant outcome" every employer hopes for and the entire financial services industry is built to produce.

Then the brakes on your car go, the emergency room copay hits, or the rent notice arrives with a number you simply can't cover this month. And you do the very thing you swore you'd never do: You log in and pull money out of the account you know you shouldn't touch.

If that stings a little, it's probably because it's a story about a lot of us.

In 2025, a record 6% of retirement plan participants took a hardship withdrawal from their 401(k), according to Vanguard's latest How America Saves report — the largest share the firm has ever recorded, and up from 5% the year before.

That happened in the very same year account balances climbed 13% and plan participation reached an all-time high of 86%. Read that again.

By those measures, the system looks healthier than ever. So why are more people than ever reaching into their retirement savings early? And how can we help mitigate this?

Hardship withdrawals aren't a discipline problem

The "easy" conclusion is that people simply aren't saving well, or that they lack discipline. I'd argue the opposite. The median hardship withdrawal last year was about $1,900. The two most common reasons were to stop a foreclosure or eviction and to cover a medical bill.

People aren't necessarily draining their retirement accounts for a vacation, a new pool in the backyard or an online shopping spree. They're reaching for the last cushion they have, because every other one is already gone.

That's the real story hiding inside the headlines: The early withdrawal isn't the problem. It's a symptom. The fragility was there long before the withdrawal; this is just where it finally became visible.

The rest of the data agrees. Worker confidence in retiring comfortably fell six points in a single year to 61%, the lowest since 2017, according to the Employee Benefit Research Institute. Fewer than three in five workers say they could handle an emergency expense, while 65% say debt is a problem in their household.

These aren't the numbers of a country that forgot how to save. They're the numbers of a country where paychecks stopped stretching as far as the plan assumed they would.

To be fair, part of the increase is mechanical. It's simply easier to take a hardship withdrawal than it used to be thanks to a 2018 rule change that removed a required step, resulting in less paperwork and fewer hoops to jump through.

Going back to the 6% taking withdrawals, this could mean friction is disappearing, not necessarily that distress is appearing. But that caveat doesn't rescue the overall story. In contrast, it sharpens it.

When someone is facing eviction, unexpected medical bills or a $1,900 shortfall and this is what they reach for first, you're not looking at carelessness. You're looking at a need.

A better way to cope with financial emergencies

If you find yourself eyeing that account in a hard month, instead of asking, "What's wrong with me?", ask some of these questions instead.

Am I measuring the right thing? A growing retirement account balance feels like security, but it's a promise about a life you'll live decades from now. It tells you nothing about your next 30 days.

The fragility lives in the gap between this paycheck and the next surprise, and that gap never shows up on your quarterly retirement account statements.

The number that may better predict whether you'll have to raid it is a different one: How long you could cover the basics if the paychecks stopped tomorrow, using money you can easily reach without touching retirement at all.

Is there anything between me and the next emergency that isn't my retirement account? For a lot of people, honestly, there isn't. But that's not a character flaw — it's the most changeable thing on this list.

A small, separate emergency fund, built however it gets built — a little set aside over time — is often all that stands between an unexpected bill and a withdrawal.

And what would actually make me feel secure, as opposed to just making the balance bigger? Those aren't always the same goal, and noticing the difference is where real security starts.

Rather than focusing too rigidly on standard savings advice, find the number that helps you sleep at night.

To be clear, none of this means the years of saving were pointless. It means retirement readiness and financial security are two different things, and we've spent a long time discussing the first as if it guarantees the second.

If you're doing everything right and still feel like you're one surprise away from it all coming apart, you're not imagining it, and you're not alone — you're paying attention. The account is never the whole picture. The life around it is.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For more than 40 million people in the United States, federal student loans are an increasingly difficult financial burden to manage.

The high cost of living is part of the problem, but President Donald Trump's second administration has also introduced major student loan repayment changes, including the new Repayment Assistance Plan.

While attention usually focuses on monthly payments, important student loan tax consequences can be overlooked. Some can work in your favor, like the student loan interest deduction, while others, surrounding tax filing status or employer benefits, can be complex.

If that weren't enough to worry about, 2026 marks the return of federal taxes on some forgiven student loan debt. Here's more to know about that shift and navigating other student loan "tax traps."

Student loan repayment changes

Before we dive into student loan tax issues, it helps to look at how much the student loan landscape has changed in recent years.

New repayment options took effect on July 1, 2026, including the Repayment Assistance Plan (RAP) and Tiered Standard Plan. Other repayment plans have been restricted, and various rules governing which loans qualify for which plans have also changed.

The Trump administration has also pursued changes involving student loan forgiveness while tightening loan limits for some graduate and professional degree programs and adjusting collections processes.

Those shifts all matter, especially with average student loan monthly payments reportedly hovering around $430.

Avoiding student loan tax traps in 2026

It's important to note that this is not an all-inclusive list of potential tax issues and concerns surrounding federal student loans. It highlights some key concerns merely for educational purposes.

And because every borrower's situation is different, it's important to consult a tax or financial advisor familiar with your situation to determine the best course of action to potentially reduce your tax liability and student loan payment amounts.

1. The student loan “marriage penalty”

If you’re married with student loans, your tax filing status can affect both your student loan payment calculation and your tax bill. This is especially important this year because of the new federal student loan Repayment Assistance Plan (RAP).

• RAP uses a borrower's income and family information to determine the federal student loan monthly payment.
• For married borrowers, tax filing status can affect whether the calculation includes a spouse's income.

That creates a potentially significant trade-off for some couples.

Consider a married couple with $100,000 of combined adjusted gross income (AGI), split evenly between the two spouses. If only one spouse has federal student loans, filing jointly would put the couple's full $100,000 of income into the RAP calculation.

Under RAP's payment schedule, that could translate to a base payment of roughly $750 a month. If the borrower instead files separately, only the borrower's $50,000 in income would be used, potentially resulting in a base payment of about $167 per month. That's a difference of roughly $583 a month — or nearly $7,000 a year.

But that lower student loan payment comes with a glitch: Filing separately can increase a couple's income tax bill and generally makes them ineligible for the student loan interest deduction and/or other potentially valuable tax deductions or credits.

So the couple would need to compare the potential $7,000 in annual student loan savings with the additional taxes and lost tax benefits of filing separately.

Disclaimer: This is a fictional illustrative calculation, not a prediction of what every borrower of $50,000 or $100,000 will pay. RAP also reduces payments for borrowers with dependents.

Remember:

• Married taxpayers who file separately generally cannot claim the student loan interest deduction.
• Other federal tax credits and deductions can also be limited or unavailable to married couples filing separately.
• That means borrowers shouldn't decide on filing status just by looking only at their student loan payment.

It’s good to consult with a trusted tax professional who can help you select the best filing status for you.

2. Taxes on student loan forgiveness

The idea of having the federal government forgive your student loan debt can be exciting. But if you anticipate having your loan debt forgiven in 2026, that relief could come with tax liability.

Why? A little history: During the pandemic, the American Rescue Plan Act (ARPA) temporarily excluded certain student loan debt discharged between 2021 and 2025 from federal taxable income.

• However, that broad temporary exclusion expired at the end of 2025.
• As a result, some borrowers whose student debt is forgiven or discharged this year (2026) could face federal income tax on the canceled amount.

Keep in mind: Whether forgiven student debt is taxable at the federal level depends on when and why the debt was discharged and whether a specific exception or exclusion applies.

• For example, the IRS says certain types of forgiveness and discharge remain excluded from federal taxable income, including Public Service Loan Forgiveness, Teacher Loan Forgiveness, and certain discharges due to death or total and permanent disability.
• Borrowers who are insolvent when debt is canceled may also be able to exclude some or all of the canceled amount under general cancellation-of-debt rules.

But…state taxes can add a wrinkle. States don't necessarily follow the federal tax treatment of forgiven student debt. So whether your state will tax your forgiven student loan amount may depend on the type of forgiveness and whether your state conforms to federal tax law.

If you expect a significant amount of debt to be discharged this year, try to understand the tax treatment before the forgiveness takes place. That might give you time to set aside money, adjust withholding, or make estimated tax payments rather than being surprised when tax season rolls around.

3. Overlooking the student loan interest deduction

Student loans aren't all negative for your taxes. One commonly overlooked benefit is the federal student loan interest deduction.

• Eligible borrowers can deduct up to $2,500 of interest paid on qualified student loans during the year.
• The deduction is available even if you don't itemize deductions, although income limitations and other eligibility requirements apply.

The student loan interest tax deduction can be easy to miss because it doesn't reduce your tax bill dollar-for-dollar. Instead, it reduces the amount of income subject to federal income tax.

Your loan servicer generally reports qualifying interest payments on Form 1098-E, Student Loan Interest Statement. But receiving the form isn't enough to establish eligibility for the tax break. Your income, filing status, and other circumstances come into play.

The student loan deduction can also interact with the filing-status decision some married borrowers face.

• As mentioned, married taxpayers who file separately generally cannot claim the student loan interest deduction.
• If you're a couple considering filing separately to reduce an income-driven student loan payment, you should carefully consider the tax trade-offs.

4. Missing out on tax-free employer student loan assistance

Under federal educational assistance rules, employers can provide up to $5,250 a year in tax-free educational assistance, including qualifying payments toward an employee's student loans.

The 2025 Trump/GOP tax law made this student loan provision permanent.

• But there is an important distinction: This isn't a tax deduction an individual borrower can claim on their own.
• The employer has to offer a qualifying educational assistance program.

It’s also important to note that employer educational assistance and tuition reimbursement are different.

Educational assistance programs can cover a broader range of expenses, including tuition, fees, books, supplies, and student loan repayments. Tuition reimbursement programs, on the other hand, typically cover only tuition and related expenses for courses taken while employed.

Check with your employer if you’re unsure about education-related benefits they do or don’t offer.

5. Skipping retirement contributions while paying student loans

Student loan payments can also affect your retirement savings even if your employer doesn't directly help pay the loans.

Under the SECURE 2.0 Act, employers can treat certain qualified student loan payments as elective deferrals for purposes of making matching contributions to a workplace retirement plan.

That means some borrowers can receive an employer retirement match based on their student loan payments even if they're not making equivalent contributions to the retirement account themselves.

• To qualify, you must be making student loan payments and have a direct legal obligation to repay the loan (guarantors do not qualify).
• Parents paying installments on Parent PLUS loans* taken out for their children's education are also eligible.
• Total matched loan payments and direct 401(k) contributions combined cannot exceed the annual federal IRS deferral limit ($24,500 for 2026, excluding catch-up contributions).

The provision could help address an increasingly common financial dilemma: Some people with student loan debt might not have enough money to make student loan payments and, at the same time, contribute enough to a 401(k) to receive an employer match.

As Kiplinger recently reported: "According to the American Institute of CPAs (AICPA), over half (53%) of personal and parent borrowers say student debt directly hinders their ability to save for retirement. For these households, the default reaction may be to reduce or even pause monthly 401(k) contributions."

But this is optional for employers. Not every workplace retirement plan offers student loan matching, and the workplace plan's specific rules determine which payments qualify and how the match is calculated.

*Also keep in mind that Parent PLUS loans (and consolidation loans containing Parent PLUS loans) are excluded from the Repayment Assistance Plan (RAP). These loans are now generally at $20,000 per year per student (with a $65,000 lifetime limit).

Check your employer retirement plan documents or ask your benefits administrator whether student loan payments qualify for matching contributions.

Related

• A Little-Known Tax-Free Way to Help Pay Your Student Loan
• Don't Miss the $2,500 Student Loan Tax Break
• What's in the 2025 Trump Tax Bill?
• The Silent 401(k) Drain Costing Thousands in Retirement Growth

Our semiquincentennial celebrations are over. We have seen the fireworks and eaten enough hot dogs to last until next year. This is a perfect moment to reflect on what some of our Founding Fathers may have really taught us.

What were they trying to build? What were some of their thoughts about their Great Experiment? Since money issues are my lane, I'm on it.

When we think about America's Founding Fathers, we probably picture powdered wigs, heated debates and the signing of the Declaration of Independence. We don't usually think about budgets, debt, inflation or investment strategies.

But perhaps we should.

The founders weren't just creating a country — they were building an economy from scratch. Many were entrepreneurs, landowners, merchants, inventors and investors. Some became wealthy. Others died deeply in debt.

Their successes — and mistakes — still offer remarkably relevant financial lessons for families today.

Here are six timeless money lessons worth borrowing.

1. Live below your means

Benjamin Franklin may be America's first financial educator. His famous advice, "Beware of little expenses; a small leak will sink a great ship," could have been written for today's subscription economy … and streaming services, food-delivery apps, impulse Amazon purchases and buy now, pay later plans.

These are today's "small leaks." The lesson isn't to eliminate every luxury. It's to recognize that financial freedom usually disappears one small purchase at a time — not with one catastrophic decision.

Today's tip: Audit recurring expenses every six months. Small savings can compound into significant wealth over time.

2. Debt can build — or destroy

Alexander Hamilton understood that debt wasn't automatically bad. As the nation's first Treasury secretary, he believed responsible debt could build infrastructure, create opportunity and establish America's creditworthiness.

The founders also witnessed how crushing personal debt could destroy families and businesses. Thomas Jefferson, the major craftsman of the Declaration of Independence, was deeply in debt when he died after years of overspending, declining tobacco income and borrowing against his plantation. Much of his estate had to be sold to pay creditors.

Today, debt and overspending matter more than ever. Mortgage debt that builds equity is very different from paying 24% interest on a credit card debt.

Student loans that lead to a higher-paying career may be worthwhile. Financing vacations or dinners out rarely is.

Today's tip: Before borrowing, ask yourself one question: Will this debt make my future stronger or simply make today more enjoyable?

3. Diversification isn't new

George Washington's secret to investing? Diversify. He constantly experimented at his Mount Vernon home in Virginia, shifting from tobacco — which depleted soil and produced inconsistent profits — to wheat, corn, barley, milling, fishing, whiskey production and other ventures. He even introduced crop rotation.

He literally understood something investors still preach today: Don't put all of your eggs in one basket. Don't rely on one source of income. The result was a more stable income and a farm that was better prepared for changing markets and unpredictable harvests.

Today's equivalent? Not depending solely on one paycheck or investments in one type of investment portfolio. A portfolio concentrated in one stock, in one industry or on one investment strategy may produce spectacular gains — for a while. But when markets shift, that concentration can quickly become a liability.

Economic surprises happen. Income and investment diversification provides resilience.

Today's tip: Develop additional income streams through a mix of investments, rental income, dividends or even a side hustle.

4. Inflation is nobody's friend

The founders experienced inflation firsthand during the Revolutionary War. To finance the war, the Continental Congress printed large amounts of paper money known as Continentals. Without enough gold or silver to back the currency — and with Britain flooding the colonies with counterfeits — the money rapidly lost value.

Prices soared, savings evaporated and merchants often refused to accept the currency. The crisis gave rise to the expression "not worth a Continental."

By 1781, America was broke, and the troops were demanding payment. Washington knew he had to do something. He turned to Haym Salomon, who'd migrated from Poland, loved his new country and could raise funds fast.

Salomon raised the money to fund the Battle of Yorktown, and we won the war.

Unfortunately, Washington's debt to Salomon went unpaid and left his family bankrupt at the time of his death.

The lesson of inflation remains painfully familiar today. Inflation quietly erodes purchasing power, creates uncertainty and can undermine confidence in an economy.

Whether in 1779 or 2026, protecting the value of money remains one of the foundations of long-term financial stability. Many retirees discover this the hard way. A comfortable retirement income today may buy significantly less 20 years from now.

Today's tip: Families should regularly review whether their savings and investments are keeping pace with inflation — not just preserving dollars, but preserving purchasing power.

5. Invest in knowledge before you invest money

Jefferson believed education was one of society's greatest investments. Financial literacy works the same way.

Before buying cryptocurrency, options, private investments or the latest "can't miss" opportunity, understand exactly what you're buying. Too many investors confuse excitement with education. Knowledge remains the highest-return investment most people will ever make.

Today's tip: Families who talk openly about finances raise children who make better financial decisions as adults.

6. Build wealth that outlives you

The founders weren't simply building fortunes. They were trying to build a nation that would endure for generations. Families should think the same way. Your greatest financial legacy isn't the size of your estate. It's the financial confidence, values and decision-making skills you pass to your children and grandchildren.

I've spent my career teaching families that money conversations should begin long before estate planning documents are signed.

Today's tip: Teach children how to earn, save, spend wisely, give generously and invest thoughtfully. Inheritance without education often disappears within a generation. Financial wisdom can last forever.

The bottom line

The Founding Fathers disagreed about politics. They argued over the size of government, taxation and the role of the federal government. But they largely agreed on principles that still matter today:

• Personal responsibility
• Planning ahead
• Education
• Preparing future generations to succeed

More than 250 years later, those lessons haven't become outdated. They've become even more valuable. Technology changes. Markets change. Tax laws change.

Human behavior doesn't.

That's why the best financial advice often isn't the newest.

Sometimes it's the oldest.

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• Inflation Is the New Fixed Expense in Retirement: 5 Things That Actually Work to Address It (and What Doesn't)
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Back-to-school brings a familiar cash-flow crunch for parents. Between upcoming college tuition bills, essential supplies, and student loan obligations, families face tough financial trade-offs.

One of the costliest compromises is saving less for later in life.

According to the American Institute of CPAs (AICPA), over half (53%) of personal and parent borrowers say student debt directly hinders their ability to save for retirement. For these households, the default reaction may be to reduce or even pause monthly 401(k) contributions.

However, scaling back 401(k) savings may trigger a higher income tax bill and forfeit compounding growth — all while causing taxpayers to miss out on federal relief. Here's what you can do.

The hidden tax penalty of pausing 401(k) contributions

AICPA data shows that over 70% of parent and personal student loan recipients are worried about their ability to keep up with payments. To cope with this financial pressure, many borrowers may be quietly cutting back on long-term retirement savings.

But reducing pre-tax 401(k) contributions doesn't just free up cash; it can immediately raise your federal tax bill.

What does that look like in practice?

Suppose a family pauses their $8,000 annual pre-tax 401(k) contribution to pay down student loans.

Because 401(k) contributions lower their adjusted gross income (AGI) dollar-for-dollar, pausing them exposes $8,000 to the following potential tax traps:*

• Tax bracket creep: a higher AGI can push a portion of that income into a higher federal marginal tax bracket (e.g., jumping from 22% to 24%).
• Shrinking loan deductions: the student loan interest deduction (worth up to $2,500) phases out at higher income levels, meaning your tax break shrinks just as your taxable income rises.
• Loss of credits and Roth eligibility: a higher AGI can reduce your eligibility for child tax credits, education credits, and direct Roth IRA contribution limits.

*Note: The exact impact depends on your filing status and overall income.

In short, cutting retirement savings to cover student loans may improve cash flow today, but create a financial headache at tax time.

The SECURE 2.0 solution: the 'student loan match'

While it may feel like an all-or-nothing choice: pay off student debt or capture workplace retirement matching funds, you can actually use federal tax law to achieve both.

Thanks to the SECURE 2.0 Act, some employers now provide matching contributions to 401(k), 403(b), governmental 457(b), and SIMPLE IRA plans based on your qualified student loan payments (QSLPs).

How the rule works:

• To qualify, you must be making student loan payments and have a direct legal obligation to repay the loan (guarantors do not qualify).
• Parents paying installments on Parent PLUS loans taken out for their children's education are also eligible for this match (which may provide much-needed relief, as new caps of $20,000 per year and a $65,000 lifetime limit per student went into effect under the 2025 Trump tax bill).
• Total matched loan payments and direct 401(k) contributions combined cannot exceed the annual federal IRS deferral limit ($24,500 for 2026, excluding catch-up contributions).

Here's an example. Say your employer offers a 4% match on your 401(k), and you contribute at least 4% of your salary toward eligible student loans. Your employer can deposit the full match into your 401(k).

You also don't need to send every bank receipt to HR to qualify. Under IRS guidelines, you only need to provide a simple annual certification confirming your payment amounts and loan details.

The bottom line. You receive 100% of your employer's free retirement match money without putting a single new dollar directly into the 401(k) plan yourself. For more information, check out Kiplinger's report on the SECURE 2.0 Act.

How to find out if your employer offers a student loan match

However, not all companies offer student loan matching. So follow these steps to check your options and protect your budget:

1. Ask HR about "QSLP matching": Review your company's 401(k) plan documents to see whether student loan matching is enabled. Because employer adoption is optional, companies must proactively add this feature to their plan.
2. Scale back to a "micro-contribution" (if unsupported): If your employer doesn't offer student loan matching yet and you can't afford the full match amount, try contributing a small amount to your 401(k). Even contributing just 1% or 2% to a tax-advantaged account is better than nothing.
3. See if you're eligible for the $2,500 interest deduction: Check if you qualify for the federal student loan interest deduction. This tax break helps claw back some of the interest you pay to your loan servicer — and best of all, you can still claim the standard deduction.

Strategies for borrowers to protect retirement funds

If your employer hasn't adopted a 401(k) student loan match, here are some further ideas to help balance retirement savings with your monthly budget.

• Look into income-driven repayment (IDR) plans: An IDR plan bases your federal student loan payments on your income and family size instead of your total debt. This lowers monthly payments for some and may free up extra cash to put toward your 401(k). (Keep in mind: Parent PLUS loans have special rules and may need to be combined into a single direct-consolidation loan first.)
• Explore other tax-free employer assistance: Under Section 127 of the tax code, employers can provide up to $5,250 annually in tax-free student loan repayment assistance directly to employees. Ask your benefits department if this student loan benefit is available.
• Time extra payments wisely: If you have extra cash to save, prioritize capturing your full employer 401(k) match before making accelerated principal payments on low-interest student debt. An employer match represents an immediate 50% to 100% return on your investment, a rate that typically outperforms the interest saved by paying down low-rate loans early.

Managing student debt shouldn't force you to sacrifice your long-term financial security. By taking advantage of federal tax law, you may be able to pay down loans today without putting your retirement on hold.

Read More

• Does Your College Student Really Have to File Taxes This Year?
• Don't Overpay the IRS: 6 Mistakes That Could Be Raising Your Tax Bill
• SECURE 2.0 Act Summary: New Retirement Savings Changes to Know

Credit card debt can quickly become overwhelming, especially when high interest rates make it difficult to reduce your balance even as you make payments. While Experian reports that the average credit card interest rate is 19.35% as of July, rates can reach nearly 30%. If you're only making minimum payments, it can be difficult to keep up.

Your home's equity may offer a way to manage that debt. By borrowing against your home equity, you may be able to pay down or eliminate your credit card balance and potentially reduce the amount you're paying in interest. But using an option such as a home equity line of credit (HELOC) also puts your home on the line.

If you're struggling with credit card debt but have equity in your home, you have options. Before you tap your home equity, make sure you understand how each option works and the risks involved.

When using home equity to pay off debt makes sense

Using home equity to pay off credit card debt can make sense in certain situations. If you have credit card debt with an APR of 20% or higher, for example, a HELOC or home equity loan may offer a lower interest rate and reduce the amount of interest you pay.

But interest rates aren't the only factor to consider. If you can't make the payments on a HELOC or home equity loan, you could potentially lose your home. Before borrowing, make sure the payments comfortably fit your budget and you have a clear plan for paying off the debt.

You'll also need enough home equity to qualify. Many lenders limit how much of your home's value you can borrow against, often requiring you to retain a certain amount of equity in the property.

For example, say your home is worth $400,000 and you owe $250,000 on your mortgage. That gives you $150,000 in equity. If your lender requires you to maintain 20% equity, or $80,000, you may be able to borrow up to $70,000 of your available equity, depending on the lender's requirements and your qualifications.

Compare your options before borrowing

There are several ways to pay down credit card debt, including options that let you borrow against your home equity. Each comes with different costs, requirements and risks, so it's important to compare them before deciding which approach is right for you.

Both a HELOC and a home equity loan use your home as collateral. With a HELOC, you can borrow from a revolving line of credit as needed, up to your approved limit. A home equity loan, on the other hand, provides a lump sum that you repay over a set period.

The biggest downside: You're putting your home on the line

HELOCs and home equity loans are forms of secured debt and typically have lower interest rates than credit cards. But that lower rate comes with a significant risk: Your home serves as collateral. If you fall behind on payments, you could face foreclosure and potentially lose your home.

Even if you have a solid repayment plan, consider how an unexpected job loss, medical bill or other major expense could affect your ability to make payments. HELOCs come with another consideration: They typically have variable interest rates, meaning your rate and monthly payment could increase over time.

Using a HELOC or home equity loan also doesn't address the reason you accumulated credit card debt in the first place. Before taking on new debt to pay off your credit cards, consider what led to the balances and whether you've addressed the underlying issue.

Questions to ask before using your equity

If you're on the fence about using your home equity, these questions may help you decide:

• Can I realistically pay this off? Make sure the monthly HELOC or home equity loan payment comfortably fits into your budget, with room for other expenses.
• Will my monthly payment decrease? Depending on your credit card balance and interest rate, switching to a HELOC or home equity loan may result in only a small reduction in your monthly payment, or none at all.
• Am I solving a temporary problem or creating a bigger one? Consider what caused you to accumulate credit card debt and whether you've addressed that issue before taking on new debt to pay it off.
• Is my income stable? Consider whether you could continue making payments if your income dropped or you unexpectedly lost your job.
• Do I have an emergency fund? Ideally, have enough savings to cover three to six months of living expenses so an unexpected expense doesn't interfere with your debt repayment plan.

Alternatives that may be safer

Using home equity isn't right for everyone, and there are several alternative options that may be safer:

• Debt consolidation loan: A debt consolidation loan lets you combine multiple debts into a single loan with one monthly payment. If you qualify for a lower interest rate than you're currently paying, you could also save money on interest. Compare rates, fees and repayment terms before applying.
• Balance transfer credit card: A balance transfer card may offer a 0% introductory APR for a limited time, allowing you to pay down your balance without accumulating additional interest during that period. Most cards charge a balance transfer fee, and any remaining balance may be subject to a much higher APR once the promotional period ends.
• Debt avalanche method: If you have multiple debts, the debt avalanche method can help minimize interest costs. Make the minimum required payment on each debt, then put extra money toward the debt with the highest interest rate. Once that's paid off, move on to the debt with the next-highest rate.
• Credit counseling: A nonprofit credit counseling agency can help you review your finances, create a budget and develop a plan for paying down debt. Depending on your situation, a counselor may also discuss whether a debt management plan is appropriate.
• Budget adjustments: Look for expenses you can temporarily reduce and redirect that money toward your credit card balance. Even smaller cuts to discretionary spending, such as dining out or entertainment, can give you more money to put toward debt each month.

Your home equity can be a valuable financial tool, but it isn't free money. Borrowing against it means taking on new debt and putting your home at risk if you can't make the payments.

Before using home equity to pay off credit card debt, consider what led to the debt and whether you have a realistic plan for repaying what you borrow. A lower interest rate can save you money, but only if you can comfortably manage the new debt without putting your home at unnecessary risk.

If you’re considering tapping your home equity, refinancing may be another option worth comparing to see how today’s rates and offers could affect your monthly costs.

Use the Bankrate tool below to compare today's top refinance offers:

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As affordability issues continue to plague the housing market, many homeowners are choosing to make changes to their home rather than their address to get the living space they need.

According to a recent survey from Citizens Financial Group, nearly half of homeowners now say that renovating their house is the most realistic financial option for their family — compared with just 13% who plan to buy a new home — and seven in 10 expect to complete a remodeling project in the next two years.

"They can’t find another place to go," says Linda Kody, a broker with Kody & Company in North Andover, Mass. "They love their neighborhood, and they want a home exactly the way that they want it."

The boom in renovations makes sense given the current state of the housing market. Home prices have jumped 54% since 2020, according to the Joint Center for Housing Studies at Harvard University.

Meanwhile, with mortgage interest rates hovering between 6% and 6.5% lately, many homeowners are reluctant to give up the 3% to 4% loans they scored before rates began climbing a few years ago. The resulting lack of inventory — there are 17% fewer homes for sale now than before the pandemic — also means there are fewer options available for those who want to move.

If you're among the many homeowners contemplating a remodeling project in the next year or two, these strategies can help you decide which projects to tackle and how to keep costs manageable.

Choose renovations strategically.

Start by thinking about your immediate maintenance needs and the functionality required for your lifestyle. If you're planning to stay in the house through retirement, for instance, consider adding design elements, such as a walk-in shower or zero-step entryway, that will make living there easier as you get older.

"The risk of having to move later can be significantly reduced if you prepare your home in advance," says Louis Tenenbaum, president and CEO of HomeRenewed Ventures, a Washington, D.C., firm that offers consulting services for homeowners to age in place.

Tenenbaum recommends completing as many necessary projects as possible simultaneously, because trying to remodel in stages as health and mobility challenges arise ends up being more expensive and stressful. Basic upgrades and repairs, such as replacing old wiring or fixing a leaky roof, also help your home retain its value and reduce maintenance costs in the future.

After that, look at high-use areas such as kitchens and bathrooms. If resale value is important to you, focus on projects that will allow you to recoup a big chunk of your costs.

Recently, that included exterior upgrades (such as replacing garage doors or upgrading siding), minor kitchen remodels and installing a backup power generator, according to Zonda, a home-building data and marketing company.

Keep spending in check.

For larger projects, Alan Archuleta, CEO and president of Archuleta Builders in Morristown, N.J., recommends starting with an architect or design firm with experience in your municipality. Rates for this type of work vary depending on scope, but the average is about $6,600, according to HomeAdvisor.

"The architects and towns dictate what you can and can't do to a home, from a zoning standpoint or an actual structural standpoint," Archuleta explains.

Get quotes from at least three contractors, and ask for itemized bids that spell out costs. Then, add an extra 20% to your budget to allow for surprise expenses, such as water damage or structural repairs, especially in older homes. "Remodeling often prompts code upgrades that would not otherwise be required," says Mari Adam, a certified financial planner in Boca Raton, Fla.

You can lower costs further by opting for midrange fixtures and materials, which balance quality and costs. If you can be flexible with your project’s timing, you may also find better contractor availability and pricing.

"The smartest approach right now is to renovate with intention, rather than rushing into a project," says Elizabeth Gomez, owner of Bridge City Contracting in Portland, Ore.

If you're planning a major renovation, comparing today's refinance rates could help you determine whether tapping your home's equity makes sense for your budget.

Use the Bankrate tool below to compare some of today's top refinance offers:

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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To help you understand what is going on in the economy and beyond, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we publish many (but not all) of our forecasts a few days afterward online. Here’s the latest...

Car sales will generally hold up this year. But affordability is a growing buyer concern. Here’s what to know if you’re in the market.

Dealerships will remain relatively busy, with about 16 million cars and light trucks sold this year, in line with 2025. Despite sticker shock, shoppers are still finding ways to afford a new vehicle. While car prices aren’t rising as swiftly now, with the average transaction price at $50,000 lately, financing and car insurance costs have surged. On average, insurance premiums have risen by 54% in the past five years. Even for buyers with good credit, auto loan rates are up by a percentage point. Folks with lower credit scores face significantly higher rates.

Borrowers have been stretching out their car loans to achieve a bearable monthly payment, even though that means paying more in interest during the loan. A third of loans to finance new cars last six-plus years.

There may not be many deals to be had now. But there are ways to save, especially for folks who are flexible on the make, model or vehicle options.

• If you can live with the base model of the car you want, do it. The difference between the cheapest and priciest trims of a given vehicle can be hefty. For example, most buyers of Toyota’s ever-popular RAV4 opt for the upscale XSE and Limited trims instead of the base LE, and pay $9,400 to $11,400 more for the added amenities.
• Note which brands have more or fewer cars in stock. Toyota and Honda have the leanest inventories, which generally means less room to bargain. Stellantis, the parent company of Jeep, RAM, Dodge and Chrysler, has the most cars on dealer lots now.
• Hybrids continue to sell well, now making up 14% of total sales. Buyers who target nonhybrid versions of a given model may face less pressure to pay up. You may have better options in the used-car market, given the high level of leasing in recent years.
• Low-mileage vehicles coming off lease can be good deals, and offer good warranties if sold through manufacturers’ certified pre-owned programs. Depreciation tends to be higher on fancier trims of used cars…good for second owners.

Automakers continue to lean on pickup trucks and SUVs as buyers’ interest in sedans continues to wane. Tesla just axed its flagship Model S sedan. Cadillac will soon have just one sedan in its lineup. Ditto for Acura. Coupes are even rarer.

Also note the budding return of small pickups. With full-size trucks so big, and even midsize models inflating in size, many buyers pining for compact work trucks who have felt left out are starting to get more options. Ford’s compact Maverick pickup has been a strong seller. Start-up Slate Auto is now taking orders for its two-door truck, which is electric, smaller than a Corolla, and starts at $24,950. Ford is readying a rival to the Slate, also electric, and Toyota is rumored to be mulling a small hybrid pickup.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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As Americans face rising costs on just about everything, the amount of debt they're taking on is going up, too. Credit card balances recently reached a record $1.28 trillion. And according to credit-reporting company Experian, 38% of U.S. consumers now have a personal loan, with the number of these loans on credit reports reaching 67.5 million. Both of those figures represent the highest levels since Experian started collecting data in 2017.

For some, the strain of staying afloat is becoming more evident. The financial stress index from the National Foundation for Credit Counseling (NFCC), which reflects the financial ability of consumers to repay unsecured debts, recently hit its highest level since the NFCC began tracking it in 2018.

“I'm not surprised. I see a lot of people dealing with short-term financial pressure, and it's been going on for a while,” says Leah Hadley, a wealth adviser in Cleveland. A large, unexpected bill can leave households with no choice but to take on debt if they don't have a cash buffer to absorb the extra expense. (Or they may tap their retirement savings. Last year, about 6% of eligible participants in Vanguard 401(k) plans took a hardship withdrawal — an all-time high.) And while the unemployment rate was recently a relatively low 4.3%, the average time it takes job seekers to find work is the longest it has been since 2019. During an extended bout of unemployment, families may rely on credit or retirement savings to make ends meet.

But economic challenges are only part of the picture. Even financially comfortable households are borrowing more frequently rather than paying cash, says Derik Farrar, head of everyday banking and borrowing at U.S. Bank. Some are taking on loans strategically to fund, for example, a badly needed home renovation, while others are incurring debt to keep up with lifestyle inflation — say, upgrading to high-end cars or taking luxury vacations.

Another factor is how much easier it has become to borrow, and to borrow larger amounts, with the click of a button. Financial technology companies such as SoFi, Prosper and LendingClub, for example, let consumers take out personal loans online in as little as 24 hours, without ever speaking to a representative. Buy now, pay later (BNPL) plans from fintechs such as Affirm, Afterpay and Klarna have surged in popularity in recent years, allowing shoppers to delay payment on purchases big and small by signing up for a plan at online checkout. And major retailers, airlines and hotels tout their credit cards to customers, promising ample rewards on their spending — but with the potential to rack up high-rate debt, too.

While borrowing may be quicker and more convenient, the challenge of paying it back remains. Even a decent income isn't surefire protection against debt trouble. People seeking credit counseling now have an average household income of about $70,000, up from $40,000 before the COVID-19 pandemic, according to data from the NFCC.

Ideally, you'll have an emergency fund with at least three to six months' worth of living expenses, stored in a safe, easily accessible place, such as a bank savings account. But if you exhaust those funds — or haven't built them yet — you may have to look to other sources of cash in a pinch. Or, if you need extra money to finance a big project, such as a kitchen remodel, you may be looking to narrow down the best borrowing strategy.

If you decide to borrow, the key is understanding how the loan fits into your finances and how you'll repay it. This guide breaks down the main borrowing options and how to use them effectively.

Questions to ask before getting a loan

Before taking on a loan, step back and ask a few key questions. The answers can help you decide whether borrowing makes sense and, if so, determine how you'll repay the debt.

1. What are you borrowing for? Productive vs unproductive debt

Anytime you consider taking on debt, ask what you're getting in return and how long that benefit will last. For example, borrowing to renovate your home or launch a business can improve your finances over time, boosting your home's value or increasing your income and net worth.

Debt that covers short-term spending, such as shopping for designer clothes or going on a vacation, is less valuable and doesn't build wealth. Farrar frames the former as productive debt and the latter as unproductive, adding that unproductive debt should be minimized.

2. Can you reduce how much you need to borrow?

If you decide to get a loan, try to maximize how much of the expense you can cover yourself, limiting the amount you borrow. Even a small reduction in the loan balance can lower your monthly payments and make the loan easier to repay.

Start by reviewing your budget and identifying areas to cut back on discretionary spending, such as dining out or subscriptions. “People don't always realize how much they're spending until they actually sit down and look at their budget,” says Michael McAuliffe, president of Family Credit Management, a nonprofit debt-relief organization in Rockford, Illinois.

You can also look for ways to bring in additional income through part-time or gig work. This is especially important if you're borrowing to cover ongoing expenses. “In this situation, more loans are not the answer. People need to change their long-term habits,” says McAuliffe.

3. Can you afford to pay off the debt?

Make sure you can comfortably handle the monthly payments on any future loans. This is especially important with secured debt, which is backed by an asset; missing payments can put your home or retirement savings at risk. And keep in mind that being able to make the minimum payment doesn't necessarily mean the debt is affordable in the long run.

McAuliffe says that he has seen clients underestimate their total outstanding balances by tens of thousands of dollars. For that reason, it's important to look beyond the minimums and have a clear plan for paying down the balance. A debt-repayment calculator can help you estimate how long it will take based on your target monthly payments.

4. Are you getting the best terms?

Once you've decided to borrow, the next step is to make sure you do so on the best possible terms. A little preparation can lift your chances of approval and help you qualify for lower interest rates.

Start by checking your credit reports and making sure your accounts are in good standing. You can get your report from each of the big three credit-reporting companies (Equifax, Experian and TransUnion) weekly for free at AnnualCreditReport.com. Are there any mistakes dragging down your credit score, such as a credit card issuer reporting a missed payment that you made on time?

You'll also want to gather basic documentation, such as recent pay stubs, bank statements and tax returns, especially if you're applying with a new lender. “The more you borrow, the more you’ll need to verify,” says Farrar. Working with a bank or credit union where you’ve already developed a relationship can improve your chances of qualifying. However, check with a few other lenders to see whether any of them offer you a better rate. Some lenders also provide prequalification tools that let you estimate potential rates without undergoing a credit check.

Types of loan: Consider your options

When it comes to a loan, the right choice for you depends on how much you need, how quickly you can repay the debt and what assets you have available to borrow against. Here are some options to consider.

Zero-interest credit card offers

For short-term borrowing, a credit card with a 0% introductory interest rate on purchases can be one of the most cost-effective options. These offers typically allow you to carry a balance for 12 to 21 months without owing any interest. If you pay off the balance in full before that window closes, it’s essentially a free source of borrowing. A few of the top options include Chase Slate, U.S. Bank Shield Visa and Wells Fargo Reflect, which all offer new customers a 0% rate for 21 months.

The trade-off: If you’re still carrying a balance after the promotional period ends, interest starts up, usually at a high rate, flipping an initially attractive offer into one of the most expensive sources of borrowing. The average credit card rate is about 24%, according to LendingTree. No-interest credit card offers make sense for smaller purchases that you can pay off relatively quickly, such as car repairs or furniture.

“I don’t have a problem with 0% offers as long as you treat them as a short-term bridge,” says Hadley. “You need a plan to get rid of the debt before the deal expires.”

Home equity lending

If you own your home, you may be able to borrow against its value through a home equity loan or a home equity line of credit (HELOC). To qualify, you typically need to have equity — in other words, the difference between the value of your home and the outstanding balance on your mortgage — of at least 15% to 20%. You'll also need to provide proof of income and have a decent credit score, usually of at least 680.

Home equity loans, which provide you with a lump sum of cash up front, come with a fixed interest rate and a set schedule of monthly payments that do not change. Average home equity loan rates were recently about 8%, according to Bankrate, though your rate will depend on how much you borrow, the length of the loan term and your creditworthiness. A home equity loan can make sense for a large, one-time purchase or expense, such as a home renovation project.

A HELOC is a revolving credit line that offers more flexibility, allowing you to borrow at your convenience, repay and borrow again over time. “Even if you don't see a need right away, having a HELOC in place can give you access to cash in an emergency,” says Kenyon Sutton, a financial coach in Jacksonville, Florida. If you set up a HELOC and then lose your job, for example, you can still borrow against it. HELOCs recently had an average rate of 7%, according to Bankrate. But the rate is usually variable, meaning your monthly payment can go up and down based on market conditions.

Because your home secures these loans, they typically come with lower interest rates and open the door to larger borrowing amounts than unsecured loans. While unsecured personal loans tend to max out at $50,000, home equity lending could allow you to borrow in the six figures or higher, assuming you have the equity to back it up.

The trade-off is the level of risk. If you miss payments, you could eventually lose your home. These loans also charge up-front origination fees of around 0.5% to 1% of the borrowed amount. And you can't turn to home equity loans if you're in a hurry. They take time to launch because the lender has to evaluate your home's value.

Personal loans

With a personal loan, you get a lump sum of cash and pay back the loan on a set schedule, usually between one and five years. You can see the scheduled repayments and total cost of the debt when you apply.

On average, interest rates on personal loans (at about 12% for those with decent credit) are lower than standard credit card rates. But unlike some credit cards, personal loans don't come with an initial 0% period, so you owe interest immediately. With that in mind, personal loans often make sense for borrowing that will take a few years to pay off, such as home improvements or a new appliance. Borrowers also commonly use personal loans to pay off their high-rate credit cards, refinancing the debt at a lower interest rate. You need to show proof of income to qualify for a personal loan, so don't count on getting one to cover expenses if you lose your job.

Personal loans are widely available through both online lenders and traditional banks or credit unions. Online lenders tend to offer a faster application process and approval, with funds often available within a day or two. Banks and credit unions take longer to process loan applications, but they can offer lower interest rates. And you may have a better shot at qualifying by getting in-person assistance from a representative, especially at financial institutions where you have a long-term relationship.

“Online is faster, but there's no one to advocate for you. There's less flexibility on the borderline,” says Sutton.

Buy now, pay later plans

BNPL plans split purchases into smaller payments, typically charging no interest during this time. The standard BNPL plan lasts six weeks, though it can be stretched out to 24 months or longer for larger purchases. Used responsibly, BNPL can be a tool to spread out the cost of the occasional big-ticket purchase — say, to buy a new dishwasher after your old one breaks down. But BNPL's convenience too often leads borrowers to overuse it, spending more than they can afford on food delivery, clothes or other discretionary purchases.

“The problem isn't the first BNPL purchase, it's that they keep adding up,” says Farrar from U.S. Bank.

You also need to pay attention to the fine print. In some cases, “no interest” offers come with a catch. For example, if the balance isn't paid off in time, borrowers may owe substantial penalties or retroactive interest.

401(k) loans

If you have a workplace retirement plan, there's a good chance it allows you to borrow from your balance. Roughly 79% of 401(k) plans offer loans, according to research from John Hancock. If your plan is among them, your employer determines how much employees can borrow through the program rules, up to the IRS limit of 50% of your vested account balance (the amount you could keep after leaving the job) or $50,000, whichever is lower. You must repay the loan within five years.

Unlike many other types of borrowing, getting a loan through your 401(k) doesn't require a credit check. The interest rate depends on the plan, but typically, it's the prime rate plus one or two percentage points. Recently, that equaled 7.75% to 8.75%.

While those features might make a 401(k) loan sound like an appealing route to take if you need cash, there is a substantial downside: The money you borrow is also out of the stock market until it's repaid.

“People focus on the interest rate, but there's much more to the story,” says Hadley, the Cleveland wealth adviser. “You're missing out on any potential growth during that time.” Considering the S&P 500's average return over the past 30 years is about 10% per year, that's an additional opportunity cost of borrowing on top of interest.

There's also an added risk if your job situation changes. If you leave your employer, the loan typically needs to be repaid within a short time frame — about 90 days, depending on the plan. If it isn't, the remaining outstanding balance is treated as a withdrawal, triggering income taxes on the unpaid amount plus a 10% early-withdrawal penalty if you are younger than 59½.

Because of these risks, 401(k) loans are typically best used only if more-favorable options aren't available to you — say, because you can't qualify for other loans.

How to get on top of your debt

1. Start with a clear payoff plan

As you create a plan to whittle your debt, consider trying the “snowball” method, which involves ranking the debts by size. You make the monthly minimum payment on all of them, and any extra funds go toward the card or loan with the smallest balance. That way, you pay off one account as quickly as possible, banking a win that motivates you to continue to the second-lowest balance, and so on.

Alternatively, the “avalanche” method targets the loan with the highest interest rate first. After that, you tackle your other loans in descending order of the interest rate. This strategy saves you the most in monthly interest charges over time.

2. Consolidate cautiously

Debt consolidation involves combining multiple existing loans and credit card balances into one larger loan, with a single monthly payment and often a lower interest rate. You may, for example, use a personal loan or home equity loan to pay off multiple credit cards and other high-rate debts. But if you go this route, make sure to make changes in the spending habits that landed you in debt in the first place.

"People take out a consolidation loan, and then the credit cards are still available," says Michael McAuliffe, president of Family Credit Management.

"They don’t mean to, but they charge them back up," causing people to sink even further into debt.

3. Reach out to current creditors

Lenders may offer hardship programs, such as deferred payments or rate reductions for borrowers who have lost their jobs, face a sudden medical emergency or are dealing with other temporary setbacks.

4. Turn to credit counseling

If the situation becomes difficult to manage on your own, a nonprofit credit-counseling agency can help create a structured plan and negotiate with your creditors on your behalf to lower interest rates or get more time to pay off the debt. You make one monthly payment to the service, which uses the money to pay your creditors.

The agreement typically forces you to temporarily shut down most of your credit cards for future purchases, and enrolling in a debt-management plan can have a short-term negative impact on your ability to borrow in the future. You can find a local credit counselor through the NFCC or the Financial Counseling Association of America (FCAA).

This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to Kiplinger Personal Finance Magazine to help you make more money and keep more of the money you make.

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If you have stellar credit, it opens a lot of doors in your financial life. It can help you qualify for credit cards and loans and snag the lowest interest rate on them. Landlords may consider your credit before offering you an apartment. Your credit health may affect your home and auto insurance premiums, too.

Your credit score is a three-digit number that gauges how well you’re managing your credit. FICO and VantageScore are the two primary companies that create credit scores, with lenders more commonly checking FICO scores before approving an application. Standard score models from both companies operate on a scale of 300 to 850; a score of 740 to 799 is typically considered very good, and a score of 800 or higher is deemed excellent.

There are plenty of sources to check your score. Credit-reporting company Experian, for example, provides a FICO score after you enroll. You could also use a credit-monitoring service like myFico, which sends you updates when there are changes. Take the steps below to give your credit score a lift — and to unlock the best terms on loans, insurance and more.

1. Pay your bills on time

Your payment history is the most influential factor in your credit rating, accounting for 35% of a FICO score. So it’s crucial to pay all of your bills by their due date.

If your credit card or loan payment is late by 30 days or more, the lender may report it to the credit-reporting companies, and that can significantly damage your score. (And if you pay just one day late, you may rack up late fees from the biller.)

Payments that are more than six months overdue may be placed in third-party collections, which is even more harmful to your score. Most negative information, including late payments and collection accounts, stays on your credit report for seven years.

Signing up for automatic payments of your bills helps ensure they are paid on time. You may also be able to set up phone or e-mail alerts to notify you when a due date is approaching.

2. Reduce your credit card balances

On credit cards, your utilization ratio — the percentage of available credit that you’re using — is another important element; how much you owe makes up 30% of your FICO score, and a key part of that is utilization, which is calculated both on individual credit cards as well as in the aggregate across all your card accounts.

You can determine your credit utilization ratio with an online calculator, such as the one from Bankrate.

Low utilization indicates that you can responsibly use credit and helps improve your credit score. A FICO study found that "high achievers" with a perfect credit score of 850 have an average revolving credit utilization rate of 4.1%. If you can’t keep your utilization below 5%, aim to limit it to 20% to 25%, says credit expert Gerri Detweiler. Paying off your credit card balance twice a month can help.

One way to decrease your utilization ratio is to get a higher credit limit, as long as you don’t increase the amount you charge on your card. For example, if you typically spend $1,000 a month on a card and your credit limit is $2,000, your credit utilization is 50%.

If your limit rises to $5,000 and your monthly spending remains at $1,000, the rate drops to 20%. Especially if your income has gone up and you’ve consistently made bill payments on time, you may be able to successfully raise your credit limit by requesting it through your credit card account online, says Detweiler.

3. Keep card accounts open (when it makes sense)

Even if you no longer use a credit card, leaving it open can help you maintain a high credit score. One reason is that if you close a card account, your overall credit utilization may rise because you’ll lose some of your available credit.

Eventually, shutting down a card could also lower the average age of the accounts on your credit report. The length of your credit history makes up 15% of your FICO score, and scoring models examine how long your oldest and newest accounts have been open in addition to the average age of all your accounts. Generally, a higher average account age is better.

For those with a perfect FICO score, the average age of their oldest account is 30 years, according to the FICO study on high achievers. After you close an account in good standing, it typically remains on your credit report for an additional 10 years. Once it’s removed, your average account age may decline.

Instead of closing a card, Detweiler recommends asking your card issuer to switch your account to a different card that better suits your needs, while preserving the entire account history on your credit report. Alternatively, you could leave your old card open and use it to make recurring payments for one or two bills so that it stays active.

But keep in mind that in some situations, closing a credit card is the best move for your overall financial health. If you’re tempted to overspend by having the card around, for example, or if you’re paying an annual fee for benefits that you don’t use enough to make the fee worthwhile, terminating the account may be the right choice.

4. Apply for new credit cards cautiously

New credit makes up 10% of your FICO score. When a creditor checks your credit file in response to your application for a new credit card or loan, a "hard" inquiry appears on your credit report.

If you apply for multiple credit cards in a short period, the resulting cluster of inquiries on your credit report can drag down your score because this behavior indicates to lenders that you may have trouble paying your bills.

That doesn’t mean you should avoid applying for new credit cards altogether; the impact of a single hard inquiry on your score is minimal. And opening a new card can improve your credit profile in the long run, as long as you make on-time payments and carry a low debt load, especially if you don’t already have any other revolving credit accounts, says Ted Rossman, principal analyst at Bankrate.

Note that if you’re shopping around for the best deal on a mortgage, car loan or student loan, newer models of the FICO score count multiple inquiries from lenders within 45 days as only a single hard inquiry, minimizing the hit to your score.

Older versions of the FICO score (which some lenders still use to evaluate applicants) have a shorter, two-week window for rate shopping.

5. Review your credit reports for mistakes often

Errors or fraudulent accounts that appear on your credit reports can hurt your score. You can request a free credit report weekly from each of the three major credit reporting companies — Equifax, Experian and TransUnion — at annualcreditreport.com.

Look for mistakes such as an incorrect balance or credit line listed on an account or a record of late payments even though you have not missed a bill. Also check for unfamiliar accounts that you never opened, a sign that an identity thief may have taken out credit in your name.

If you find a problem, file a dispute with each credit-reporting company that’s listing it, and contact the lender or other entity that supplied the erroneous information.

A financial professional can help you create a personalized plan to manage debt, strengthen your credit profile and work toward your financial goals.

Use the tool below, powered by Bankrate, to connect with a financial professional who can help you create a plan for your specific financial needs:

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If you have a kid heading to college, you have probably half-watched two years of student loan headlines. Forgiveness on, forgiveness off, repayment plans launched and then struck down. Most of it was easy to tune out.

But if you're now sitting down to figure out how to pay next year's bill, you'll discover one of those changes matters a great deal. The Parent PLUS program, the loan most families counted on to cover whatever grants, savings and student loans left behind, now has a limit.

The change comes from the One Big Beautiful Bill Act, which became law in July 2025. For the first time, Parent PLUS borrowing is capped.

If you take out your first PLUS loan for a child starting a program on or after July 1, 2026, you can borrow $20,000 a year per student, up to $65,000 in total.

The cap follows the student, not the parent, so if both parents want to borrow for the same child, they share a single $20,000 a year.

That detail surprises people, but the bigger shift is what the cap replaces. PLUS used to have no ceiling at all. A parent who passed a basic credit check could borrow right up to a school's full cost of attendance, however high that number climbed. Families leaned on it.

For a lot of households, it was less a loan they chose than a gap-filler they assumed would always be there.

Why $65,000 falls short fast

Sixty-five thousand dollars sounds like plenty until you hold it against a real tuition bill. At an in-state public university, it might stretch across all four years. At a private college running $80,000 or $90,000 a year, it barely dents the gap PLUS used to close.

The old program rose with the price of the school. The new one ignores it. A family sending a child to a $25,000 school and a family sending one to a $90,000 school get the same $65,000, which means the households that stretched hardest for an expensive school are the first to hit the wall.

Before you stew over this in the abstract, put numbers to it. Add up four years of cost, then subtract grants and scholarships, the federal loans your student can take out, and what you can realistically pay from income and savings.

What is left is the slice PLUS used to absorb. A college cost and net-price estimator turns that from a vague worry into a figure you can plan around.

What actually changes on July 1, 2026

A few specifics decide who this hits and who it skips.

• New Parent PLUS borrowers are capped at $20,000 a year and $65,000 total per student
• The caps apply to your first PLUS loan for a program that starts on or after July 1, 2026
• If your PLUS loans went out before that date, you can keep borrowing under the old, uncapped rules, but only for three more years or until your child finishes, whichever comes first

That last line is worth sitting with. A parent already borrowing for a current student is in a completely different spot from one whose first PLUS loan lands for a freshman in fall 2026. Same school, same major, very different ceiling, all because of timing.

Graduate and professional students get squeezed harder

This is not only an undergraduate story. The same law ends Grad PLUS loans for new borrowers on July 1, 2026. Graduate students will be limited to $20,500 a year and $100,000 total, and professional students in fields like medicine, dentistry and law will be limited to $50,000 a year and $200,000 total, all under a federal lifetime cap of $257,500.

For professional school, those ceilings fall short of reality. A year of medical school often runs past $50,000 once you count living costs, and Grad PLUS used to make up the difference up to the full cost.

Now a gap opens, and it lands on the students least able to absorb a surprise, the ones still years away from the income their training will eventually produce.

Readers of my previous articles will know the refrain: The steeper your climb to a high salary, the less room you have for a financing mistake along the way.

What to do before the rules change

None of this calls for panic borrowing, and it certainly does not mean piling on debt to beat a deadline. It means trading the old assumption — that PLUS will cover it — for a plan. Start here.

Run the gap first. Before loans enter the picture, set the full four-year cost against everything you will not borrow: Grants, scholarships, 529 money and what you can pay from income. The number left over is the one that matters, and a borrowing-gap planner keeps you from guessing at it.

Use the student's federal loans before the parent loans. Loans in the student's name carry protections and income-driven repayment options that Parent PLUS and private loans do not. Parent borrowing should fill whatever gap remains, not lead.

Know your grandfather window. If you already hold PLUS loans, you may have three more years of uncapped borrowing. Find out when it ends so a junior-year tuition bill does not catch you flat.

Do not build the whole plan on PLUS. For an expensive school, the money above $65,000 has to come from somewhere: Savings, a cheaper school, more scholarships or private loans you take on knowing exactly what you are trading away.

None of those choices gets easier if you push it to the August before senior year. Look hard at repayment options and what each loan type costs over time while you build the plan, not after the money is gone.

The bigger picture

Parent PLUS was never meant to be the whole strategy. It became one because it had no limit, and a backstop with no limit is an easy thing to lean on. The caps do not make college cost more. They take away the cushion that let families avoid looking the price straight in the eye.

That is uncomfortable. It is also a nudge in the right direction. The parents who come through this in good shape will not be the ones who rushed to borrow before the deadline.

They will be the ones who ran the numbers early, picked schools that fit those numbers, and treated borrowing as one piece of a plan instead of the thing that swallowed whatever the plan left behind. The ceiling is here. Better to measure your distance from it now than to find it the hard way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

To curb record-breaking credit card debt, the Trump administration has backed a proposal to temporarily cap credit card interest rates at 10% for one year.

While the proposal has stalled for now, the underlying debt problems for consumers haven't. According to the New York Fed, Americans are shouldering $1.25 trillion in credit card debt.

And while a change like this could bring relief to borrowers, some estimates suggest it could limit access to credit for millions of Americans.

For those carrying balances, the appeal is straightforward: Lower rates mean less money is going toward interest, and more is going toward paying down principal. In practice, that difference can be significant.

For example, if someone is carrying a balance of $20,000 and making a monthly payment of $500, at 20% interest, could spend hundreds less on interest over the course of a one-year rate cap at 10%.

While a temporary rate cap likely wouldn't eliminate long-term debt entirely, lowering interest charges, even briefly, could help ensure more of their payments go toward the principal.

Over time, that kind of difference can accelerate the process of getting out of debt.

But while this proposal looks good on paper, the broader reality is more nuanced.

Improving financial habits

Lower interest rates can reduce the cost of debt, but in many cases, it's not enough to improve financial habits. A report from Bankrate found that just 47% of Americans have enough liquidity to cover a $1,000 emergency expense, and 58% say they have less or the same amount of emergency savings compared with a year ago.

This raises questions about how much a rate cap could do to change long-term financial behavior.

In some cases, lower rates could even introduce new risks.

Lending decisions are typically based on a person's monthly debt obligations relative to their income, rather than their total debt. When interest rates are lower, those payments decrease, which can make it easier to qualify for more credit even if total debt continues to grow. That can increase overall debt instead of reducing it.

Impact on lenders

Beyond borrower behavior, a 10% cap could have broader implications for the lending system.

Lenders rely on interest rates to price risk, especially for borrowers with lower credit profiles. If that flexibility gets reduced, it can change the way credit is extended. This could force some lenders to tighten underwriting standards.

An analysis from Unleash Prosperity found a 10% interest rate cap could limit access to credit for an estimated 100 million Americans. It could also impact a large portion of existing credit card accounts.

Regardless of whether a cap is implemented, the fundamentals of managing debt remain the same.

How to manage debt

Not all debt is created equal, and how it's used matters.

Credit cards are often best used as a short-term tool rather than a long-term solution.

When paying down debt, prioritizing higher-interest balances first can make a difference. As each balance is paid off, those payments can then be applied to the debt with the next-highest rate.

For larger amounts of debt, structured loans with fixed rates and terms can offer more predictability.

If borrowing costs do come down, continuing to make the same payments can help accelerate the process of becoming debt-free.

If a 10% rate cap is implemented, how it's used will determine whether real progress is made.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Several months ago, I reviewed Wealth Your Way: A Simple Path to Financial Freedom by Cosmo DeStefano, a financial strategist, retired CPA and fellow Kiplinger.com contributor.

The book's central idea is that financial freedom is achievable through simple, consistent habits, not just a high income. Building wealth and staying out of financial trouble result when we maintain those habits and behaviors — instead of chasing get-rich schemes.

I'm pleased that sales of Wealth Your Way have been robust. After my article ran, I heard from readers who felt that, with today's economy and political situation, most people are just not going to ever get ahead.

If you're feeling that way, what book should be delivered to your door next? I would recommend this antidote to that pessimism: The recently published How to Get Rich in American History: 300 Years of Financial Advice That Worked (& Didn't) by historian Joseph S. Moore, who teaches American History at Kennesaw State University in Georgia.

When I began reading this book, I just could not put it down. Moore makes America's financial history jump off of the pages, bringing life to history, placing you right there — when great and terrible things were happening. The stories read like they could be fiction, but they are not.

We learn that speculators and con artists have been present from the beginning days of our country. While failed schemes are depressing, Moore consistently shows that the very essence of the American character is the persistent belief that tomorrow can be better than today.

He is passionate about finance and how it shaped our country and believes that by understanding its history, we will be better able to avoid the investment decisions that harmed so many across three centuries.

I interviewed Moore via Zoom and was left with the feeling that if I were a student at his university, I would take every course he teaches.

The deeper I got into How to Get Rich in American History, the more it became clear this book is the ideal companion to DeStefano's Wealth Your Way.

Here's why: Moore explains the origins of American concepts and goals regarding wealth from the earliest years of our country , while DeStephano serves as a GPS guide to achieving financial independence today.

History provides key insights into the present

If anyone thinks there was a time when people never went to bed haunted by debt, certain that the investment they'd made would pay off handsomely, well, Moore pours cold water on that myth.

We have always dreamed of prosperity while being stalked by speculative manias, economic uncertainty on a national level and panic over money — not having enough and seeking a quick fix.

You know the saying, "The more things change, the more they stay the same."

Moore shows how Americans have dealt with identical temptations generation after generation: Overconfidence, greed, the belief that real estate values always go up (until they don't) fear and despair during market crashes.

We had the Colonial land speculation, railroad booms, the roaring 1920s. Every era of American history had financial prophets with "you will make a killing" opportunities.

Before the Global Financial Crisis in 2008, Wall Street argued that bundling subprime mortgages into CDOs (collateralized debt obligations) diversified risk. Experts claimed modern financial engineering had ended the boom-and-bust cycle. The mantra was, "This time, it is different."

We all know what happened after that.

Moore points out that when investors believe "this time, it is different," logic and clear thinking fly out the window.

Yet, following each crisis, we have found a path to prosperity.

"There is something in our hearts, in our souls, something so positive and unique to America," Moore told me. "No one has to make America great again — it is and has always been great!"

Especially valuable for younger readers

Many of today's young adults are living a financial nightmare: A terrible job market, excessive student loan debt and significantly higher prices. Plus, the American dream of owning a home seems shelved for many of them, possibly permanently.

Moore reminds us all that virtually every generation dealt with the unexpected: Frightening economic challenges, depressions, bank runs, recessions, and wars. Yet, we've survived them all. We will survive AI, as well.

When it comes to juggling the financial tug-of-war each of us faces going to the supermarket — can we afford this? Do we need it? — DeStefano's guidance shows us a path out of the darkness by focusing on sound, repeatable financial habits, emotional discipline and long-term planning.

Both authors make a strong case to not fall prey to self-anointed financial gurus making predictions that must be acted on now.

Common sense

Ask any bankruptcy lawyer, "What gets a lot of people in trouble?" They will say that, often, it is a desire to impress neighbors, romantic interests, anyone and everyone with how "successful" they are.

Meanwhile, the expensive cars might be leased, and luxury items might have been bought on credit cards that are maxed out — all is for show.

Both authors make a case that financially successful people understand that more is less. Some of the wealthiest people in the country live in modest homes that they own, drive cars that are paid for and have something that money can indeed buy: A good night's sleep.

With How to Get Rich in American History and Wealth Your Way on your nightstand, you could be headed for some sweet financial dreams!

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If it feels like your credit card balance is not going down, even though you're making payments each month, you're not imagining it.

Elevated interest rates, the higher cost of living and increased month-to-month card balances can make paying off debt feel more like running in place than making progress.

It's an experience millions of people are navigating right now — juggling multiple accounts, rising costs and the quiet fatigue that comes from trying to stay on top of it all.

For years, advice around paying off debt has emphasized willpower: Spend less, pay more, repeat. Those things matter, but they don't fully reflect what many people are dealing with day to day.

Many feel overwhelmed by their balances and discouraged by how slow progress can be. These feelings often lead to guilt, repeated attempts to reset, and a return to the same habits that contributed to the debt in the first place. It becomes a cycle that is hard to break.

That cycle is often reinforced by the way debt is structured. Balances are spread across multiple cards, each with different interest rates, due dates and minimum payments.

Keeping track of everything can feel like a constant mental strain. When managing debt feels complex and time consuming, people are more likely to avoid it.

The good news is that getting out of debt does not require perfect discipline. It requires clarity, structure and a system that is realistic enough to follow over time. The steps below focus on building a plan and maintaining progress in a way that reduces friction and helps you stay engaged.

Planning

1. Start with a clear picture

This step is simple, but it's often the hardest to take. List every balance, interest rate and minimum payment.

It can feel overwhelming at first, and many people put it off for that reason. But clarity is what turns a vague, stressful situation into something concrete and manageable.

Once you can see the full picture, you can start making real progress.

2. Define what you can realistically pay each month

Before choosing a payoff strategy, figure out how much you can consistently put toward your debt.

Review your income and essential expenses, then identify what's left over. This number doesn't need to be ambitious — it needs to be sustainable. A plan that works on your best month but falls apart on your hardest month won't stick.

Even a modest, consistent payment above the minimum can make a meaningful difference over time.

3. Choose a strategy that works for you

Decide how you want to tackle your balances. Two common approaches are the snowball and avalanche methods. The snowball method focuses on paying off your smallest balance first, which builds momentum with quick early wins.

The avalanche method prioritizes the highest interest rate, helping you save more over time. You can also just take a customized approach based on what feels most manageable or motivating. All of these can work, but the best strategy is the one you can stick with consistently.

4. Identify what is driving your debt

Take time to understand how the debt built up, whether from overspending, an emergency, a move or a period of higher expenses. This is not about judgment, but awareness. Use that insight to make more intentional choices and avoid repeating the same patterns.

Stay focused on the progress you're making. Picture the relief of eliminating those monthly payments, and what that money could do for you instead. Keeping that outcome in mind can help you stay motivated and avoid burnout.

Progress

1. Look for ways your lender can help

At the start of your payoff journey, explore options that could make repayment easier. Call your credit card issuer to ask for a lower APR. It doesn't always work, but it works more often than people expect.

If you're struggling financially, ask about hardship programs, as many lenders offer temporary relief.

You can also adjust your payment due dates to better align with your pay schedule. And set up autopay (at least for the minimum) to avoid late fees and protect your credit score.

2. Use tools to reduce the friction

Managing multiple balances, payments and due dates can be time consuming and mentally draining. The more complicated it feels, the easier it is to put it off or give up altogether.

That's where technology can help. Tools like Cleo's Debt Reset are designed to bring everything into one place, help build a plan that adapts as your situation changes and track progress automatically.

The goal isn't to do the work for you, but to simplify the process so you can stay consistent.

3. Consistency over perfection

Getting out of debt takes time and doesn't need to be about doing everything perfectly. Progress comes from staying consistent over time. There will be moments when progress feels slow, or times when you need to adjust your plan to address financial demands or needs. That's normal.

Your plan should be something you can easily return to, even after a setback. Recognize your small wins along the way to help reinforce your progress and keep you engaged. Ultimately, progress doesn't come from perfection, it comes from consistency.

This isn't an easy journey, but it's one you're capable of finishing. Stay patient, stay consistent and keep moving forward.

Over time, the progress will add up, and you'll have more than just a lower balance to show for it.

Related Content

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• A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
• Need Help Digging Out of Debt? What You Can Do
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• When Spring Cleaning Your Finances, Don't Forget to Look in These 5 Corners

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Picture this: You and your spouse find the perfect home. You're eager to make an offer, but before you do, you visit a mortgage banker for a pre-approval. They run the numbers, and you sit back and relax, knowing you, the meticulous bill payer and responsible card user, are in a good spot.

But then, his eyebrows furrow. He shows you an item on your credit report, a charged-off Macy's credit card. The only problem is that you've never had a card with them. Your spouse is surprised, too.

You file an appeal with the credit bureaus using the Consumer Financial Protection Bureau (CFPB), You wait. Nothing happens. This is a reality many face now.

Unmasking the culprits: Identifying the drivers of declining resolutions

Here's the issue: Mistakes on credit reports are increasing. And this is coming at a time when credit bureaus are not resolving disputes at the rate they were in the past. This can leave people with incorrect information on their report, which can hurt them financially when they need to borrow money. There isn't a simple fix as there are multiple moving parts.

First, the number of complaints filed by the CFPB (PDF) rose to a record 5.9 million in 2025. The CFPB receives complaints from customers having trouble correcting incorrect information on their credit reports. In turn, the agency will file disputes for legitimate complaints.

What's causing the increase in complaints? A joint investigation conducted by Consumer Reports and WorkMoney found that almost half the people who volunteered to check their credit reports discovered errors.

Next, you have credit repair agencies flooding each of the three bureaus with sometimes erroneous disputes. What happens is these agencies promise a temporary score bump through credit washing. This is when, if the bureau can't respond to a complaint within 30 to 45 days, it must remove the item from the credit history, even if it's accurate.

Then, there's what's going on inside the CFPB. Recently, under the new leadership of Russell Vought, the bureau has changed how customers file complaints when they find erroneous information on their credit reports. They changed the policies due to what they call a high number of illegitimate claims.

How have the policies changed? By requiring the following, per the National Consumer Law Center:

• If you want to dispute an item, you must provide personal information, such as your birth date and demographic information
• Go through two-factor authentication (when you receive a text or email code to log in), and you're limited to how many complaints you can make per phone number
• Restricting some IP addresses from allowing the user to submit a complaint, making it harder for those without home internet access to do so

Then, there's the effectiveness in helping customers resolve their complaints. A ProPublica investigation found a significant drop in the number of customer complaints resolved by two of the major credit bureaus.

It prompted four senators, led by Elizabeth Warren, D-Mass, ranking member of the Senate Banking, Housing and Urban Affairs Committee, Tammy Duckworth, D-Ill., Andy Kim, D-N.J., and Lisa Blunt Rochester, D-DE, to write letters to each bureau. In them, Warren says, "That credit bureaus are not helping customers."

The mistake that could cost you thousands

Your credit history is your financial barometer with lenders. However, if you have inaccurate information with one and it isn't resolved, it places you at a huge disadvantage when you need to borrow money, especially if those errors contribute to a lower credit score.

Here's a look at how much a $25,000 car loan (assuming no money down) costs you at different interest rates:

As you can see, there's a huge difference in total loan costs. If someone steals your information and uses it to run a few balances up, you could easily fall into the subprime category. This could cost you an extra $5,644 for this car loan.

How do you prevent this from happening to you?

Thankfully, it's easier than ever to monitor your credit health. There are tools, such as myFICO, that can alert you to any changes in your credit report, such as a new inquiry or a new account opened.

Some credit cards also offer credit-monitoring tools. Capital One has CreditWise, which alerts you to any score updates, as well as changes in your credit profile. You can also access a free credit report from each bureau weekly through AnnualCreditReport.com.

If you notice any errors in your report, do the following:

• Freeze your credit while you go through the dispute process (generally speaking, it's a good idea to keep your credit frozen all the time, except when you're applying for something that needs a credit check, such as a loan or credit card)
• Contact the bureau(s) reporting the inaccurate information and follow their dispute process
• This includes writing a letter to support your case (the FTC has an excellent sample letter as a guide)
• Send the letter via certified mail with a return receipt requested
• The credit bureau(s) have 30 days to respond
• If they deny your request, you can file an appeal
• Contact the lender that reported the error to file a dispute — if they determine it was in error, they'll have the item removed for you

Keeping on top of your credit health is now more integral than ever. With errors in credit reports increasing and fewer consumer protections available, the onus is on you to stay abreast of any changes and act promptly. Doing so can save you thousands of dollars in future loan costs and protect you from incurring debt that isn't yours.

If you're planning to buy a home, refinance or take out another major loan, a financial professional can help you prepare your finances beyond just improving your credit score.

Use the Bankrate tool below to connect with a financial planner who can help you build a road map to your financial success:

Related content

• How to Fix Errors in Your Credit Report
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Wealth Wise is Kiplinger's advice column on navigating retirement-related dilemmas. Questions from real people, for real people. Got a question? See below for how to send it to us.

DEAR WEALTH WISE: We are both 61, still working, and earn $400k a year. We've accumulated substantial unsecured debt and want to pay it off using an equity loan from our primary home. However, because of our debt-to-income ratio, we can't get approved for an equity loan from our credit union. We have a second home (the reason for our high debt ratio), which we bought with our single daughter and that serves as her primary home. My husband holds the power of attorney and manages his 90-year-old father’s finances and assisted living expenses.

Should we use money from his father’s account to pay the unsecured loans — improve our DTI — and then get an equity loan to pay back what we took from his father’s account? — Up to Our Ears

Dear "Up to Our Ears": It's not a given that earning a high salary makes debt easy to manage. Even with a generous income, you may find yourself overwhelmed with monthly debt payments.

Here, we have a 61-year-old couple earning $400,000 who needs help managing their debt. A home equity loan is commonly a great consolidation tool for unsecured debts because it can offer a considerably lower interest rate.

But this couple has a high debt-to-income ratio (DTI). That means they may struggle to get approved for a home equity loan. And even if they do get approved, they may face a less favorable interest rate due to their borrower profile.

The couple wants to know if borrowing the money from the husband's father's account is a smart course of action. The husband has power of attorney and can easily access that money. But while theft is clearly the last thing on this couple's mind, as they've expressly stated their intent would be to repay every dollar, this approach raises a few red flags.

It's a very slippery slope

When a person gets power of attorney over another person's finances, it's often because they've become incapacitated due to illness, injury, or dementia. As such, they're not in a place to make clear-headed, informed financial decisions.

The person holding power of attorney is often a relative and a trusted person by nature. But here, borrowing a lump sum of money may breach that trust.

"The power of attorney from an elderly father to his son only allows the son to act for his father’s benefit, and it also includes a fiduciary duty that the agent, the son, owes to his father," explains Asher Rubinstein, estate planning attorney and partner at Gallet Dreyer & Berkey.

"Using the elderly father’s money to pay off the son’s loans is a definite breach of the fiduciary duty, as it only benefits the son and depletes the father’s assets. It may also cross the line of criminality."

Kerri Koen, estate planning attorney at Modern Legacy Law Group, agrees.

"Whenever your strategy depends on 'we’ll pay it back later,' you can be sure there are legal and ethical red flags," she says. "Using an elderly parent’s funds under a power of attorney to solve your own debt problem, even temporarily, is almost always a breach of fiduciary duty that will create legal exposure for you and risk to your parent’s care, not to mention the possibility of significant family conflict."

Jonathan Codispoti, Founder at Legacy Wealth Strategies, says the repercussions of taking an unauthorized loan could be significant.

"I understand the logic," he says. "You see a pool of money, you have every intention of paying it back, and nobody technically gets hurt. But the law, the ethics, and the practical risks all point in the same direction."

Codispoti also says that in this situation, the collateral damage could be enormous.

"Your husband could face criminal charges, civil suits from other heirs, and an Adult Protective Services investigation triggered by his father's assisted living facility, which is a mandated reporter," he explains. "If his father is on Medicaid or might apply within five years, the transfer creates a 'look-back' problem that can disqualify him from benefits and leave your family personally responsible for care that easily runs $8,000 to $12,000 a month."

Additionally, Codispoti points out that if you were to move forward with your plan and apply for a home equity loan, you may be asked to document the source of the funds used to pay off your debts.

"Misrepresenting that on a loan application is itself fraud," he says.

An authorized loan may be a different story

It's clearly illegal to borrow from a parent's funds without their consent. But an authorized loan may be acceptable, provided the father is capable of making that determination.

"If they are borrowing from the father and he has the capacity to agree to this, then that would be a better approach," says Koen.

Rubinstein agrees, but with a strong caveat.

"Is the 90-year-old father capable of gifting to his debtor son himself, or giving the son written, notarized permission to use the power as anticipated? If not, then it would be over-reaching for the son to use the power in the way he is considering," he insists.

However, Rubinstein cautions, "Even if the father makes a gift to the son, if the father is frail, someone — another potential beneficiary — could try to argue that the son over-reached and unduly influenced the father to make the gift."

You have other options for addressing your debt problem

Since using the father's funds in any capacity is potentially problematic, a safer move may be to address your debt on your own. The good news, says Codispoti, is that you may have more options than you think.

"Shop the loan," he says. "Credit unions are often conservative on DTI. A mortgage broker can place you with banks or non-bank lenders that underwrite high-income borrowers with elevated DTI from a second property more flexibly. Cash-out refinances and non-QM HELOCs are worth asking about."

Codispoti also suggests addressing the root cause of your issue.

"The second home is driving your DTI," he says. "Hard as the conversation may be, explore whether your daughter can refinance it into her own name, whether you can restructure ownership, or whether selling is the right call."

Take the ethical route

You may technically be able to get a loan from your husband's father without crossing a legal line. Whether that's the right thing to do is very questionable.

"Your father-in-law is 90," Codispoti says. "The money in his account exists to ensure his dignity, comfort, and safety in the final chapter of his life.... Diverting it, even briefly, puts his welfare at risk to solve a problem he didn't create."

A word from Wealth Wise

We know that many Gen X readers, like this couple, struggle to provide support to their adult children and aging parents, all while planning their own retirement. In many cases, something's got to give. As our article explains, selling the second home that the daughter lives in might just be the best long-term option.

Moreover, an unspoken (or perhaps unconscious) implication of the reader's question is that the father, at 90, won't be around much longer. That would free up his assets and make paying back the loan moot. That's a dangerous assumption, given that the Social Security Administration's Life Expectancy Calculator estimates that someone born in 1936 will likely live another four years and that more Americans are living to 100.

So, play it safe: Live with the resources you have now and know that your inheritance will be a welcome windfall someday.

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our writers and experts, in this advice column, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial adviser regarding any questions you may have in relation to the matters discussed in this article.

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• We're 60 with $550K saved and will inherit $3 million. Can we retire now, even if we can't afford it?
• What you Learn Becoming Your Mother's Financial Caregiver
• I Am 55 With a $1.5 Million 401(k). Should I Take a 401(k) Loan to Pay for a Home Improvement Project?

Many professionals pursue law or business school with a clear goal: Higher income and greater financial security.

What often comes with it, however, is a six-figure salary paired with significant debt.

Law school graduates carry an average of about $130,000 in debt, often paid over the course of 20 to 25 years, while MBA graduates average close to $80,000.

These payments may feel manageable early, but they can quickly become a source of stress if your circumstances change, whether due to job loss, career shifts or burnout.

In one study, 75% of young lawyers who borrowed reported that debt altered the career plans they had when they entered law school.

Paying down this debt is often framed as a financial decision. But I encourage you to think about it another way: An investment in stress reduction.

Eliminating or significantly reducing that burden early can open options later, and the first five years of your career offer a unique opportunity to do that. Rather than stretching repayment over decades, a focused, intentional approach can dramatically accelerate progress.

This approach requires discipline, especially after years of living on a student budget. But the trade-off is greater financial control, reduced long-term pressure and the ability to make career decisions without being constrained by debt.

The framework is similar across professions, but how it's applied can vary. Here's how it works, with some special call-outs for MBA graduates and for attorneys.

A five-year framework for accelerated debt repayment

Set your spending framework. The foundation is simple: Live on 80% (or less) of your gross income for the first five years. The remaining 20% or more can be directed toward accelerated loan repayment.

This is a temporary, intentional decision designed to create momentum early in your career. By anchoring your lifestyle below your means from the start, you avoid building fixed expenses that are difficult to unwind later.

Lock in financial priorities first. Maximize contributions to your employer-sponsored retirement plan, particularly if there is a company match. These contributions not only build long-term wealth but also reduce taxable income.

If eligible, contribute annually to a health savings account (HSA), which is available to those enrolled in a high-deductible health plan. HSAs offer a triple tax advantage:

• Tax-deductible contributions
• Tax-free growth
• Tax-free withdrawals for qualified medical expenses

After age 65, funds can also be used for non-medical expenses without penalty (though subject to ordinary income tax).

Establishing these habits early ensures that accelerated debt repayment doesn't come at the expense of long-term financial progress — all while bringing down your taxable income.

Accelerate your loan repayment. Target 20% to 30% of gross income toward student loans. Using a percentage rather than a fixed dollar amount allows your payments to scale with your income, keeping you on an accelerated path as your earnings grow.

Refinancing might also be worth considering if it meaningfully reduces the total cost of the loan.

However, evaluate the full impact carefully, particularly if it involves giving up federal protections such as income-driven repayment plans or temporary payment relief during periods of financial hardship.

Use bonuses strategically. Bonuses provide one of the most powerful opportunities to accelerate repayment.

Rather than using them to inflate your lifestyle, direct 50% to 70% of each bonus toward loan principal. The remainder can be used for investing or planned spending.

This approach allows you to make significant progress without increasing fixed monthly obligations — one of the most effective ways to accelerate repayment.

Protect your plan with liquidity. Maintain a cash reserve of at least three to nine months of expenses.

This buffer allows you to continue executing your strategy even if your income fluctuates or unexpected expenses arise. Without it, there's a risk that progress made on debt reduction could be undone by short-term disruptions.

How this plays out for MBA graduates

MBA graduates typically leave school with less debt and enter careers that offer greater flexibility in compensation, geography and career path. This combination creates a significant opportunity to eliminate student loans quickly.

With lower overall balances, the same disciplined framework can lead to full repayment within a relatively short period, especially when bonuses are used strategically.

In addition, MBA graduates often have greater career flexibility, with the ability to move across roles and industries — such as consulting, finance, private equity or corporate leadership — allowing them to adjust income, workload or career trajectory more easily than in more structured paths.

The primary risk for MBA graduates is lifestyle creep. Early increases in income can make it tempting to upgrade housing, travel or discretionary spending too quickly. Maintaining discipline during the first few years is what allows the accelerated debt repayment strategy to work.

How this plays out for attorneys

For attorneys, the framework is just as effective — but the constraints are different.

Debt levels are typically higher, and early-career paths tend to be more rigid and demanding. Long hours and high expectations can make it easier to justify increased spending, particularly on housing or convenience.

This makes controlling fixed expenses especially important. If you're working 70 to 80 hours a week, your home might primarily serve as a place to sleep. Keeping those costs in check creates a meaningful opportunity to redirect income toward debt reduction.

Liquidity also plays a larger role. Given the demands of legal careers and the potential for shifts — whether through lateral moves, transitions to in-house roles or changes in firm structure — maintaining a larger cash reserve (closer to nine to 12 months) provides important flexibility.

Finally, attorneys should remain adaptable. Partnership opportunities, buy-ins or career changes might require adjustments to your repayment strategy. Avoid locking yourself into a plan that depends on consistently high income without room for change.

What the accelerated debt repayment strategy gets you

Whether you pursue this approach as an MBA graduate or an attorney, the outcome is beneficial: a significantly reduced — or eliminated — loan balance on an accelerated timeline, alongside a strong foundation for retirement savings and long-term wealth.

Beyond law and business, these principles apply broadly to high earners with significant debt. A focused, time-bound approach, combined with disciplined spending and strategic use of income, can dramatically change your financial trajectory.

The impact goes beyond the numbers. Clients who take this approach often find that once debt is reduced or eliminated, their financial lives feel fundamentally different.

Major expenses can be paid in cash, and progress to long-term goals accelerates, but most important, there is a noticeable shift in overall well-being.

The absence of debt creates a sense of stability and confidence that carries into all areas of life — giving you the freedom to make career and life decisions on your own terms.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Question: Our grandson just graduated from college with $45,000 in debt. I want to pay off his student loans, but my husband says we can't afford it. We're 73-year-old retirees with $2.1 million and $4,000 a month in Social Security that covers most of our bills. Who's right?

Answer: You'll often hear that college graduates are drowning in debt. That might not be true for everyone, but the average student loan debt, including private loans, could be as high as $42,673 today, reports the Education Data Initiative.

A balance that large could be difficult to shake for recent grads who aren't diving into instantly lucrative careers. If you're a retired couple who's financially comfortable and have a grandson who just walked away with a $45,000 pile of student loan debt after wrapping up his studies, you might be inclined to help.

If you're sitting on a $2.1 million nest and your $4,000 monthly Social Security check mostly covers your bills, it's clear that you have some wiggle room in your budget. But your husband might not be as convinced.

Here's how to figure out how to lend a hand in a manner that doesn't compromise your financial security or convey the wrong message.

Paying off the loan probably won't change your lifestyle

A $2.1 million nest egg is not the same thing as unlimited financial resources. But if you're mostly able to live on Social Security and that $2.1 million is just your "extra" cash, a $45,000 withdrawal might have a minimal impact, says Deon Strickland, Ph.D. financial adviser at Scholar Advising.

"If you’re looking at the couple, 73 years old, about $2 million in retirement assets, and $4,000 a month in Social Security, you’re probably talking about somewhere around $100,000 a year, give or take, available to spend after tax," he says. "They’re in a position where this decision is not going to dramatically change their lifestyle."

That doesn't mean you should just write a check without thinking things through, though.

As Strickland says, "This really comes down more to the relationship with the grandson and what they’re trying to accomplish. If the grandson has been responsible, appreciates the opportunities he’s had, then maybe there’s a way to help. But it doesn't necessarily have to be just writing a check."

Strickland says you shouldn't feel obligated to pay your grandson's debt in its entirety.

"It could be structured," he explains. "It could be something like, 'If you pay the first $5,000, we’ll match it.' Something that reinforces good behavior rather than replaces it."

Consider your goals carefully

A $45,000 gift to repay student loans might be a small chunk of a $2.1 million pool of money. But for your grandson, it's huge.

Strickland says that if you're looking to make that gift, it's important to tell the right story.

"It’s more about what they want to pass on, not just financially, but in terms of values," he says. "While $45,000 is not going to be a huge shock to their overall financial picture, it is an opportunity to demonstrate how to make good financial decisions."

In other words, if you're going to give your grandson the money, set some expectations and help him realize what that gift represents. It could be the thing that allows him to build savings early on or get a head start on accumulating his own retirement nest egg so that he might one day be in a position to help a grandchild pay off their student debt.

Figure out the path that's best for your cash flow

Even though you can probably afford to pay off your grandson's $45,000 debt without blinking, that doesn't mean you shouldn't try to do so strategically. Brandon Agamennone, CRPC and wealth management adviser at Victory Private Wealth, says you have several options for handling that bill.

"It depends on what you need for your income," he says. But one option is to use dividends or interest from your portfolio to pay off the loan over a few years. Another option is for each of you to give your grandson a $19,000 gift this year, for a total of $38,000, to stay within the gift tax limit. You can then tackle the remaining loan balance the year after.

Another option? "If you have RMDs on a portion of your investment portfolio," Agamennone says, "you could take those and then gift some or all of that amount to your grandson to pay off the student loan."

Make sure your grandson knows what repayment options he has

A $45,000 student loan bill might seem overwhelming to a new college graduate. But before you rush to come to the rescue, you could want to walk your grandson through his options for repaying that debt, either on his own or with assistance.

"I would have the grandson understand college loan consolidation options," says Brian Safdari, founder of College Planning Experts. "Maybe the [grandson] can get some student loan interest deductions while working."

Safdari thinks it's important that borrowers realize that there are different ways to tackle college loans. With federal loans, for example, there are income-based repayment plans that can be more affordable.

"Start with a strategy and a plan first," he says. "Then execute the best plan that provides the family the best outcome."

That plan could involve having you foot some or all the bill, but it's important to dole out that money in the context of a broad plan everyone involved is on board with.

Next Steps to Help Your Grandchild Afford College

• The basics
  • Use the 529 Grandparent Loophole to Maximize College Savings
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• Balance your retirement security with supporting grandchildren
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Refinancing student loans is often treated as a milestone: Your income goes up, your rate goes down, and you move on.

For high earners, especially physicians and other professionals early in their careers, that moment tends to come quickly. And that's exactly where the mistake happens. Most borrowers don't refinance at the wrong rate.

They refinance at the wrong time.

The appeal is obvious, and that's the problem

Once your income crosses a certain threshold, refinancing feels like a straightforward upgrade. You qualify easily. The rate looks better. The math works. But that framing assumes your financial situation is already settled.

For many high earners, it isn't. Early attending physicians, newly promoted professionals and anyone on a steep income ramp can move from constrained to comfortable very quickly. That shift creates pressure to "optimize" right away, starting with student loans. Lowering your rate feels like progress. But timing still matters.

What you're trading away

Refinancing federal loans isn't just a financial adjustment; it's a structural decision.

You're giving up:

• Income-driven repayment flexibility
• Federal forbearance and deferment options
• Any future path to forgiveness

In exchange, you get a lower rate and a more predictable repayment structure.

For high earners, that trade can make sense, but it should be intentional. Once you refinance, there's no way back into the federal system.

High income doesn't mean stability yet

This is where many borrowers misread their position. A high salary, especially after years of training or career progression, can be a permanent step up. But early in that phase, income is often still evolving.

Take physicians, for example:

• Compensation structures may shift in the first few years of practice
• Bonuses and production-based income can vary
• Geographic or role changes are still common

The same applies to other high-income fields where compensation includes variable components or where career mobility is still high.

Refinancing works best when your income is not just high, but predictable and durable. So the question isn't, "Can I refinance?" but, "Is this the right time to give up flexibility?"

A few signals that the timing is right:

• Your income has stabilized beyond the initial ramp-up
• You have a meaningful emergency fund (at least several months of expenses)
• You're no longer relying on federal protections even as a fallback
• Your financial priorities are shifting toward efficiency and simplification

If those aren't fully in place yet, waiting is not a missed opportunity. It's a way to preserve optionality while your financial picture settles.

Why timing can improve outcomes

Refinancing is not a one-time window. It's a decision you can make and revisit over time. Even just waiting 12 to 24 months can change the equation:

• A longer track record of income can strengthen your application
• Credit consistency can lead to more competitive offers
• A stronger balance sheet reduces the need for federal safety nets

None of this guarantees a better rate. But it does put you in a position to refinance with greater certainty and fewer trade-offs.

Understanding what drives your rate

While rates vary across lenders, a few factors consistently matter:

• Stability of income (not just total compensation)
• Debt-to-income ratio
• Credit history and repayment consistency

This is why two borrowers with similar salaries can receive different offers and why initial rate quotes don't always match final terms. The strongest profile isn't simply the highest earner. It's the most stable one.

The bottom line

For high-income borrowers, refinancing student loans is often the right move. But it's frequently done too early, before income stabilizes, before financial reserves are built, and before the value of flexibility has fully diminished.

The goal isn't just to lower your interest rate. It's to make that decision at a point where you no longer need what you're giving up. If your income is steady, your finances are well established, and you're comfortable stepping away from federal protections, refinancing can be a clean and efficient step.

If not, waiting isn't hesitation. It's discipline. Exercising patience now preserves your options and reinforces your control over your financial future.

Related Content

• Over 50 and Still Paying Student Loans? Here's Some Help
• A Little-Known Tax-Free Way To Help Pay Your Student Loan
• How Long it Actually Takes to Pay Off Student Loans
• How to Find Free Money for Graduate School as Federal Loans Tighten in 2026
• 6 Practical Steps to Help Keep Your Student Focused on College Rather Than the Financial Strain

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The Federal Reserve left interest rates unchanged at its June meeting. Looking ahead, don't expect a rate cut anytime soon, either. CME FedWatch projects the Fed is likely to keep rates steady again at its July meeting.

The concern about elevated inflation risks, stemming from higher oil costs, suggests that long-term interest rates will likely remain high, as noted by David Payne of the Kiplinger Letter. Even with a resolution for the Iranian conflict, prices won't drop overnight.

For consumers, the Fed's decision has mixed impacts. While it helps savers by keeping annual percentage yields (APYs) higher on savings accounts, it poses a challenge for those carrying debt or needing to borrow for upcoming purchases. I'll explain how this policy can increase borrowing costs, as well as ways to borrow money and avoid higher rates.

How the Fed's decision impacts your credit card APRs, auto loans

The Fed's decision has different implications, depending on the kind of credit you have/want. To illustrate, the annual percentage rate (APR) on credit cards is directly tied to the prime rate.

What is the prime rate? It's the benchmark that banks use to determine how much customers pay for lending products, such as credit cards, auto or personal loans. Since the prime rate is set at the federal funds rate plus 3%, no movement means credit card rates will remain high.

The current average APR on credit cards is 19.56%, per Bankrate. This means if you're carrying a balance of $10,000 and you only make the minimum payment, of around $225, it will take you 81 months to pay it off. It can lead to a hidden cost of more than $8,000 in interest, almost doubling the balance owed.

Meanwhile, lenders will use the prime rate as part of determining the rate you'll pay on an auto loan. If the Fed raised interest rates, it would increase the APR you'll pay for car financing, which could add hundreds to thousands more in total loan costs.

Other factors will also shape what you pay. Your credit score plays a major role, along with the vehicle itself (its make, model and age) and the length of your loan term, all of which lenders use to determine your final rate and total cost.

Does Fed policy impact mortgage rates?

Not directly, as with auto loans or credit cards, but it does play a small part. For longer-term loans, such as fixed-rate mortgages, the 10-year Treasury yield is a better indicator of what you'll pay.

As its name implies, this yield is the government's borrowing cost for a decade. It's a better benchmark because the average homeowner stays in their home around that long, or they'll refinance somewhere along the way.

Who or what influences the yield? Primarily, it's investors who buy mortgage-backed securities. Their expectations on short-term interest rates have an impact because risks are elevated with longer-term investments.

Furthermore, other factors could influence the yield. When inflation becomes higher, as it is now, the 10-year Treasury yield rises. Inflation is currently 4.45%, showing investors are worried about how gas prices will impact the economy.

Another factor is economic policies. When the Fed sets the federal funds rate, it can give investors a window into the future. Holding rates steady could lead to a murky future, in which a wait-and-see approach is best. When confidence in the economy wanes, investors might require higher rates to feel comfortable with their risk.

Is now a smart time to borrow money?

It will be more expensive, but there are things you can do to lower your borrowing costs, depending on your situation:

If you're carrying high-interest debt

With everyday prices rising, it's common for some borrowers to pay the minimum each month. It's frustrating because even though you're making a payment, it doesn't make a dent in your balance.

This is where transferring that debt to a balance transfer credit card with 0% APR can help. Some cards offer generous 0% APR periods of up to 21 months, giving you almost two years to pay down that balance.

There are a few things to consider before taking this approach: Transferring your balance isn't free; usually, lenders charge 3% to 5% of the balance. Some of these cards come with annual fees, which can also take away from your ability to pay off your debt more quickly.

If you decide to go with this approach, I recommend paying as much as you can each month, which can significantly reduce your debt before the introductory period ends. You'll save in interest and take years off your debt repayment. If you have other debts, this can build momentum to help you tackle them next.

You need to make a bigger purchase, but don't have the cash

If you have an immediate need and don't have the cash on hand, it makes sense to consider credit. But there are smarter approaches than using whatever credit card is in your wallet.

To demonstrate, I don't usually recommend store credit cards. They come with sky-high APRs, but if you shop at the same store regularly (Costco, Lowe's, etc.), you might be missing out on some really sweet card perks.

To demonstrate, Costco's Anywhere Visa by Citi offers 5% back on the first $7,000 charged at Costco gas stations. You'll also earn 2% back on Costco purchases. We made this switch because it allowed us to earn cash back on larger purchases and save on everyday costs, such as gas, prescriptions and groceries.

Other store credit cards offer generous interest-free promotional periods from six months to a year. I use these when buying larger appliances. As long as you pay it off within that promotional window, you won't have to incur the higher interest rates.

That said, if your purchase isn't urgent, it might be worth taking a step back and saving first. Even setting aside a portion of the cost can make a difference. Every dollar you pay upfront is one less you'll finance, helping reduce your total interest costs.

One simple way to do this is to treat your savings like a monthly bill. Set aside a fixed amount in your budget and transfer it from your checking account into a high-yield savings account. This creates a consistent habit while allowing your money to grow, with some accounts offering rates up to 4.20% APY.

Use the Bankrate tool below to find the best fit for your needs:

How to use the Fed's decision to your advantage

Ultimately, the Federal Reserve holding rates steady is good news if you’re focused on building savings. But if you’re carrying debt or planning a large purchase, borrowing costs will remain elevated.

To manage that, consider using promotional financing offers, transferring balances to cards with 0% introductory APR periods or delaying the purchase and saving in a high-yield account to take advantage of today’s higher rates while you work toward your goal.

Related content

• How the Federal Reserve Affects Mortgage Rates — and What It Means for Homebuyers in 2026
• After the Fed Meeting, 7 High-Yield Savings Accounts Worth Your While
• Kiplinger Interest Rates Outlook: Long-term Rates to Remain Elevated as Long as Oil Prices Cause Inflation Risk

Spring often brings a sense of fresh starts, and for some families, that includes moving forward with a separation or divorce. If you're navigating that transition, it's easy to focus on the big decisions like housing, custody and dividing assets.

But there's one area that tends to quietly cause long-term financial damage if ignored: Your credit cards. Shared accounts, lingering balances and unclear responsibility can follow you long after the paperwork is finalized. And the reality is, your credit card issuer doesn't care what your divorce decree says; they care whose name is on the account.

Here's how to protect yourself before credit card debt becomes an expensive aftershock of your split.

Joint liability doesn't disappear with a separation

One of the most common and costly misconceptions is assuming that divorce automatically separates debt. It does not.

If you share a joint credit card, both of you remain legally responsible for the balance, regardless of who made the charges or what your agreement says. Even if a court assigns that debt to one person, creditors can still pursue either party for payment.

That means if your ex stops paying, missed payments can appear on your credit report and damage your score. Understanding exactly where you are liable, and where you are not, is the first step in protecting your credit.

Understand who is actually responsible for the debt

Not all credit card accounts are treated the same, and the distinction matters.

Joint accounts vs. authorized users:

• Joint account holders are equally responsible for the debt.
• Authorized users can make purchases, but aren't legally required to repay the balance.

If you're only an authorized user, removing yourself from the account can help protect your credit. But if you're a joint account holder, the responsibility sticks until the balance is paid off and the account is closed or refinanced.

State laws also play a role. In community property states, most debt incurred during marriage is considered shared. In equitable distribution states, debt is divided based on fairness, not necessarily a 50/50 split.

Still, creditors ultimately rely on the account agreement (not state-level divorce rulings) when collecting payments.

Sorting out your finances is hard enough. A divorce can make it even more complicated. Use the tool below, powered by Bankrate, and answer a few quick questions to see personalized offers.

Why your name matters more than the court ruling

If your name is on the credit card account, you are still responsible for making the payment. That is why relying on a court order that says "your ex will pay it" can backfire.

If they miss a payment, it can lower your credit score and increase your credit utilization. It can also trigger late fees and penalty APRs.

In other words, your financial future can be affected by someone else's actions unless you take steps to separate things cleanly.

Take these steps immediately to protect your credit

When a separation becomes real, whether you have filed paperwork or are just starting to live apart, your financial lives can shift faster than you expect. Expenses may overlap, communication can break down and spending habits may change in ways you cannot control. This is one of the most vulnerable times for your credit.

Even a single missed payment or a sudden increase in a joint balance can lower your score and follow you for years. Because credit card accounts update frequently, the impact can happen quickly.

Taking a few proactive steps right away can help you limit new debt, prevent surprises and create a clearer financial boundary between you and your spouse while everything else is being sorted out.

1. Stop using joint credit cards

Continuing to charge expenses on shared accounts can increase balances and complicate negotiations.

2. Freeze or close accounts where possible

Contact your issuer to freeze the account to new purchases or close it entirely. Keep in mind that accounts with balances typically need to be paid down before closure.

3. Remove authorized users (or yourself)

If you’re an authorized user, request removal immediately. If your spouse is an authorized user on your account, consider removing them to limit further charges.

How to separate your finances cleanly

The more organized and intentional you are during this phase, the easier it will be to avoid confusion, missed payments and lingering ties that can cause problems later.

Start by opening accounts in your own name if you do not already have them. This includes a checking account for everyday spending, a savings account for short term goals or emergencies and at least one credit card to help you build or maintain your individual credit history. If most of your financial life was previously shared, this step is essential for establishing independence.

Next, redirect all automatic payments and deposits. Go through your bank and credit card statements line by line to identify recurring charges. Do not forget about things like streaming services, utilities, insurance premiums and subscriptions. Update each one so it is tied to the appropriate individual account. This is also a good time to separate mobile phone plans, cloud storage and any other shared services that could continue billing both parties.

You will also want to create a clear system for handling any remaining shared expenses during the transition. For example, if you are temporarily splitting household bills, decide who is responsible for paying each bill and how reimbursement will work. Putting this in writing, even informally, can help prevent missed payments and misunderstandings.

Separating your finances may feel tedious, but it is one of the most important steps you can take to move forward with clarity and control.

Watch for these common (and costly) mistakes

Even with the best intentions, it’s easy to overlook key details during a separation, especially when emotions and logistics are both running high. Here are some costly mistakes to avoid.

• Assuming your ex will pay: Even if it’s written into your divorce decree, creditors can still hold you responsible if your name is on the account. Whenever possible, aim to remove your name from the debt entirely or ensure the balance is transferred into one person’s sole account.
• Ignoring joint accounts: It’s surprisingly common for people to "set aside" joint accounts during a separation, especially if they’re focused on larger issues. But leaving accounts open and unmanaged can lead to new charges, growing balances or missed payments. Make it a priority to address every shared account, even ones with small balances or no recent activity.
• Missing payments during the transition: Between moving, legal expenses and changes in income, it’s easy for due dates to slip through the cracks. Setting up automatic payments can help protect your credit while you sort everything out.
• Overlooking authorized user accounts: If you’re an authorized user on your spouse’s card, their spending behavior can still affect your credit utilization and payment history. Removing yourself from these accounts can help limit your exposure.
• Closing accounts without a plan: Closing accounts can reduce your available credit, which may increase your utilization ratio and lower your score. Make sure you have a strategy for paying off or transferring balances first.

Being aware of these common pitfalls can help you stay one step ahead, and protect your credit while you navigate a major life transition.

How divorce can affect your credit score

The act of divorcing itself won’t hurt your credit score. But the financial ripple effects can. Your score may drop if payments are missed, balances increase (raising your credit utilization), or even if accounts are closed, which reduces available credit.

On the flip side, taking control early by paying down balances, separating accounts and maintaining on-time payments can help stabilize your credit over time.

Divorce doesn't automatically divide your debt. Instead, you’ll have to take a proactive approach to do that with the partner you're separating from.

Taking clear, early action on credit cards can prevent long-term financial damage and give you a cleaner slate as you move forward.

Related Content:

• More Than Half of Couples Say This One Thing Justifies Divorce (and It's Not Infidelity)
• I'm 61 and Want a Divorce, but I Worry About My Finances. Should We Live Separately but Stay Married?
• Gray Divorce After 50: Managing the Shift to Your Solo 'Second Act'

If you need cash for a major expense, you might be considering tapping your home equity. With a home equity line of credit (HELOC), a home equity loan or a cash-out refinance, you can access the equity in your home and use that money for renovations and other expenses.

But it’s more important than ever to understand the potential risks that come with tapping your home equity. According to the Intercontinental Exchange Mortgage Monitor report, Americans hold approximately $17 trillion in total equity, with about $11 trillion tappable.

High home values and limited inventory have resulted in equity-rich but cash-constrained households. Using your home’s equity can be a risky move, so be sure you understand all of the factors involved before deciding if this is the right decision for you.

Borrowing costs remain elevated, with new pressures in 2026

Home equity borrowing is still relatively expensive, and recent economic conditions are adding more uncertainty to where rates go next.

As of April 2026, average home equity loan rates are hovering around the 8% range, according to Bankrate:

• 5-year home equity loan: 7.89%
• 10-year home equity loan: 8.02%
• 15-year home equity loan: 8.00%

Rates vary based on credit score, loan-to-value ratio and lender.

These rates are noticeably higher than what many homeowners are used to, especially those who locked in mortgage rates below 4% in recent years.

At the same time, the Federal Reserve has held rates steady through its January and March meetings, signaling a more cautious approach to rate cuts. That means borrowing costs tied to the prime rate, including HELOCs, have remained relatively high so far this year.

Geopolitical tensions, including the ongoing war in Iran, are also contributing to inflation pressure, particularly through energy prices. That added uncertainty can make it harder for rates to move lower in the near term.

In this environment, the type of loan you choose matters more. Home equity loans offer fixed rates, which can provide predictable payments. HELOCs typically come with variable rates, meaning your costs could change over time. Meanwhile, mortgage rates, which affect cash-out refinancing, tend to follow the 10-year Treasury yield and remain sensitive to inflation and broader market conditions.

When tapping your home equity can make sense

Tapping your home equity may make sense when you’re using the funds for a clear, high-value purpose. For example, you might finance home improvements that increase your property’s value, helping offset the cost of borrowing over time.

Some homeowners also use home equity to consolidate high-interest debt. Replacing a credit card balance with a rate around 20% with a lower-rate home equity loan or HELOC can reduce interest costs and simplify payments.

Home equity can also help cover large, planned expenses, such as education costs or major medical bills. In these cases, the value of the expense may justify the interest you’ll pay. Used intentionally, home equity can be a strategic financial tool — not just a way to cover everyday spending.

Use the tool below, powered by Bankrate, to explore and compare today's home equity loan and HELOC options from multiple lenders:

When tapping your home equity could be a risky move

Tapping your home equity can be risky. When you use your equity, your home is collateral. If you default on your loan, you could face foreclosure.

HELOCs have variable interest rates. While your interest rate could drop, it could also rise, meaning your payments could be larger than you anticipated, and you might ultimately pay much more in interest than you’d planned.

It’s also possible to overborrow home equity. When paired with market uncertainty resulting in fluctuating interest rates and home values, overborrowing could increase your chance of defaulting on your loan and facing foreclosure. It's always best to borrow no more money than you absolutely need, which will also help minimize what you pay in interest.

Home equity loan vs. HELOC vs. cash-out refinance

Let’s take a look at how three methods of accessing home equity compare:

• Home equity loans are fixed-rate loans, so you’ll have predictable, set payments throughout the loan’s term.
• HELOCs are revolving credit lines that you can draw from, repay and reuse. They offer flexibility, but variable rates mean your payments can change over time.
• A cash-out refinance replaces your existing mortgage with a new, larger loan, resetting your interest rate and loan terms.

Since many homeowners are locked into ultra-low mortgage rates, refinancing tends to be a less attractive option right now.

Timing matters more than most borrowers realize

Timing matters when tapping your home equity. Rates could fall later in 2026, but that’s far from certain. Waiting might help you secure a lower rate, but it could also work against you if home values decline or lending standards tighten.

The key is balancing timing with necessity. If you’re facing a time-sensitive expense, such as an urgent home repair or education costs, waiting for a better rate may not be practical.

How to decide if borrowing is right for you

This simple checklist can help you decide if borrowing against your home equity is right for you:

• Do you have a clear purpose? Tapping home equity is risky, so make sure that your purpose justifies that risk.
• Can you comfortably afford payments? With your home as collateral, you risk foreclosure if you can’t make the payments.
• Are you choosing the right product? Be sure you understand the pros and cons of each home equity product to choose the one that’s best for your situation.
• Have you compared lenders? Rates, terms and loan costs can vary from lender to lender. Compare quotes from multiple mortgage lenders to find the best option.

Think beyond access to equity

Home equity can be a powerful financial tool, but it comes with real risk. Because your home is on the line, it’s important to borrow with a clear purpose and a plan to manage the payments.

The decision isn’t just about whether you can access the funds. It’s about whether using your equity supports your broader financial goals and makes sense given today’s rates and market conditions.

Related Content

• HELOC Rules Are Changing in 2026
• 4 Ways To Use Your Home Equity To Boost Your Retirement
• What Home Equity Is and Why It's a Valuable Long-Term Investment
• How a Home Equity Line of Credit (HELOC) Works

You've probably heard a lot about investing in private equity and debt markets lately. Private assets may even be an option in your 401(k) soon, per an August White House executive order to make them more accessible to individual investors.

These investments can provide portfolio diversification and above-average returns — but they come with formidable caveats: They’re complex, less than transparent, illiquid and sport high fees.

Still, you might be feeling some FOMO if you’re not partaking in the latest portfolio craze.

But maybe you are after all. New research from asset management firm Dimensional Fund Advisors found that the 20 largest U.S. public companies by market value collectively had about $96 billion to $157 billion invested in private companies at the end of 2024, according to financial statements.

That means if you own those companies (and anyone with a stake in the S&P 500 owns a good chunk), you’ve got an indirect stake in private markets, too.

For instance, in 2024, according to DFA, Amazon.com invested $5.3 billion in Anthropic, the startup known for its artificial intelligence assistant, Claude, and planned to invest another $2.7 billion by the end of 2025.

The Wall Street Journal recently broke the news that Amazon was in talks to invest up to $50 billion in OpenAI, the firm behind ChatGPT. As for Anthropic, other tech giants, including Alphabet, Microsoft and Nvidia, have stakes as well.

Moreover, public companies gain exposure to private markets via venture capital partners or in-house divisions, or through wholly owned subsidiaries. Alphabet shareholders, for example, have indirect access to GV, formerly Google Ventures, which means they also have indirect exposure to roughly $10 billion in assets managed by the private equity unit, including a stake in Stripe, a payments processor.

Other large companies with VC arms include Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN) and Eli Lilly (LLY).

Measuring the degree to which these public companies hold private assets is an inexact science, says Kaitlin Hendrix, director of asset allocation research at DFA. “We’re limited to what we can find in accounting statements,” she says, and companies account for private investments in a variety of ways.

As a result, DFA came up with an estimated range of private-asset holdings for the companies they examined, including a lower, conservative estimate and a more aggressive one.

But it’s likely, she adds, that some private ownership is not captured by the research, including ownership beyond the largest companies. “There’s quite a bit of the market unaccounted for,” she says.

Big investors.

ExxonMobil (XOM) had the biggest stake in private assets, with as much as $41.4 billion invested, according to the upper bound of DFA’s estimate. That’s followed by Alphabet (GOOGL), with as much as $40.9 billion; Amazon ($18.7 billion); Berkshire Hathaway (BRK.B) and Microsoft ($10.1 billion each); JPMorgan Chase (JPM) ($9.1 billion); and UnitedHealth Group (UNH) ($8.7 billion).

Investors who own these public companies, says Hendrix, “can take comfort in knowing they have exposure to private companies without having to deal with meaningful friction when it comes to access, fees and liquidity.”

You can also open the back door to private assets by investing through a reputable mutual fund that owns some. For example, T. Rowe Price Global Technology (PRGTX) and Fidelity Blue Chip Growth (FBGRX), both members of the Kiplinger 25, the list of our favorite actively managed no-load funds, have stakes in private AI companies, including Anthropic and Databricks.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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At the end of 2025, Americans carried a record $18.8 trillion of household debt. While interest rates have ticked lower, a 30-year mortgage is hovering around 6%, and credit cards charge over 20% on average.

Debt is a reality for the vast majority of Americans, making Debt Awareness Week (March 16-22) a good time to remember that, for most of us, the goal shouldn't be "no debt," but rather, making sure your debt is working for you.

That's because while debt can certainly be problematic, it's not inherently good or bad. It's best viewed as a tool that can help optimize your financial strategy.

An auto loan may allow you to buy a car that you need to drive to a job, a business loan could lead to building a successful business, or you could strategically use leverage to gain tax benefits.

How do you keep debt a friend and not an enemy? Here are some tips to help make sure your relationship with debt stays healthy.

1. Know the difference between 'good debt' and 'bad debt'

Debt can be good or bad based on its characteristics and how it's used.

Is it affordable or expensive? Look at your interest rate to figure out how much it's costing you. Higher rates (especially those above about 8%) are more likely to be bad debt, while lower rates tend to be good debt.

How much do you have? In general, lenders like to see debt payments including a mortgage be less than 35% of your monthly gross income, and debt payments without a mortgage be less than 20% of your monthly gross income.

If your debt payments are straining your budget or lenders are wary of lending you money, it's a sign you have bad debt.

What are you using it to buy? If you're using debt for everyday expenses like eating out frequently or vacations you otherwise couldn't afford, you might be fueling a lifestyle out of reach rather than improving your financial situation.

A good use of debt is to buy things that help you generate income (like that car that gets you to work) or for things likely to grow in value (like a business or home).

Considering using this week to inventory your debt (type, amount outstanding, interest rate, payment) and determine how much falls into the good vs bad categories.

2. Optimize any debt you have

Now is a great time to check in on whether your existing debt is optimized, which won't reduce the amount of debt you have, but it could reduce your payments or interest owed.

There are three optimization strategies.

• Refinancing debt. Paying off an existing debt using new debt of the same type that has different terms, such as refinancing a mortgage or auto loan
• Swapping debt. Paying off an existing debt using new debt of a different type that has different terms, such as using a home equity loan to pay off credit card debt
• Consolidating debt. Paying off multiple existing debts using new debt to combine several payments into one, such as consolidating federal student loans)

To make the most of these strategies, you'll generally need to have a good credit score.

And before you move a balance, you should consider any associated fees, the change to the total interest you'll pay over the life of the loan, new terms and conditions and the impact on your credit score.

When optimizing debt, it can be especially helpful to work with a trusted professional like a financial adviser, who can also help you avoid any bad actors looking to take advantage of individuals who have debt.

3. Know when to pay down debt … and when not to

First things first: Always make your minimum payment.

If you're wanting to pay down debt faster because you have problematic debt or simply because you're debt-averse, you might be tempted to put every spare dollar toward paying down debt. But that's not always the best use of your surplus.

For example, if you have nothing in your emergency fund, you might want to prioritize that until you have at least a few hundred dollars or one months' worth of expenses. That way, if an unexpected expense pops up, you're not immediately going back into debt to afford it.

Alternatively, if your debt has a low interest rate, such as a 3% mortgage, you might get a better return on your money by investing it.

Once you determine how much extra you do want to put toward paying down debt, there are largely two strategies for prioritizing which debts to tackle first:

• The avalanche method, where you pay debt with the highest interest rate first
• The snowball method, where you pay debt with the lowest balance first

There are very strong opinions about which of these is best. While we advise starting with the highest-interest debt, paying off small balances can be very motivating for some. Ultimately, you should do what works best for you.

4. Use debt strategically

While many of us need debt to buy a home or car, as wealth increases, it becomes more of a choice. At this point, it can help you build your assets while also potentially providing tax benefits.

If the alternative is selling assets to fund an investment opportunity or make a purchase, you might want to consider whether borrowing would be more advantageous.

For example, selling an asset often comes with a tax consequence. You may owe capital gains tax on a stock sale, and it can be substantial if you have a low-basis investment.

Or you might have to pay income tax if withdrawing from a pretax retirement account. A loan may allow you to stay invested and defer the tax consequence of selling.

Another example is if you own an illiquid asset, which might come with substantial selling costs that a loan could let you avoid.

Using debt responsibly should help you meet your financial goals, rather than hinder them. And Debt Awareness Week is the perfect time to take stock of how debt is — or isn't — working for you.

Related Content

• I'm a Financial Professional: Here Are Four Ways You Can Use Debt to Build Wealth
• How to Use Good Debt (While Identifying and Avoiding Bad Debt)
• A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
• Extra Cash? Should You Pay Off Debt or Invest?
• Seven Ways to Manage Your Financial Stress

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Buying a new vehicle is a major investment, and the cost of new vehicles has soared in recent years. According to Kelley Blue Book, the average price of a new car reached a record $50,326 in December 2025, making any potential savings on a vehicle purchase even more valuable.

Costco may be known for offering great deals on groceries, appliances and other items, but the Costco Auto Program could help you save on a new or pre-owned vehicle purchase or lease. While the program provides a more streamlined buying experience, it doesn't always guarantee the lowest possible price.

The program offers several additional perks for members, from discounts on parts and service to discounts on RVs. Taking a closer look at how the program works and what these benefits include can help you decide whether it's a good fit for your next vehicle purchase.

What is the Costco Auto Program?

Costco doesn't sell vehicles directly. Instead, it connects members with a network of participating dealerships that offer prearranged pricing. The Costco Auto Program, which has been around since 1989, is free to use with an active Costco membership.

Through the program, members can shop for new vehicles, electric vehicles and certified pre-owned models, all with pricing negotiated in advance through participating dealers.

How the Costco Auto Program works

Once you decide to use the program, the process is fairly straightforward:

• Visit the Costco Auto Program website. To get started, you’ll search the auto program website for the type of vehicle you want to buy or lease. You'll enter your zip code and pick out the vehicle you want.
• Get connected with an approved dealership. After selecting your car, you'll enter your contact information and Costco member number. From there, Costco will connect you with an authorized dealer. That dealer will contact you to make an appointment.
• Review price information. During your appointment, you'll receive prearranged Costco member pricing on the vehicle.
• Complete your purchase. You can choose to complete the purchase or lease, or you can decide not to buy the vehicle after seeing the prearranged price.

Costco vets and trains participating dealerships, with a focus on customer service, to help ensure a more consistent and lower-pressure buying experience. However, Costco doesn't sell vehicles or negotiate individual transactions. You'll complete the purchase directly with the dealership.

Pricing is negotiated in advance between Costco and participating dealers, but it isn’t displayed online. Instead, you'll need to visit or connect with the dealer to receive your prearranged Costco member price and decide whether to move forward with the purchase.

Dealerships pay a fee to participate in the program, which helps support and maintain the service.

How much money can you save?

The amount you can save through the Costco Auto Program varies based on the vehicle model, demand and your location. Some estimates suggest average savings of around $1,000 on a new vehicle purchase, though actual discounts can be higher or lower depending on market conditions.

In some cases, limited-time manufacturer incentives can increase your savings when combined with Costco’s prearranged pricing. For example, the current promotion offers eligible Costco members up to $1,250 on a new Chevrolet Traverse for Executive Members ($1,000 for non-Executive Members), plus any additional incentives they qualified for.

These types of promotions can increase the overall value of the program, especially if you're flexible on timing your purchase.

Additional perks beyond vehicle pricing

The Costco Auto Program also includes perks beyond vehicle pricing that can add ongoing value. Member-only incentives and limited-time promotions can be stacked on top of the prearranged Costco price, potentially increasing your total savings at the time of purchase or lease.

In addition, members receive 15% off parts, service and accessories at participating service centers. Savings are capped at $500 per visit, but these discounts can help reduce maintenance and ownership costs over time, especially for routine services or larger repairs.

Pros of using the Costco Auto Program

Here are a few reasons to consider using the Costco Auto Program:

• Simple purchase process: With the program, you can get a prearranged price on your vehicle. There's no haggling required, and the purchase is simple and straightforward.
• Access to vetted dealerships: Costco has vetted dealerships for customer service, which can give you peace of mind as you shop.
• Predictable pricing: Costco's prearranged pricing is predictable. It typically won't exceed the vehicle's MSRP and may help you save compared to what you would pay at another dealership.
• Reduced sales pressure: Compared to traditional dealerships, the Costco Auto Program offers a lower-pressure buying or leasing experience.

Cons and limitations buyers should know

While there's a lot to like about the Costco Auto Program, it does come with some drawbacks:

• Must use participating dealers: If you want to use the program, then you must buy a vehicle through a participating dealer. That might mean you could miss out on decent deals offered by dealers that don't participate in the program.
• Pricing isn't quoted remotely: In most cases, the preauthorized pricing isn't quoted remotely, and you'll need to make an appointment with a dealer to access that pricing.
• Negotiators could find better deals elsewhere: If you're a skilled negotiator, you might be able to find a better deal on that same vehicle by using a traditional approach and negotiating a vehicle price down, especially if you have an older vehicle to trade in.
• You might face add-ons or extras: Dealers in the Costco program might still offer add-ons or extras. These options can quickly increase your preauthorized price.
• Costco membership required: To use the Costco Auto Program, you’ll need an active Costco membership.

Who the Costco Auto Program works best for

The Costco Auto Program tends to work best for buyers who value simplicity and a more predictable experience. If you dislike negotiating, the prearranged pricing can take much of the stress out of the process.

First-time car buyers may also appreciate the straightforward, guided approach, while busy shoppers can benefit from being able to start the process online and complete a more streamlined transaction at the dealership.

The program can be especially useful for high-demand vehicles, where discounts below MSRP are harder to find. In those cases, even a modest prearranged discount or added incentive can provide value.

That said, the program may not be the best fit for every buyer. If your top priority is getting the lowest possible price and you are willing to visit multiple dealerships, negotiate or use competing offers as leverage, you may be able to find a better deal on your own.

Tips to get the most value from the Costco Auto Program

You can get the most value from the Costco Auto Program if you're willing to do a little extra research:

• Compare Costco pricing with outside quotes: In some cases, you might find the best pricing through the Costco program, but that won't necessarily always be the case. Do some comparison shopping and see if you could save more on the same vehicle at a dealership outside of the program.
• Stack manufacturer rebates and financing incentives: Research available manufacturer rebates and financing incentives. You can stack these on top of the Costco pricing for additional savings.
• Research dealer add-ons: Dealer add-ons, like extended warranties and paint and fabric protection, may seem like a good investment in your vehicle, but they can quickly increase the price. Research these add-ons to determine which are really worth the investment for your situation.
• Verify inventory availability: Before you visit a participating Costco dealership, verify that the vehicle(s) you're interested in are available. Doing so can ensure that you'll be able to test drive the vehicles and complete a purchase if you decide to do so.

Is Costco's Auto Program worth it?

The Costco Auto Program offers convenience and predictable pricing, but it doesn’t guarantee the lowest possible deal in every situation. If you're in the market for a new car, consider how much you value a simpler buying experience versus the potential savings of negotiating on your own.

It can be worth comparing the Costco price with quotes from other dealerships, as well as factoring in available incentives and your willingness to negotiate. Weighing these trade-offs can help you decide whether the program is the right fit for your budget and buying style.

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In these complex times of economic and interest rate uncertainty, many homeowners are choosing to stay put through it all.

Some are strategically holding on to a low mortgage rate in an unpredictable market. Others are prioritizing stability, maintaining their sense of control while the economic pendulum swings.

But staying in place doesn't mean standing still. A growing number of Americans are tapping into one of the most powerful yet underutilized assets they own — home equity. At the same time, many homeowners may not fully understand the tools available to them.

According to a recent survey from TD Bank, 30% of homeowners can't correctly identify what a home equity line of credit (HELOC) is, and 34% can't define a home equity loan.

A HELOC is a line of credit that lets one borrow money using the available equity in one's home as collateral. It offers the flexibility associated with a line, allowing the borrower to draw and repay funds as needed.

Rates are typically lower than other forms of credit, such as credit cards and are variable tied to the Wall Street Journal Prime Rate plus or minus a margin. Once utilized, many HELOCs allow for the balance to be moved to a fixed rate, with a set repayment term and monthly payment.

By contrast, a home equity loan provides a single lump sum amount, also secured by the home. Home equity loans typically have a fixed rate and term from the start, giving homeowners consistent and predictable monthly payments.

The current lack of awareness represents a potential missed opportunity. When used responsibly, home equity can serve as an adaptable financial resource, a strategic debt management tool and can even be an investment in the future.

When homeowners understand how to make their equity work for them, they can make confident choices that align with their financial goals.

A modern financial resource

American households have been under sustained financial pressures, which have only amplified over time. Inflation, interest-rate volatility and lingering debt burdens have left many families searching for ways to create financial breathing room, and home equity products have emerged as potential solutions.

In fact, 86% of homeowners who use home equity products, such as HELOCs and home equity loans, consider them an important part of their financial plan.

Unlike higher-interest forms of borrowing, these products allow homeowners to access the value they've built in their homes, providing a cushion that can be used for major expenses, renovations, unexpected emergencies or other financial needs.

In an environment in which cash-flow flexibility can matter as much as long-term savings, this option might make sense for homeowners.

When used as one piece of a broader financial plan, it can provide both stability and opportunity, two qualities that are often in short supply when markets are uncertain.

A key to simpler debt consolidation

While home equity products can help homeowners with one-time expenses, they're also proving valuable as a tool for long-term debt management amid higher interest rates. For context, according to Experian, the average nonmortgage debt balance in 2024 was $23,066.

To manage these debts and ease the pressure, homeowners might consider consolidating their debt into a single loan with a lower rate, without realizing their home equity could help make that possible.

HELOCs and home-equity loans allow homeowners to consolidate multiple high-interest debts into a single, lower-rate payment. This can free cash for savings, investments or other priorities, transforming home equity from a static asset into an active part of a financial toolkit.

With home equity loans' fixed rates and defined repayment terms, homeowners have the clarity to plan around consistent monthly payments. That can make it easier to build a realistic budget and stay on track to pay off debts within a set time frame.

Reaching higher home values through renovations

Beyond serving as a financial safety net or debt-management tool, home equity products can also empower homeowners to invest in their futures. For many households, the home represents their primary asset; responsible access to this asset is of paramount importance.

Tapping into that equity can be an affordable way to maintain and protect a property's value, whether that means replacing an aging roof, upgrading outdated appliances or remodeling a kitchen or bathroom. These kinds of investments tend to pay off over time, improving homeowners' daily lives while helping their home hold or increase in value.

Knowing that they can proactively improve their financial standing, rather than being beholden to market conditions, can give homeowners a tangible sense of progress and confidence in their broader financial goals.

As markets continue to evolve, more homeowners are recognizing that they don't need to look beyond their front doors to find financial flexibility. With the right strategy, the equity they've already built can become one of the most powerful tools for navigating whatever comes next.

Related Content

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• 13 Home Features That Add Value and Speed Up a Sale
• This Is How You Can Turn Your Home Equity Into a Retirement Buffer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Women have long been the chief operating officers of their households — the ones who remember the dentist appointments, plan the birthday parties and keep everything running thanks to countless tabs open 24/7 inside their heads.

I get it, because I'm a wife and mom first. But we can't let the invisible labor and emotional burden of the day-to-day stand in our way of long-term planning.

Married or not — and it should be noted that more Millennials are unmarried than previous generations at the same age — women need to be the chief financial officers of their households. The stakes are high.

Women, on average, live longer than men. And women are projected to control two-thirds of America's wealth by 2030, according to a 2025 report by McKinsey & Company.

That shift is already underway and makes 2026 an ideal year for women — single, married, divorced, widowed, raising a family or empty nesting — to shore up their finances and plan for their future.

Here are six savvy financial moves women at every age and stage of their financial journey should make this year.

Savvy Move No. 1: Organize your documents now

Often, people wait until tax time to tidy up their financial lives, but this annual ritual represents only part of the picture.

What if everything related to your financial life and life in general — not just the things you need to hand to your accountant or access for your tax filing — was organized all year long, year after year?

Imagine the space in your brain you'd free up knowing that receipts, account statements, insurance policies, powers of attorney and other estate planning documents, birth certificates, passports, Social Security cards and more were all in one place?

You can do this electronically, of course. But there's something about the assurance of having hard copies on hand. You can create your own filing system or check out products like the Nokbox, which offers fireproof boxes with files labeled for everything you need to organize.

You could do this in one afternoon and call 2026 the year you truly got your financial house and your life in order.

Savvy Move No. 2: Tackle debt and make savings automatic

Pay down your debt and begin to save 20% of your gross income.

Many financial advisers will favor saving over paying down debt if you can make more in interest on money you sock away.

And, of course, not all debt is equal. Your mortgage is different than your credit cards.

Still, too much debt can impact you psychologically and make it harder to get to your bigger financial goals, so plan to knock it down so you can build up your savings.

Ways to make your savings automatic include contributing the max to your employer-sponsored retirement plan and directing a certain portion of money each month to your emergency savings (or cash equivalent) account and 529 education plans if you are saving for college.

Making it automatic keeps you from automatically spending it.

Savvy Move No. 3: Build a cash cushion

Building on the savings theme, it's always a good time to beef up the "heaven help us" account. Strive for having six months' worth of living expenses available in case of emergency.

People often think that means in case of a job loss, and that's a big one. But other stuff can happen, too. You could need to step back at work to care for a child or aging parent.

There are other ways to ensure cash flow beyond savings. For example, it's smart to have a home equity line of credit in place for emergencies, just so long as you don't spend it all on home projects, credit card debt or vacations.

This line of credit can be a lifeline and also buy you time to build up your cash cushion.

Savvy Move No. 4: Protect yourself

Review your insurance coverage — life, health, disability, auto, property and casualty. Are beneficiaries up to date? Do you have enough? Are there policies you don't have in place but should?

Ask yourself what has changed. If you're starting a family, it might be time for you or your partner to add a term life policy to replace future income in a worst-case situation.

Or perhaps you have life insurance but not disability insurance. Did you know you are more likely to become prematurely disabled than to die prematurely?

Or, if you have a new teenage driver in the house, you might consider taking out an umbrella insurance policy.

Savvy Move No. 5: Audit and review investments

You should understand the purpose of and timeline for each investment — along with your risk tolerance — so that you can determine the right asset mix for each investment portfolio.

For example, perhaps your first baby is now a high school senior; it's probably time to dial down the aggressiveness of that 529 college savings plan.

Maybe you plan to retire sooner than you originally anticipated, or you just got a dream position and plan to extend your career.

Either way, you will want to adjust the asset allocation and corresponding level of risk on your retirement plan investments.

Savvy Move No. 6: Dare to dream

Please take a moment to dream big. Not just about 2026. But about what you want for your life years into the future.

Why are you working so hard right now? What is your "why"?

Short-term, tactical goals are nice. But the big picture — retiring when you want, vacationing when and where you want, starting a business, buying a beach house, living abroad, setting up a philanthropic organization or foundation — is even richer.

If you know what you're working, saving and investing toward, the better your chances for staying on the path to getting exactly what you envision and deserve in 2026 and beyond.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Refinancing replaces your current mortgage with a new loan, often to lower your interest rate, shorten your loan term or lock in a fixed rate. Some homeowners also choose a cash-out refinance, which lets you tap your home’s equity and receive a lump sum for larger expenses.

As housing markets shift and personal finances evolve, many homeowners periodically reassess whether their mortgage still fits their needs. Changes in income, home equity, debt levels or long-term plans can all create opportunities, or reasons to consider refinancing.

Still, refinancing isn’t automatically a win. Closing costs, extended loan terms and aggressive lender offers can quietly add thousands of dollars to your total cost. Before you apply, it’s important to understand the warning signs, run the numbers and make sure a refinance truly aligns with your financial goals.

Warning signs and red flags to watch for

Refinancing can be financially smart, but not every offer is created equal. Some lenders rely on confusing terms, aggressive marketing or hidden costs that can quietly increase what you’ll pay over time.

Be aware of warning signs and red flags that you might see when refinancing a mortgage:

• Too-good-to-be-true offers: If a refinance offer seems to be too good to be true, it probably is. Look out for aggressive pitches and offers designed to be irresistible, such as unbelievably low interest rates.
• No closing costs: Refinancing comes with closing costs, but some offers roll those costs into the loan amount, increasing your debt and the amount you’ll pay in interest. “No closing cost” offers should be reviewed carefully.
• Upfront fees: Most lenders won’t require you to pay any large fees upfront when refinancing a mortgage; you’ll just be responsible for closing costs at the closing. If the loan terms outline upfront fees, you may not be working with a legitimate lender.
• Excessive pressure: Refinancing a mortgage is a big decision, and you should take your time researching lenders before you decide to refinance. If a lender or broker is pressuring you to quickly decide to refinance, walk away.

Do the math: Rates, costs and break-even

Refinancing your home can help you get a lower interest rate, but you’ll also need to pay closing costs. Calculating your break-even point, which is the point at which your interest savings will cover the closing costs, can help you determine whether refinancing makes sense.

To get started, add up all of your closing costs, including lender fees, title costs and escrow services. You’ll also need to determine how much your new mortgage will save you per month; you can do that by subtracting your new monthly mortgage payment from your old monthly mortgage payment.

To calculate your break-even point, divide your total closing costs by your monthly savings. The resulting figure is the number of months that it will take before your savings will cover the closing costs and you’ll break even.

For example, if your closing costs are $6,000, and you’ll save $250 per month, it will take 24 months before you break even on your refinancing.

A common rule of thumb can help you decide when to refinance. If you have a 30-year mortgage, a 0.75% drop in interest rates will usually result in positive savings after three years, often justifying the cost of refinancing. With a 1% drop, you’ll break even in about 20 months.

Generally speaking, if interest rates have dropped by 0.5% or less, refinancing may not be worth it, since you won’t reach your break-even point in a reasonable amount of time.

When you refinance, you have the option to extend the loan term, taking a longer time to pay down your mortgage. Extending the loan term on a 30-year refinance could end up costing you more over time, since it starts amortization over again.

When you start paying on your new 30-year mortgage, your initial payments are interest-heavy, which increases your cost. Even if you have a lower interest rate, the longer mortgage term and interest could mean you’ll ultimately pay more. To avoid this scenario, consider refinancing while maintaining your loan term or even shortening your mortgage to a 15-year term if you can comfortably afford the payments.

Other financial traps you might overlook

Even if you avoid obvious red flags, refinancing can still come with less visible costs that affect your long-term finances. Understanding these potential traps can help you make a more informed decision.

Be aware of several other refinancing traps that could cost you money:

• Closing costs: Refinancing closing costs can range from 2% to 6% of your total loan amount, on average. If you have a $400,000 mortgage, your closing costs could be $8,000 to $24,000. Make sure that you understand these costs before you close on your refinance.
• New loan terms: Your new loan terms could delay your payoff or increase your mortgage’s lifetime interest. Carefully read the refinance terms and make sure you understand how they will impact your mortgage going forward.
• Mortgage insurance and equity requirements: If you refinance with less than 20% equity on a conventional loan, you’ll typically need to pay private mortgage insurance until you rebuild sufficient equity, which increases your monthly costs.

How to shop and compare refinance offers

Different lenders offer different terms and interest rates, so it’s important to shop around and compare quotes from different lenders. Request at least three quotes from different lenders and pay attention to factors like interest rates, closing costs and loan terms.

Consider getting offers from credit unions, online lenders and mortgage brokers, since they may offer lower interest rates and better overall terms than larger traditional banks and lenders.

Who should not refinance right now

Refinancing can offer benefits to some homeowners, but make sure that it makes sense for your specific situation. For example, if your refinance break-even point is in five years, but you plan to move within the next two years, refinancing doesn’t make financial sense, and you’ll pay more to refinance than you’ll save. Think about how long you plan to stay in your home to determine if you should refinance now.

You also need sufficient equity in your home to be able to refinance. According to A+ Federal Credit Union, you’ll generally need at least 20% equity in your home. Some lenders will work with you if you have less equity, but chances are you’ll need to pay private mortgage insurance until you build up 20% equity again, which adds onto the cost of refinancing and pushes your break-even point further out.

If you don’t have a strong credit score, refinancing may not make sense, either. Lenders often consider borrowers with poor credit scores as being higher risk, so they charge a higher interest rate to make up for that risk. If you’re refinancing to take advantage of a lower interest rate, you may not qualify for that interest rate, especially if your credit score has dropped since you initially bought your home.

Practical next steps before you apply

Before you apply to refinance a mortgage, do some calculations to determine if it makes financial sense. The Navy Federal Credit Union’s mortgage refinance calculator makes it easy to see how much refinancing could save or cost you.

Take some time to talk with a trusted financial adviser or mortgage professional about your goals and what you should consider when refinancing. These experts can provide advice tailored to your specific situation and can also help you spot potential financial pitfalls.

Curious about today's refinance interest rates? Use the tool below, powered by Bankrate, to explore and compare some of today's top offers:

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Everybody (rightfully) looks forward to booking a vacation, especially in the dreary days of winter. But the ever-present issue with travel is that, well, it costs a lot of money. Between picking out flights, shelling out for hotels and selecting special destination experiences, the vacation tab starts out high and only continues to climb.

That's where the new "buy now, pay later" options have been coming in handy for many travelers. But does it make sense to use buy now, pay later as a way to afford your vacation?

While there are certainly upsides, there is a lot you need to consider before you press "yes" on "BNPL."

What is buy now, pay later?

Buy now, pay later programs are exactly what they sound like: They give you the option of buying something – whether it’s a clothing item, a piece of furniture, or yes, even a flight — without handing over the full price at this exact moment. Instead, you opt into a payment plan, which may require you to pay in four biweekly installments, pay monthly over a set period of time, or pay the full price at a specific selected date in the future, among other options.

Popular services like Klarna, Afterpay, Flex Pay and Affirm are dedicated to this method and pop up on most websites as a payment choice, and even PayPal has started offering buy now, pay later options come checkout time.

The pros of using buy now, pay later to finance your vacation

The obvious benefit of using BNPL is that you can essentially purchase what you want, even if you don't have the funds for it right now. This can be particularly enticing for travel.

Airfare can rise dramatically, hotels run out of rooms and experiences are booked up as your departure date approaches. Plus, there may be a sale or a special vacation package being offered you need to take advantage of now. You may also be on a saving schedule where you'll have the budget ready to spend on the trip – at the time of the trip itself, not months before it starts.

Another benefit? Unlike credit cards, most (but not all) BNPL services are zero-interest, provided you make on-time payments, of course. Otherwise, most of them will start charging interest on your missed payments.

The cons of using buy now, pay later

Although it's easy to see why BNPL makes sense at first glance, the reality is it's usually not a smart financial decision, especially when it comes to vacations. After all, while we wish vacations were a necessity, the reality is that they're not.

If you can’t pay for it now, it's simply not a wise move to book a trip: You're essentially just kicking the can down the road, accumulating more and more debt that you can't say for sure you'll pay off on time.

In fact, Brady Wright, a Certified Financial Planner with Golden Road Advisors, strongly warns against using BNPL for any purpose, citing the hidden potential fees associated with this kind of service and describing it as "the latest iteration of the same psychological trick credit card companies have been using for decades: 'Get what you want now, worry about it later.'"

"Retailers partner with BNPL companies because they can show you a price tag that's 75% smaller upfront while dangling phrases like 'interest-free' in front of you — and that gets consumers to spend significantly more," he explained.

It's not just about you buying more than you were planning on, either, he warned. It's also about making a profit off any potential lapses on your part.

"BNPL companies are banking on the fact that a percentage of users will miss payments, at which point they can charge substantial fees or interest rates. Miss a payment, and you're hit with compounding interest that can quickly spiral," Wright said.

So, should you use buy now, pay later for your vacation?

While there are situations where it may make financial sense to set up a Klarna plan for a trip (where you know for sure you're going to pay it off the following week and want to take advantage of a travel deal, for example), those occurrences are rare.

In general, if you need to depend on a BNPL plan to book a vacation, it's probably not a good idea to go now. While it may seem like a temporary godsend, these plans add up quickly and can plunge you into a vicious cycle, especially if you miss a payment and the service decides to charge you interest on your remaining balance. We all deserve a vacation, but no amount of relaxing on a trip makes up for the eventual stress that future financial issues will bring you.

"Whether it's credit cards or BNPL, you need to recognize that both forms of debt allow others to profit at the expense of your ability to build wealth and achieve your long-term financial goals," Wright emphasized.

And keep an eye out if your child mentions using BNPL to go on vacation with you or if they're planning a trip on their own: BNPL purchases are the reason behind 28% of total unsecured consumer debt for borrowers aged 18 to 24, according to the Consumer Finance Bureau. Make sure to warn them of the dangers these kind of services pose to their overall financial well-being, and explain what you both need to do in order to have a successful trip:

Work on slowly setting aside money for your travels. Use this Bankrate tool to find the quickest ways to achieve this:

Next, draw up a budget and timeline if needed so you're able to afford it when it comes time to book. Your trip will be happier and more relaxing if it's already paid off by the time you arrive at your destination.

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You worked hard all year and were awarded an amazing bonus. It's time to go on a shopping spree and treat yourself — because you only live once, so why not live it up?

Let me stop you there: Don't spend it all in one place. Of course it's important to treat yourself, but within reason.

There are most likely buckets that need to be filled to help set you up for success with your end-of-year and 2026 financial goals.

Here are five smart things to do with your year-end bonus.

No. 1: Pay down debt

If you've been living beyond your means, it's vital to pay down debt.

Credit cards, which charge extremely high interest rates, should be considered a priority to be paid off first. Otherwise, you're losing money by paying these fees.

Mortgages, student loans, and auto loans often charge lower interest rates, so those are usually fine to pay off monthly.

However, before making another large purchase, it's important to pay down these expenses.

No. 2: Contribute more to retirement savings

If you aren't contributing to or maxing out your retirement savings accounts — think 401(k), IRA, Roth IRA, etc. — then I would look hard at making a nice contribution to one of these accounts.

Keep in mind the contribution limits of 401(k)s ($23,500 in 2025), and traditional and Roth IRAs ($7,000 for individuals under age 50, $8,000 for individuals 50-plus).

Because of compound interest, your contribution can pay off when you reach the point of thinking about retirement. Your future self will thank you.

No. 3: Bulk up your emergency funds

Most financial advisers will likely recommend that you have three to six months of living expenses in your emergency fund in case someone loses a job, gets sick or has an unexpectedly large expense.

This fund allows you to take care of yourself and your family without having to stress or touch investment accounts or those that are hard to access.

A year-end bonus would be a great way to start or replenish an emergency fund. Start small and build on it over time.

Life happens, and it would be great to be more prepared next time you have an emergency.

No. 4: Fund a future expense

Something I started doing is to anticipate and plan for two big expenses that happen every year, way before I need the money: holiday gifts and summer camps for our children.

I started allocating part of my budget every year to set aside for these two major recurring expenses. I budget for the camps through my flexible spending account (FSA), but I have also started putting a portion of my year-end bonus into these future expenses.

I invest the money in a high-yield cash account, then pull my FSA money only twice a year to pay myself back, then invest that, too.

It can be a win/win and help take the stress of high expense periods away from me and my family.

No. 5: Save for a big trip, house project or fun purchases

Most of the other recommendations were very responsible, so here's something a little more fun (in a responsible way).

Have you always wanted to go on a trip, remodel your kitchen or buy e-bikes so you can ride to the beach? Now is the time to start a "fun fund." If you don't plan for it, it will never happen.

Consider putting a portion (or all) of your year-end bonus into a high-yield savings account. Contribute to it regularly, and before you know it, you'll be ready to check that thing off your bucket list.

This year, when you receive that year-end bonus check, take a breath and think about how these funds might impact your financial future.

Instead of buying a toy your kids will forget or an expensive bag that will only be in style for a few years, consider your long-term financial goals.

Saving and achieving your financial goals is fun, too — it just takes a little planning.

If you need more help deciding how to invest your year-end bonus, contact your financial adviser to help you get started.

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• How to Make the Most of Your Bonus (and Other Variable Income)
• The Best Ways to Use Your Year-End Bonus (and the Worst)
• How Do You Know When It's Time to Change Financial Advisers?
• Three Steps for Couples Navigating the Money Maze

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

With a home equity line of credit, or HELOC, you can use your home’s equity to cover costs like renovations, education or emergency expenses. With Americans collectively holding about $17.3 trillion in home equity, a level not seen in decades, many homeowners now have more borrowing power than they realize.

A HELOC’s flexibility is appealing, but your monthly payment can shift based on your credit, loan terms and interest rate. Understanding how those factors work is key before tapping your equity.

Here’s what a $50,000 HELOC may cost each month and how to decide if this type of financing fits your needs.

What affects your HELOC payment?

Many factors affect your HELOC payment, so it’s important to consider your specific situation and how these factors will impact your rates:

• Credit score: If you have a high credit score, you’re more likely to qualify for a lower HELOC interest rate. If your credit score is lower, though, you’ll probably have a higher interest rate. Keep in mind that even if you have a HELOC already, if your credit score drops during the loan term, your lender might increase your interest rate because they consider you a higher-risk borrower.
• HELOC term: Your HELOC term will affect your rates, too. Shorter terms usually carry lower interest rates, and longer terms will typically have higher interest rates. Most HELOCs consist of a draw period ranging from five to 10 years, during which you make interest-only payments. The repayment period can last 10 to 20 years, and during that period, you’ll be repaying the principal and interest, meaning your payments will increase.
• Loan-to-value ratio: Your loan-to-value ratio compares the amount of your loan to your home’s appraised value. The lower this ratio is, the less risky lenders consider you to be, meaning you’re likely to get a lower interest rate. According to First Merchants Bank, you’ll need a loan-to-value ratio of 90% or lower to qualify for a HELOC. For the best interest rates, your loan-to-value ratio should be 80% or less.
• Prime interest rate: Your HELOC interest rates are based on the prime rate, which is affected by the Federal Reserve’s actions. According to the Wall Street Journal, the average HELOC interest rate as of November 11 is 7.82%.
• Lender margins: In addition to the prime rate, each lender can add their own margins to determine your final interest rate. Lender margins can be negative or positive, and they vary from lender to lender. As a result, it’s best to shop around and compare quotes from multiple lenders before taking out a HELOC.
• Variable rate adjustments: Most HELOCs have a variable interest rate, so your interest rate can change throughout the term of your loan. As the prime rate fluctuates, your interest rate could increase or decrease, too.
• Rate cap: Many lenders implement an interest rate cap to protect you if interest rates decrease dramatically. Often, that cap is around 18%, but that can vary depending on your lender.

How much a $50,000 HELOC costs per month

Here’s an example of what a $50,000 HELOC could cost based on current rates and typical loan terms. The United Nations Federal Credit Union HELOC payment calculator makes this easy.

If you have excellent credit and a low loan-to-value ratio, you might qualify for an interest rate around 7.82%. With a 10-year draw period followed by a 20-year repayment period, your payments would begin as interest-only and later shift to principal and interest.

The table below outlines how those payments break down:

Note: These payments don’t account for potential changes from a variable interest rate. Your actual monthly cost may increase or decrease over time.

HELOC vs. home equity loan: What’s the difference in monthly cost?

Like a HELOC, a home equity loan lets you borrow against your home’s equity, but the structure is different. A HELOC gives you flexibility to borrow only what you need during the draw period, while a home equity loan provides a single lump sum upfront.

Home equity loans also come with fixed interest rates, which means your monthly payment stays the same throughout the life of the loan. That predictability creates a very different cost profile compared with a HELOC’s variable rate and interest-only draw period.

Because of those differences, your monthly cost on a home equity loan may be more stable, while a HELOC’s payment may rise or fall over time.

Use the tool below to explore some of today's top home equity offers, powered by Bankrate:

Pros and cons of borrowing $50,000 from your home equity

There are several pros and cons to taking out a $50,000 HELOC. Its biggest advantage is flexibility. During the draw period, you can borrow, repay and borrow again up to your credit limit. For example, if your limit is $50,000, you could borrow the full amount, repay $15,000 and then borrow that $15,000 again whenever you need it.

This revolving structure makes a HELOC useful when you’re unsure how much you’ll ultimately need, such as when funding education costs or paying for a home upgrade or renovation.

During the draw period, another advantage of a HELOC is that your required payment typically covers only the interest, not the principal. You can choose to pay down the principal during this time, but the option to make interest-only payments keeps your initial costs lower. That trade-off does mean your principal and interest payments will be higher once the repayment period begins.

There are downsides to consider, too. Most HELOCs have variable interest rates, which can rise or fall throughout the loan term. Because your rate isn’t fixed, your monthly payment can change, and you’ll need to be prepared for potential fluctuations as the prime rate moves.

A HELOC also uses your home as collateral. If you’re unable to make the required payments, you could put your home at risk. It’s important to weigh that possibility carefully and make sure you’re comfortable with the long-term commitment.

When a $50,000 HELOC makes sense

A $50,000 HELOC can make sense in several situations. It’s often used for home improvements, particularly if the renovation is likely to increase your property’s value. It can also provide quick access to funds for large or unexpected expenses, such as medical bills, education costs or business startup needs.

A HELOC may also work as a debt consolidation tool. If you’re carrying multiple high-interest debts and qualify for a lower HELOC rate, you could use the line to pay those balances off and replace them with a single monthly payment. Just be mindful that HELOCs have variable interest rates and longer repayment periods, which could result in higher overall costs if rates rise.

As with any borrowing decision, it’s important to consider how predictable your expenses are and whether the flexibility of a HELOC aligns with your financial situation.

Tips before applying for a HELOC

If you decide a HELOC is right for you, it’s important to carefully shop around. Interest rates and rate caps can vary from lender to lender, so get multiple offers and compare them. Make sure that you understand all of the terms of the loan, and if you’re not clear on something, ask for more information.

A HELOC may be helpful in certain situations, but it’s not the right choice for everyone or every scenario. Consider the long-term affordability of this type of loan and make sure that you’re comfortable with the risks before you take out a HELOC.

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Homeowners today are sitting on a historic amount of real estate wealth. Americans collectively hold about $17.3 trillion in home equity, a level not seen in decades.

At the same time, borrowing costs tied to that equity have begun to ease. Many home-equity loans, home-equity lines of credit (HELOCs) and cash-out refinances have recently dipped below 8%, after peaking much higher during the rate-hike cycle.

With 2026 approaching, a year that could bring both lower interest rates and tax-law changes, many homeowners are weighing their options. Should they tap their equity now, or wait in hopes of better savings later? Here is how to think about the trade-offs.

When borrowing now makes sense

Pulling equity out before the year ends can be a smart move in several scenarios, especially if you’re using funds strategically. Here are a few reasons when tapping your home’s equity might make sense.

You’re planning a renovation or essential home project.

If your roof, HVAC system or major appliances are nearing the end of their lifespans, tapping equity can be far more affordable than turning to high-interest credit cards or personal loans. Even slightly lower home-equity rates can translate into substantial long-term savings on large projects.

You’re consolidating high-interest debt.

Credit card APRs regularly sit above 20%, so even a home-equity loan in the 7% range can slash interest costs. For disciplined borrowers who won’t fall back into high-interest balances, tapping equity can serve as a true reset for their budget.

You want flexibility and expect rates to fall.

A variable-rate HELOC lets you borrow only what you need when you need it, and you’ll only pay interest on the amount drawn. If market rates continue to decline into the new year, your HELOC payments could adjust downward accordingly.

You’re confident in long-term home value and stable cash flow.

If your income is steady and your local housing market remains resilient, borrowing today might offer a healthy balance of affordability and liquidity without adding unnecessary financial strain.

Why waiting could be smarter and what’s at stake

Patience can pay off, especially if rate forecasts hold. Here are a few reasons you might want to wait before tapping your home’s equity.

Additional rate cuts might lower borrowing costs.

Some analysts expect the Fed to continue trimming rates into 2026. If that plays out, fixed-rate home-equity loans and even cash-out refinances could become cheaper next year. Shaving even half a percentage point off a large loan can save thousands over time.

Fixed-rate borrowers stand to gain the most by waiting.

Unlike HELOCs, which can adjust downward as rates fall, fixed-rate loans require you to lock in a rate at closing. If you’re planning a major home improvement project next year, delaying could give you more room to secure a better deal.

But waiting isn’t without risk, since your home’s value or local market conditions could shift. In some markets, tighter lending standards or shifts in demand could make equity borrowing more restrictive over time. Unexpected expenses can also come up. If a sudden repair or financial emergency hits, you might be forced to borrow during a less favorable window.

Waiting can save you money, but only if market conditions move in your favor and your financial needs stay predictable.

If you haven't taken out a home equity loan or HELOC yet, use our home equity tool below, powered by Bankrate, to compare rates you can get today:

Common mistakes homeowners make when tapping equity and how to avoid them

One of the biggest mistakes homeowners make when borrowing against their home is using the funds for non-essential or short-lived expenses such as vacations, gifts or lifestyle upgrades. While tempting in the moment, these uses don’t build long-term value and often leave borrowers with years of additional debt.

Another common misstep is assuming HELOC rates will continue to fall. Variable-rate credit lines can be helpful for flexibility, but they’re also unpredictable. If rates rise again, monthly payments can climb quickly.

Homeowners also frequently borrow more than they truly need, simply because lenders approve larger credit limits. Taking the maximum available amount can put unnecessary pressure on your budget and increase overall risk.

To avoid these pitfalls, focus equity borrowing on essential financial goals like necessary home improvements or consolidating high-interest debt, choose the loan structure that aligns with your risk tolerance, and borrow only what’s needed to meet your objective.

Practical advice for homeowners evaluating their options

If you’re weighing whether to pull equity now or wait until 2026, take these steps to make a sound decision:

1. Calculate your current equity (realistically)

Review your latest mortgage balance and compare it with recent comparable sales in your area. Don’t rely solely on automated valuation tools, since they can be overly optimistic.

2. Clarify your purpose

Equity borrowing makes the most sense when it strengthens your financial health: Increasing home value or lowering interest costs. If the purpose is discretionary, it’s better to pause.

3. Shop aggressively for a lender

Rates, closing costs and terms vary widely. Don’t automatically default to your current mortgage provider. A difference of even 0.25% can significantly affect long-term cost. It pays to shop around for a mortgage lender, since each lender might offer different rates, fee structures and support.

4. Choose the right loan structure for your personality and goals

A HELOC works well for gradual projects or flexible cash needs because you can draw funds as you go.
A home-equity loan suits borrowers who want predictable monthly payments and a fixed repayment timeline.

5. Run the numbers before committing

Estimate monthly payments, total interest costs and the potential tax benefits. Under current IRS rules, interest on home-equity debt is tax-deductible only when the funds are used for qualifying home improvements. That’s worth factoring into your calculations.

Tapping your home equity before 2026 can be a strategic way to unlock lower-cost financing, but only if the timing aligns with your broader financial goals. Borrowing now offers certainty and flexibility, especially for homeowners facing immediate needs or high-interest debt.

Waiting, meanwhile, might yield better rates, but also carries risks tied to home prices, market conditions and unforeseen expenses.

The right move depends on your financial stability, long-term plans and comfort with rate fluctuations. Approach the decision carefully, run the numbers, and choose the option that delivers the best balance of cost, stability and opportunity for your household.

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If you have a car, you're probably getting flooded with calls, emails and letters telling you that your car needs an extended warranty. A lot of these are scams, but extended warranties themselves are real and sometimes useful.

While you might be reluctant to pay the added cost, some of these sales materials can make it sound pretty scary to drive without one. But, if you don't check the fine print or choose a reputable warranty underwriter, you could end up paying for coverage that doesn't quite live up to your expectations.

How do extended warranties work? Do you really need one? What should you consider if you are going to buy one? Get the details you need to know below.

How do extended warranties work with new cars?

When buying a new car, you might be offered an "extended" or "wrap-around" warranty. Whether it's worth it depends on what the standard warranty already included with your new car covers.

This varies by make and model, but typically a standard warranty lasts about three to five years or 36,000 to 60,000 miles. In terms of what they do, there are a few things to understand before signing:

• Normal wear and tear is never covered. All warranties only cover defects or damage that aren't considered normal wear and tear. So, something like worn-out brake pads will be on you to replace.
• Covered components: Some warranties might be "comprehensive" or "bumper-to-bumper," meaning all parts and systems are covered. Others might apply to specific systems like the powertrain, infotainment system or battery.
• Owner responsibilities: Often, warranties come with the condition that you keep up with routine maintenance like oil changes and tune-ups. If you fall behind, the warranty could be voided.
• Exclusions: Even if a certain system is included, some specific components of it might be excluded, or there might be certain situations in which they'll be excluded. Read through these exclusions carefully.
• Upgrades can lead to denied claims. If you take it to a shop after the fact to modify it in any way, dealerships may claim the upgrade caused the defect and deny your claim. Something as simple as swapping the tires or installing a hardwired dash cam may be enough to cause problems
• "Abnormal use" won't be covered. Even if you have a car made for off-roading, your warranty may not cover damage that happens if you actually take it off-road. In some cases, doing anything more than normal street driving could void the entire warranty.

An extended warranty, meanwhile, would work the same as your standard. The difference is it either includes things that are excluded from your standard warranty or that it extends the time that your vehicle is covered.

How do extended warranties work with used cars?

Unlike a new car, buying a used car usually doesn't come with a warranty. One exception to that is a certified pre-owned car, which is certified by the dealer to meet certain standards and will sometimes come with an extended warranty to back that up.

For the most part, used car warranties work the same way. But there are a couple of unique features that you might find:

• Waiting periods. Sometimes, used car warranties won't kick in right away. Instead, they take effect 30 to 90 days after purchase. The waiting period might instead be a mileage, like 1,000 miles.
• Preexisting conditions. Any issue that existed before the warranty was purchased is often excluded. If you bought the warranty when you bought the car, it can be hard to appeal a claim that's denied as a preexisting condition.

Is it worth it to get an extended warranty on a car?

The answer depends on your risk tolerance. When buying a new car, you already have a standard warranty included in the price, so you can at least wait until that one is near its expiration to explore your options.

For used cars, the answer is trickier because it depends on the condition and maintenance history of the car you bought. For a certified pre-owned car that came with an extended warranty, go ahead and use the warranty if you can.

If trying to get a claim approved turns out to be a huge headache, it might not be worth the money to buy another extended warranty when that one expires.

Reasons to not buy an extended warranty

Some reasons you might opt not to get the extended warranty include:

• You had bad experiences trying to get repairs covered under the original warranty that came with your car.
• You've made modifications to your car that would either void a warranty or render it pretty much useless.
• You've done the routine maintenance on the car yourself, so you don't have official records documenting its maintenance history.
• You do a lot of off-roading, hauling or other things with your car that a warranty underwriter could deem "abnormal."
• You'd just prefer to handle repairs without the stress of a claims process.

Extended warranty vs emergency fund

Depending on whether the car is used or new, an extended warranty can range from about $1,000 to $3,000 for a coverage period lasting three to five years (or a certain mileage).

Would you be better off forking over that cash for a warranty or stashing it in a savings account to pay for repairs as needed over that time frame?

The good news is you aren't stuck with one decision or the other. As mentioned, you can hold off on deciding about that extended warranty until your existing warranty is about to expire.

While you're waiting, go ahead and keep the cash you'd spend on it in a savings account so it can earn interest while you weigh your options.

Mistakes to avoid when buying an extended car warranty

If you would feel more comfortable having that extended warranty, there are some important steps to take to make sure you're getting a fair price and paying for a warranty that is actually usable.

Here are some of the biggest mistakes car buyers make when buying extended warranties:

• Forgetting to negotiate the price. The price you're offered isn't set in stone. Start by offering to pay half (or even less) than the price you're initially quoted and negotiate from there.
• Not vetting the company. You'll get plenty of ads, phone calls and emails offering you an extended car warranty. But they aren't all created equal. You need to buy one from a reputable source, like your car's manufacturer, a local bank or an auto club like AAA.
• Getting pressured into buying an extended warranty right away. At the dealership, the salesman might put a lot of pressure on you to add that warranty right then. Just take your car home, do some research, and compare prices and options from multiple reputable companies. Your dealer's offer might be the best one, but you might end up scoring a better deal elsewhere.

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Question: I'm 61 with a $950,000 401(k) and need $50,000 for home repairs. Should I borrow given today's rates or take a 401(k) withdrawal?

Answer: The nice thing about owning a home is getting to build equity in a place that’s yours. Eventually, that could mean cashing in that equity to improve your financial life or simply enjoying the stability of staying put as long as you keep up with your mortgage payments and property taxes.

The downside of owning a home, though, is that expensive repairs can arise when you least expect them.

A home equity line of credit (HELOC) is a common source of funding that many homeowners rely on for large home repairs. However, the average U.S. HELOC interest rate remains high, at 7.82% as of November 5, according to Bankrate. A newer loan option is a home-equity-backed card, which might offer a slightly lower interest rate than a HELOC for borrowers with excellent credit, but still upwards of 6%.

If you’re 61 and need $50,000 to cover home repairs you can’t put off, you might be wondering if it pays to dip into your savings or borrow the money given today’s elevated interest rates. The answer might depend on how much savings you have.

With a $3 million nest egg, taking a $50,000 withdrawal might seem like a no-brainer. With a $950,000 balance in your 401(k), it becomes a much tougher question. It’s important to review your options carefully.

Use the tool below to explore some of today's top rates, powered by Bankrate:

It could be a good time to capitalize on 401(k) gains

Any funds you take out of your 401(k) is money that can no longer continue growing in a tax-advantaged fashion. When you have a pile of available money and borrowing rates are high, it could make more sense to tap your 401(k) rather than take on an expensive loan you might struggle to pay back.

Additionally, if your 401(k) balance is high, now might be an especially good time to take a withdrawal.

"The market’s near an all-time high," says Prudence Zhu, CPA, CFP, and Founder and CEO at Enso Financial. "With borrowing rates outside your 401(k) shooting up, grabbing a slice of those gains today means you can fix that leaky roof or creaky furnace without gambling on a market downturn."

That said, Zhu warns that if you have a traditional 401(k), as opposed to a Roth, your withdrawals aren't tax-free. Rather, they're taxed as ordinary income. If you're still working, says Zhu, the combination of your paycheck and a large 401(k) withdrawal could bump you into a higher tax bracket.

Zhu also points out that while you might not be covered by Medicare if you're only 61, you could have a spouse who's on Medicare, or who will be in a couple of years. If so, your higher income this year could impact their Medicare premium costs in two years and potentially subject them to IRMAAs.

A 401(k) loan could be a better option than a withdrawal

If you're still employed and plan to continue working, Zhu advises considering a 401(k) loan instead of a withdrawal. These loans allow you to pay yourself back with interest instead of an outside lender.

"That interest actually goes right back into your investments, so you’re essentially dollar-cost averaging your repayments," Zhu explains.

The danger of taking out a 401(k) loan is that if you switch jobs and can't repay it, the remaining balance is treated as a withdrawal. That could trigger a big tax bill.

But if taking a withdrawal in the first place is something you’re considering, a loan might be a fairly low-risk option if you’ve accepted the fact that you might be looking at a huge tax bill and are able to plan for it accordingly.

You’ll need to run the numbers carefully

Taking money out of a 401(k) at age 61 isn't necessarily a bad idea. Since you're beyond age 59½, you won't have to worry about facing an early withdrawal penalty on your money.

One thing to keep in mind is that the more money you withdraw from your 401(k) ahead of retirement, the less annual income your nest egg might provide you with. Additionally, as Joseph Patrick Roop, president at Belmont Capital Advisors, points out, depending on your tax bracket, if you need $50,000 to cover home repairs, you'll need to take a larger distribution.

"I will assume they are working and in the 22% federal and 5% state tax brackets," he says. In that case, "to take a distribution and net 50,000, you will need to take a total distribution of approximately $68,500."

Let’s say you don’t tap your 401(k) for home repair money and you retire with $950,000. Using the popular 4% rule, you'd garner an annual income of $38,000, not accounting for inflation-related adjustments.

If you whittle your nest egg down to $881,500, you’re looking at a baseline income of $35,260 instead. You’ll need to decide if you’re OK with that, based on your projected retirement income needs.

Do what’s best for your peace of mind

If you need money for a home repair, you'll either have to come to terms with taking it from your 401(k) or borrowing it and repaying the loan. For this reason, Zhu suggests you might want to choose whichever option sits best with you mentally.

“Given the hassle and uncertainty of job security plus the risks of loan repayment, sometimes the simplest fix is the best fix,” she says. “A direct withdrawal might just buy you the peace of mind you need, especially when it means a safer, happier home.”

Read More

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• I Claimed Social Security Six Months Ago at 62, but My Checks Are Too Small. What Are my Options?

Until recently, lenders that sell mortgages to Fannie Mae and Freddie Mac, the government-sponsored enterprises that guarantee about half of U.S. mortgage debt, could review credit scores only from FICO to help determine whether an applicant qualifies for a loan. But now those lenders also have the option of using VantageScore, a competing score owned by the three major credit-reporting companies (Equifax, Experian and TransUnion).

FICO and VantageScore evaluate many of the same criteria to create scores, including an applicant’s record of on-time loan and credit card payments, but their formulas differ.

The version of VantageScore that mortgage lenders may now review, known as VantageScore 4.0, also factors in such alternative data as an applicant’s history of rent payments.

FICO’s newer models, including FICO 10T, integrate more of this nontraditional data, too. (Currently, however, many landlords don’t provide rental-payment info to the credit-reporting companies). Mortgage lenders that extend loans backed by Freddie and Fannie are using older FICO models now, but they will later be able to adopt FICO 10T.

Credit scores that include alternative data could present a more complete picture of an applicant’s credit history and expand the pool of those who get loan approvals, says Keith Gumbinger, vice president of mortgage information website HSH.com.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below, powered by Bankrate:

Regardless of which credit score a mortgage lender uses, you can boost your odds of being approved for a loan and capturing a desirable interest rate by following the basic rules to raise your score.

Make all your bill payments on time, and keep the balances on your credit cards low as a percentage of their limits. That’s especially important if you’re getting ready to apply for a mortgage; aim for a credit-utilization ratio in the single digits.

Get your free credit reports from annualcreditreport.com and correct any errors you find that could hurt your score.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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