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.

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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.

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.

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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.

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.

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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.

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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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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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.

Anyone who’s tackled a home remodel knows costs can snowball fast, and today’s prices for materials, labor and financing don’t make it any easier. While mortgage rates have cooled slightly from their 2023 peak, many homeowners are still reluctant to refinance and lose their low rates.

That has sparked a new question: How can you fund a remodel without touching your first mortgage or maxing out credit cards?

Rather than relying on a traditional loan with fixed draws and paperwork-heavy funding, a growing number of lenders now offer flexible, card-based home equity lines of credit (HELOCs) that let homeowners tap their home’s value as needed. These hybrid products work much like a credit card, offering swipe access or digital transfers but with interest rates tied to home-equity lending rather than high-rate consumer credit.

Why homeowners are looking beyond traditional HELOCs

A standard home equity line of credit (HELOC) remains one of the most common ways to fund a home remodel. It offers a revolving line of credit secured by your home’s equity, typically with variable interest rates that are lower than most personal loans or credit cards.

But traditional HELOCs can feel rigid. Lenders often require a minimum draw amount, charge setup fees or impose strict repayment schedules. That’s where Trovy and similar platforms come in.

They combine the lower-rate borrowing power of a HELOC with the convenience and accessibility of a credit card. Instead of completing multiple forms and waiting for funds to transfer to a bank account, approved borrowers receive a Trovy card linked directly to their home-equity line.

With it, homeowners can pay contractors, purchase materials or move funds online, drawing only what they need, when they need it.

How a home-equity-backed card like Trovy works

Trovy’s model is designed for homeowners with built-up equity who want to finance projects gradually. You start by applying online, providing property details and verifying income and credit. Once approved, your line of credit is secured by your home but you don’t have to borrow a lump sum right away.

Instead, Trovy issues a HELOC card that functions like a credit card. You can use it for materials, appliances, contractor invoices and other purchases related to your renovation.

Because it’s tied to your home equity, the interest rate will likely be lower than a standard credit card. Trovy lists variable APRs in the 6% to 12% range, depending on your credit profile and available equity.

Other notable features:

• No minimum draw requirement. You only pay interest on what you use.
• No annual or closing fees. Trovy eliminates several costs that can make traditional HELOCs less appealing.
• Flexible repayment. Borrowers can pay down balances at any time without penalty.
• Tax-deductible interest. When funds are used for qualified home improvements, the interest may be deductible under IRS rules.

For homeowners managing multi-phase projects, say, a kitchen update now and a bathroom overhaul six months later, this flexibility can be a game-changer.

Real-world example: A remodel paid as it happens

Imagine a homeowner planning a $75,000 kitchen remodel. Rather than taking out a lump-sum home equity loan or depleting savings, they open a $100,000 Trovy line of credit. During construction, they use the Trovy card to pay a contractor’s $20,000 deposit and later buy $15,000 worth of appliances.

Because they’ve only drawn $35,000 so far, they pay interest on that amount, not on the full $100,000 line of credit. When phase two begins months later, they can use the same line to cover additional costs. This approach keeps cash flow flexible and helps avoid paying interest on unused funds.

It’s a modern take on the HELOC, built for how most renovations actually unfold one invoice, delivery or supply run at a time.

How Trovy compares to other funding options

The main advantage of a Trovy HELOC card is control. You can access your home’s value at lower rates than credit cards, but without the commitment of a lump-sum loan.

The trade-off is that, like any HELOC, your home is collateral. Missing payments could affect your credit or, in some cases, lead to foreclosure.

When Trovy makes sense and when it doesn’t

A home-equity-backed card is best suited for homeowners who:

• Have significant equity (at least 20%) and good credit.
• Prefer incremental funding over a single lump sum.
• Want a lower-interest alternative to credit cards for big-ticket home upgrades.
• Plan to deduct interest for qualifying renovations.

It may not be ideal if you:

• Don't have good credit.
• Don’t have enough equity.
• Prefer not to secure a credit line with your home.

The future of home-equity access

For homeowners who want to remodel without refinancing or racking up high-interest debt, Trovy’s home-equity-backed card offers a middle ground. You borrow only what you need, and enjoy rates below typical credit cards.

It’s not a one-size-fits-all solution, and borrowers should compare costs and read the fine print. But as more homeowners look for flexible ways to use their built-up equity amid high renovation costs, Trovy’s model offers a modern option in home-improvement financing.

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Emergency funds play a huge role in financial well-being.

Vanguard research shows that setting aside $2,000 can boost your financial stability by 21%. If you add three to six months' worth of expenses, you get another 13% bump, even after factoring in income, debt and other assets.

An emergency fund is the money you set aside to cover unexpected expenses during unforeseen circumstances, such as a job loss, medical situations and house repairs. But if you're oversaving for this fund, that can be a problem, unlikely as it might seem.

How come? We'll discuss the hidden risks of maintaining an overly large emergency fund, because saving too much could hurt instead of help.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The problem with saving too much

Vanguard's report speaks volumes. It's wise to save to establish financial stability.

However, oversaving for your emergency fund can be problematic. You're missing out on other monetary opportunities that could potentially grow your wealth and provide a higher quality of life.

Signs you're saving too much:

• You've got more than a year's worth of expenses sitting in savings
• Your investment accounts and retirement funds aren't where they should be
• You focus on stashing cash instead of knocking out high-interest debt
• You feel uneasy about moving money into investments that could grow faster

Among the hidden financial risks of oversaving for your emergency fund:

1. Lost financial growth

When all your extra money sits in a basic savings account, it likely earns little interest.

Better options include a high-yield savings accounts with interest rates of up to 4.35% or in stocks, bonds, mutual funds and real estate investment trusts (REITs).

Andrew Bates, COO at Bates Electric, recommends establishing high-yield savings and investment accounts after building an emergency fund. He believes it's one way to avoid losing the financial growth you deserve.

"Parking too much cash in your emergency fund means you're missing out on real growth," Bates says. "A smarter move is to use high-yield savings for liquidity and put the rest into investments like stocks or REITs, where your money can actually work for you."

2. Potential inflation risk

As prices go up every year, savings slowly lose value, especially if you live in cities hit hard by inflation. As of August 2025, the inflation rate in the U.S. is 2.9%.

If your savings account for your emergency fund earns only 2%, your money is actually shrinking in terms of purchasing power. The more cash you stockpile, the bigger this hidden loss becomes.

Leon Huang, CEO at RapidDirect, suggests beating inflation through investment diversification instead of putting extra money in an emergency fund.

"Keeping too much in low-interest savings is like letting inflation chip away at your money," Huang explains. "Diversifying into assets like stocks and bonds helps preserve and even grow your purchasing power over time.

"Remember, don't let your savings sit idle when they could be working harder for you."

3. Financial opportunity cost

Every extra dollar in your emergency fund is money not working elsewhere. It's just sitting in a low-yield savings account when that money could be growing or improving your finances.

Use it to pay off high-interest debt, prepare for retirement or buy your dream home or start a business, for example.

The message is clear: Oversaving for your emergency fund means missing out on several opportunities.

Learn from Edward White, head of Growth at beehiiv. When he earns extra money from his income or business, he considers balancing various aspects of his finances.

"Cash that just sits in a savings account isn't doing you any favors," White says. "Redirecting that money toward paying off debt, building retirement funds or investing in your next big project creates real financial progress. At the end of the day, money should be a tool for growth, not just a safety net."

4. Psychological mindset trap

There's a line between being financially secure and overly cautious. Having a substantial amount of money can feel reassuring.

However, you could end up being financially trapped. For example, you avoid paying off loans and making investments because you're clinging to that "safety net." Over time, this mindset can hinder your financial progress.

Take it from Raihan Masroor, founder and CEO at Your Doctors Online. He once feared making investments and expanding his business by going digital. However, he quickly learned that this mindset means not making financial progress.

Masroor warns against the psychological trap of oversaving. "Clinging too tightly to cash can make you overly cautious and stall your growth.

"I've learned that avoiding investments or expansion out of fear doesn't protect you, but keeps you stuck. True financial security comes from balance, not from hoarding money."

Finding the sweet spot

The reason you're saving for an emergency fund is to prepare for unexpected situations or manage your fluctuating income. But if you've saved enough to be financially prepared for the rainy seasons, you can use extra cash for other financial opportunities.

Start by saving just enough for your emergency fund. There's no set amount for an emergency fund. The target largely depends on your income and expenses, as well as dependents and overall lifestyle.

According to most financial experts, the general rule is simple: Build three to six months' worth of living expenses.

This means that if you suddenly lose your job, for example, you can cover expenses such as bills and groceries for three to six months, or until you find new employment.

What to do with extra money

Once you hit your emergency funds target, use your extra money for other financial opportunities:

Debt payments (credit cards, personal loans, mortgage, etc.). It's more practical to use your money to settle debts, whether you're paying off credit cards or personal loans. It doesn't make sense to oversave for your emergency fund if you haven't zeroed out your debts.

Specific savings (education, real estate, travel, etc.). Put extra cash into a high-yield savings account, which will exponentially grow your money. You can also use this money to invest in your dream house, finance your children's future education or even find deals on your travel in 2025.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

Basic insurance (health insurance, life insurance, etc.). To protect yourself from financial risks, it's wise to invest in different types of insurance.

Consider getting medical coverage, whole life insurance, a dental policy and/or pharmaceutical benefits. Think of these as secondary emergency funds.

Investment diversification (stocks, bonds, mutual funds, REITs, etc.). It's a good idea to get strategic about your investments by diversifying your portfolio. Not only will this help grow your money, but it also reduces your financial risks.

Wrapping up

Building an emergency fund is one of the first steps to establishing your financial security. But if you oversave for this fund, you might lose investment growth and face inflation risks. You might be psychologically trapped, missing out on many financial opportunities.

Build three to six months' worth of living expenses, then, allocate extra money towards loans, savings, insurance and investments.

When it comes to money, it's a numbers game — be wise about saving and investing.

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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.

The ripple effects of each Federal Reserve meeting reach far beyond Wall Street. They shape the rate on your mortgage, the growth of your savings, and even the value of long-term investments.

Ahead of the September Fed meeting, mortgage rates dropped to their lowest level since October 2024. The average 30-year fixed rate slipped below 6.5% for the first time in months, thanks to cooling inflation and growing confidence that the Fed may begin cutting rates in the coming quarter.

The reaction was immediate: refinance applications spiked nearly 60% last week — the sharpest increase in more than two years. As rates shift, understanding who stands to benefit and who may lose ground is the first step in adjusting your financial strategy.

The big winners: Homeowners and buyers

Falling mortgage rates are a welcome break for homeowners who took out mortgages during the peak-rate periods of 2022 and 2023. For those with rates above 7%, today’s environment opens the door to consider refinancing into lower monthly payments.

That relief can free up hundreds of dollars per month, offering a much-needed buffer against other rising costs like groceries, insurance and energy.

Homebuyers also stand to benefit, at least in theory. Lower rates slightly boost affordability by reducing monthly payment burdens, making it easier to qualify for a mortgage. However, inventory remains tight in many markets, and prices are still elevated. This means buyers may find some relief but not a complete reset of the housing affordability crunch.

Curious about today's rates? Explore and compare some of today's best offers with the tool below, powered by Bankrate:

The losers: Banks, investors and savers

Not everyone wins when rates fall. Banks and investors holding older mortgage-backed securities (MBS) face losses as new loans enter the market at lower yields. As older, higher-interest loans get refinanced, the value of those securities drops, reducing bank profitability and potentially affecting investor portfolios with heavy exposure to mortgage debt.

Savers, too, may feel the downside. If the Fed signals a pivot to rate cuts in response to softening inflation and economic data, banks will likely lower yields on CDs and high-yield savings accounts.

For consumers relying on those accounts for a reasonable return, the recent gains in interest income may start to decrease. The era of 5% savings rates could be short-lived if broader rate cuts materialize.

Browse some of today's best savings account offers with the tool below, powered by Bankrate:

What it means for your financial strategy

When interest rates shift up or down, it sends a ripple effect across nearly every aspect of your personal finances. That’s especially true when mortgage rates move sharply. If you're a homeowner, a buyer, or someone with money in savings, now’s the time to pause and ask: What should I do differently?

Here are a few options to consider.

Refinance math: When it makes sense.

If you have a mortgage with an interest rate at least one percentage point higher than current offerings, now is the time to run the numbers. Just make sure you factor in closing costs, loan term changes and how long you plan to stay in the home. Refinancing isn’t always a slam dunk, but for many, it could mean real monthly savings.

Diversifying savings if yields fall.

If CD and high-yield account rates start to decline, look into laddering strategies or short-term Treasury bills to lock in higher yields while they last. Consider moving a portion of savings into I-bonds or other inflation-protected assets if you’re worried about losing ground.

Big picture: why every rate move creates both opportunity and trade-offs.

Whether you’re a homeowner, a saver or an investor, every rate change reshapes your financial landscape. With another decision coming in October, now is the time to revisit your strategy, weigh the trade-offs between borrowing and saving and make adjustments that support your long-term goals.

Falling mortgage rates can provide relief for homeowners and buyers but they also bring challenges for savers and financial institutions. Instead of seeing these shifts as purely good or bad, treat them as a signal to reassess and realign your money decisions.

Related Content:

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Mortgage rates have slipped to their lowest level in nearly a year, creating a pivotal moment for homeowners considering a refinance.

Those who bought after 2022, when rates climbed above 6%, now have an opportunity to reassess. Lower borrowing costs can translate into real savings, but the decision hinges on timing, long-term goals and whether the math works out after closing costs.

The current surge in refinancing isn’t just about cheaper payments. It’s being driven by signs of a cooling job market, falling Treasury yields and expectations that the Federal Reserve could enter a rate-cut cycle. Together, these forces are reshaping the landscape and prompting many homeowners to take a closer look at their options.

Mortgage rates fall, fueling a surge in refinancing

On September 11, Freddie Mac reported a 15-basis-point drop in mortgage rates from the previous week — the largest weekly decline in the past year. The average rate for a 30-year fixed mortgage fell to 6.35%, while the 15-year fixed dropped to 5.5%.

Homeowners moved quickly to seize the opportunity. Data from the Mortgage Bankers Association shows refinance applications climbed 60% in early September, rising from 1,010 on August 31 to 1,600 by September 7.

Why refinancing is back on the table

Several factors are contributing to falling mortgage rates. The August jobs report revealed that unemployment increased from 4.2% in July to 4.3% in August, suggesting a slowdown in the labor market. The Federal Reserve often cuts interest rates to help drive employment, and a rate cut could help drive mortgage rates down further.

Additionally, the Treasury yield, which can reflect interest rates, recently dropped to 4.04%. The 10-year Treasury yield, which is the borrowing cost the government pays over a decade, tends to closely correlate with mortgage rates. The recent drop in the Treasury yield means that mortgage rates will likely drop, too.

The falling mortgage rates are a welcome reprieve from the high-rate environment of the past 24 months. Beginning in 2023, mortgage rates climbed significantly, and interest rates for a 30-year fixed rate mortgage reached 8% on October 18, 2023, according to Mortgage News Daily.

Rates hovered between about 6.5% and over 7% for much of 2025, so the recent drop offers exciting opportunities for buyers and homeowners looking to refinance.

What homeowners could gain by refinancing now

If you bought a home when interest rates were higher than the current 6.35% for a 30-year fixed rate mortgage, you could potentially save money by refinancing. When you refinance, you can take advantage of a lower mortgage rate, which means you’ll pay less in interest each month, lowering your monthly mortgage payments.

Locking in a lower mortgage rate also saves you on interest over the life of a loan. Even if the interest rate has dropped just a few points, those savings can add up significantly across the life of a 30-year loan.

When you refinance, you also have the option to shorten your loan term. For example, if you’ve been paying on a 30-year mortgage but want to pay your home off sooner, you could refinance to a 15-year mortgage to speed up the process. By paying your home off sooner, you can again save on interest.

Explore and compare some of today's best refinance offers with the tool below, powered by Bankrate:

Costs and risks to weigh carefully

As refinance applications surge, it may be tempting to join in on the refinancing movement, but it’s essential to carefully consider whether refinancing makes sense for you.

Start by carefully reviewing the costs of refinancing. You will be responsible for paying closing costs to refinance, which typically range from 3% to 6% of your mortgage balance.

If you owe $250,000 on your home and want to refinance, you could pay $7,500 to $15,000 in closing costs. Those costs can vary depending on the lender you use and the type of refinance you choose, so be sure to shop around and compare costs.

Calculating the refinance break-even point can help you determine if refinancing makes financial sense. The break-even point occurs when you start saving money as a result of refinancing your home.

To start, add up all of your costs of refinancing, then determine how much money you’ll save each month. Divide your refinancing fees by the amount of money you save per month to determine how many months it will take before you start saving money.

For example, if your fees total $7,000 and you’ll save $350 a month, you’ll divide 7,000 by 350 for a result of 20 months. In this scenario, you’ll start saving money in just under two years.

Make sure that you meet the requirements to refinance, too. It’s a good idea to have built up at least 20% equity in your home before you refinance. While some lenders will allow you to refinance with less, they will typically require you to carry private mortgage insurance, which will eat into your savings.

It’s ideal to have a strong credit score, too. The better your credit score, the better the chances of a lender offering you the lowest available mortgage rate. It’s also important to keep your debt-to-income ratio as low as possible. That ratio affects your credit, plus each lender may require borrowers to meet specific debt-to-income ratio requirements.

Consider the timing of refinancing, too. If you’re planning to move in just a few years, refinancing may not make sense, especially if you could be moving before you meet that break-even date. If you refinance your mortgage and move soon after, you might never recoup the money you paid for your closing costs, ultimately losing money thanks to a refinance.

Is this window temporary?

The falling mortgage rates may be temporary. Economic instability from a volatile market and unpredictable tariffs could prompt interest rates to increase. If inflation continues to climb, the Federal Reserve might choose to keep interest rates higher to help fight inflation, which could result in higher mortgage rates.

Since it’s difficult to predict how long lower rates will hold, many homeowners are weighing their options now. The recent drop has already sparked a surge in refinancing, but future moves by the Federal Reserve and broader economic shifts could change the picture quickly.

For borrowers, the key is understanding how long it might take to benefit from a refinance and whether it aligns with their financial goals — especially in a market that could shift again in the coming months.

Related Content

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• Mortgage Rates Dip to Year-Low as Jobs Data Disappoints
• My Mortgage Rate is 6.5%. Should I Refinance If Rates Fall By Half a Point

Being debt-free is a financial badge of honor. With American household debt at $18 trillion at the end of 2024, it's easy to understand why.

People seek the peace of mind that comes from knowing no one has a claim on their paychecks (except the IRS).

What if living a debt-free life isn't the best option?

A neutral tool

Debt isn't inherently bad or good; it's a financial tool that can be used to further your goals if you understand the processes behind it. When used correctly, it can increase your net worth, enhance your earning power or generate long-term returns.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

The trick isn't to avoid debt like the plague, but to know when and which type is worth taking on.

We'll discuss several scenarios in which taking on debt is a smart, strategic move. Learn which types of debt make the most sense in each case, what to watch for and how to evaluate these decisions.

1. Take on a mortgage in a favorable market

In the first quarter of 2025, the American homeownership rate was 65.1%, a decrease from 65.7% at the end of 2024. This means that fewer people, especially first-time buyers and younger adults, can afford to own the house in which they live.

Higher mortgage rates and a limited housing supply are among the main contributing factors, but the fear of incurring debt also exacerbates this situation.

For most people, homeownership is the biggest financial decision they'll ever make. It's also one of the most misunderstood when it comes to debt.

A mortgage puts you into six figures of debt, but it's also one of the few loans that can make you wealthier over time.

Unlike rent, which goes straight into someone else's pocket, mortgage payments gradually build equity, which grows as your home appreciates in value.

"Over the years, I've helped thousands of people move. Based on my observations, homeowners tend to be more focused on the future than renters," says Adrian Iorga, founder and president at Stairhopper Movers. "They're investing in their property and their community, not just paying to live. That mindset shift from renting to owning makes a big difference in long-term wealth and lifestyle."

When it makes sense

Factors that make taking a mortgage a good investment include:

• Interest rates are relatively low or stable
• You plan to stay in the home for at least five to seven years
• Your monthly mortgage payment is manageable within your income
• You understand all costs involved, in the short and long term
• You're buying in a high-demand or appreciating market

If you're not yet sure if buying a home is the right step, maybe this fact will help you decide: The wealth of a typical homeowner in America is almost 40 times larger than that of the typical renter, according to the Aspen Institute.

2. Invest in education or high return on investment (ROI) skills

College graduates are more likely to be employed than high school graduates and will earn, on average, $1.2 million more over their lifetime.

Most people are aware of this through their own experiences in the workforce, which is why the global student loan sector is currently undergoing a growth phase.

As a parent, you want to ensure your child has all the opportunities they need to be successful in life. Still, the increase in the costs of higher education drives more students towards taking out loans, which ties down a young adult before they start a proper career.

"I've seen firsthand, through my clients, how borrowing large amounts for low-return education can create decades of financial strain," says Conrad Wang, managing director at EnableU. "When debt doesn't lead to real opportunity, it becomes a trap. This is why it's crucial to weigh the long-term value of what you're financing."

This doesn't mean you shouldn't invest in your education or skills. When used strategically, education debt is a high-return investment that continues to support your growth for years to come.

When it makes sense

If you're pursuing a degree or certification in a high-demand, high-income field — technology, health care, finance or the skilled trades — debt can be a smart move. Fields with strong job placement rates and a reasonable cost-to-earnings ratio are especially worth the investment.

Bonus tip: Take advantage of grants, scholarships or employer tuition reimbursement first. If you do take out a loan, devise a clear repayment plan based on your expected income after graduation.

3. Use business debt to further your goals

"Debt and entrepreneurship both carry risk, but when paired strategically, they can unlock serious growth," says Shan Abbasi, director of business development at PayCompass. "As an entrepreneur, you can use borrowed capital to scale smarter, improve operations, and boost revenue. It's all in the intention behind the debt."

Business loans should be used to scale operations, hire talent, invest in equipment or expand into new markets. Borrowing to cover ongoing losses or unclear expenses often leads to deeper debt, not growth. If you don't know how the loan pays for itself, you're better off.

When it makes sense

The best time to think about taking a business loan, such as a Small Business Administration (SBA) loan or a line of credit, is when you already have a profitable or proven business model. Even then, you shouldn't jump on the first funding opportunity that comes your way.

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Explore all options and choose the most cost-effective financing solutions. Put together a clear and realistic plan for how the borrowed funds will generate more income and if you'll be able to repay the loan even if growth is slower than expected.

4. Bet on strategic investments instead of lifestyle upgrades

It's tempting to use debt for a flashy car, a kitchen remodel or that two-week dream vacation to the Maldives. While some purchases might feel like upgrades, they rarely pay you back.

As Michael Melen, co-founder at SmartSites, puts it, "When I started SmartSites, I invested most of my personal finances into building the business. It meant sacrificing short-term comforts like luxury vacations or splurges, but I had a clear vision of where we were headed. That focus paid off. The smartest investment is in your future."

If you're not interested in entrepreneurship, you can focus on things such as energy-efficient home improvements, rental property upgrades that increase cash flow or certifications that boost your earning power.

When it makes sense

Regardless of what type of project you're funding, make sure you can handle the monthly payment without jeopardizing your emergency fund or retirement contributions.

Shop around for the most favorable loan terms, and choose only projects that either increase your income or reduce long-term expenses.

The bottom line

In the real world, strategic debt is a powerful tool for building wealth. Whether it's investing in property, education, business, or smart upgrades, the key is borrowing with intention and a clear ROI.

There is no such thing as "bad" debt; rather, it is debt taken without a plan and for the wrong reasons. Make it work for you, not against you.

Related Content

• How to Use Good Debt (While Identifying and Avoiding Bad Debt)
• A Guide to Debt: Good vs. Bad and Tips to Better Manage It
• 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.

Medical debt might seem as though it’s a problem limited largely to people who lack adequate health insurance coverage.

But even those who have a health plan could find themselves struggling to pay bills.

According to a 2023 study from health care advocacy organization The Commonwealth Fund, 30% of adults with employer coverage were paying off debt from medical or dental care, as were 33% of those with Medicare, 33% of those with an individual or Affordable Care Act marketplace plan, and 21% with Medicaid.

Cutbacks to Medicaid funding in the One Big Beautiful Bill Act, which became law over the summer, have raised concerns that more people will find themselves immersed in medical debt.

“It’s such a common burden because of the complexity and lack of affordability in our health care system, even if you have insurance,” says Ruth Landé, vice president of provider relations at Undue Medical Debt, a nonprofit organization working to alleviate the burden of medical debt.

If you rack up big bills while you’re still subject to your health plan’s annual deductible, you might be on the hook for thousands of dollars before your insurance coverage starts — especially if you have a high-deductible plan.

Even after insurance kicks in, the out-of-pocket costs for co-payments, co-insurance, or charges for out-of-network care can stack up.

Hospital stays and surgeries or serious illnesses that require inpatient care, such as appendicitis or a heart attack, often have hefty costs for patients. Bills for room charges, surgeons, anesthesia, or imaging can quickly accumulate.

Emergency room visits are also a driver of medical debt, although thanks to the federal No Surprises Act, patients can’t be billed more than the in-network rate for emergency care, even at an out-of-network hospital or if some of the providers are in network and some are out of network.

Treatment for chronic illness is another common culprit. Conditions such as diabetes, cancer, heart disease, asthma and autoimmune disorders require regular care, tests and medications, and ongoing expenses for treatments such as insulin, chemotherapy and dialysis can add up.

Insurance plans might cover only certain treatments, medications or specialists. Some newer or specialized drugs or therapies might be only partially covered — or receive no coverage at all — and the specialists you prefer to visit might not participate in your insurer’s network, resulting in substantial out-of-pocket expenses for you.

Costly medical bills might feel insurmountable, but the worst move you can make is to ignore them or forgo care that you need out of fear of going into debt.

According to the Commonwealth survey, nearly two in five working-age adults had delayed or skipped needed health care or a prescription drug in the past year because they couldn’t afford it. If you’ve received a medical bill that you can’t pay, or if you’re already in debt, you can take action to get some relief.

Confirm that the charges are accurate

Make sure that you truly owe the charges you’re being asked to pay. Review copies of your bills, explanations of benefits (EOBs) and other communication from your insurance company and health care providers as soon as you get them.

Insurance companies typically send EOBs in the mail, but you can also usually find them by logging in to your account on the insurer’s online portal. If you can’t locate an EOB for a medical service you received, call your health care provider to be sure it has your insurance information and that it billed the insurance company.

Look for problems such as duplicate charges, charges for services you didn’t receive, incorrect information about you and any medical conditions you might have, and billing for an out-of-network provider when you visited an in-network one.

If you notice that your insurance company paid for a service you didn’t receive, you should point that out, too; even though you might not owe any money, incorrect billing can still be a problem for you because it could cause denials of future claims if the insurance company thinks you already had certain treatments.

Keep in mind that if you get a bill long after you received a medical service, it might be because of ongoing disputes between health care providers and insurance companies, says Landé.

Reach out to the provider or insurance company as soon as possible if anything looks out of place or you don’t understand your charges — and consider doing so by e-mail to keep a paper trail. If your insurance company is denying coverage that you believe you deserve, you can appeal it.

If your health care provider or insurance company fails to resolve inaccurate bills, you can file a complaint with your state’s department of health (find its website at www.usa.gov/state-health), its department of insurance (https://content.naic.org/state-insurance-departments) or, sometimes, its attorney general (www.naag.org/find-my-ag).

These entities can review your complaint, and they might contact the provider or insurer to investigate, though the extent to which they take action to help you will vary by state.

For example, the Illinois Department of Insurance reviews complaints about insurance billing and can take corrective action if necessary, as does the New York State Attorney General’s Health Care Bureau.

Create a payment plan

Once you establish that you’re responsible for a bill, the next step is to figure out a plan to pay it. If you can’t afford it up front, make that clear to the health care provider.

“Providers often just don’t know the economic circumstances of folks. But if they do, they can classify your care as charitable care or offer financial assistance,” says Landé.

Even if you have health insurance, you might qualify for assistance. They might forgive a portion of your bill or, in some cases, the entire amount. Most providers also allow patients to set up zero-interest payment plans.

If you need some extra guidance, consider reaching out to a nonprofit organization such as Dollar For, which offers free help navigating medical financial-assistance applications.

Although it might be tempting to pay a medical bill with a credit card — especially if the bill is unexpectedly large and you don’t have money readily available to pay it — avoid doing so at all costs, says Landé.

If you carry a balance from month to month on your card, you’ll likely pay interest on that debt at a steep rate — an average of 20%, according to Bankrate.

Manage a debt in collection

If you don’t work out a plan to pay a medical bill, the provider might eventually turn the debt over to a collection agency. In some cases, a collection agency might track you down and legally require you to pay under the threat of being sued. Sometimes debt collectors also threaten wage garnishment, meaning your employer could withhold some of your pay to cover the debt.

If you have a medical debt in collection, pay only what you can afford. Don't stop taking medications, visiting your doctor, or paying for housing and utilities. A good general rule is to spend no more than 3% to 6% of your gross income on out-of-pocket medical bills, says Landé.

Debt-collection agencies can work with you to create a payment plan. You might also want to get help from a credit counselor. To connect with one, go to the website of the National Foundation for Credit Counseling.

If a debt-collection lawsuit is filed against you, respond either personally or through an attorney by the date specified in the court papers.

To preserve your rights and the chance to fight a court order, respond promptly. Consider enlisting the help of a legal aid organization such as the Legal Aid Justice Center.

Know your rights

Your state could offer legal protections when it comes to the collection of medical debt. Many states restrict health care providers’ ability to sue patients for their medical debt, often by regulating whether or how they can send debt to collection agencies.

On the federal level, the Fair Debt Collection Practices Act bans debt collectors from using abusive, unfair or deceptive methods.

In recent years, both policymakers and the credit industry have made efforts to lessen the impact that medical debt has on your credit.

Some states (California, Colorado, Connecticut, Illinois, Maryland, Minnesota, New Jersey, New York, Rhode Island, Vermont, Virginia and Washington) have laws in place that prevent or restrict the reporting of the debt to the credit-reporting companies (Equifax, Experian and TransUnion).

In January, under the Biden administration, the Consumer Financial Protection Bureau finalized a rule that banned the inclusion of medical debts on credit reports and prevented lenders from using medical information in credit decisions.

The rule was supposed to go into effect in March. But under the Trump administration, the CFPB no longer supports the rule, and it faces legal challenges from credit-industry groups.

Still, the credit-reporting companies have made policy changes that limit how medical debt might appear on credit reports. Credit reports no longer list medical debts that have been paid, unpaid medical debt that is less than a year old, or medical collections of less than $500.

Major credit-scoring models have altered their formulas to lessen medical debt’s negative effects on the scores. Unpaid medical debt has a smaller impact on FICO scores than other unpaid debt, for example. (Note that if you paid a medical bill with your credit card, that debt is typically not classified as medical debt.)

Make a plan now to avoid debt later

If you have solid health insurance, you can make moves to help you avoid falling into debt in the first place. Preventive care, such as regular check-ups, can ward off expensive health issues. Most health insurance plans must cover certain preventive-care services at no cost.

“Take advantage of your annual wellness visit or annual physical and get to know your preventive benefits,” says Tatiana Fassieux, education and training specialist for California Health Advocates.

Get to know your family history, too, says Fassieux. Even if you’re healthy now, being aware of whether certain medical conditions run in your family may help you assess your risk for future needed care, she says. The U.S. Surgeon General’s “My Family Health Portrait” tool can help you gather information about your family health history and learn about your risks.

If you anticipate that your health care needs might increase in the coming years, consider how your insurance plan would cover you. Compare premiums and deductibles to find the balance of monthly costs and maximum out-of-pocket expenses that will work for your budget.

If you expect to use health care services frequently, you may want to steer clear of a high-deductible health plan unless you have enough money in savings to fully cover the deductible. HDHPs have been associated with statistically significant lower use of evidence-based clinic visits, laboratory tests and prescription drugs for individuals with chronic illnesses, according to a recent study by the Journal of the American Medical Association.

For planned medical services, you should familiarize yourself with the up-front costs — and that starts with knowing the ins and outs of your insurance coverage. Before you receive a treatment, verify that all the providers involved are in-network under your plan. It’s not uncommon for one provider, such as your primary care doctor or surgeon, to be in-network, while others, such as the anesthesiologist or radiologist, are not.

Reviewing coverage in advance with a provider who will be on your care team may help you avoid unexpected costs.

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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Whether you're buying gas, groceries or clothes, you now have the option to defer payments over several months through installments, rather than pay in full at the time of purchase.

These Buy Now, Pay Later (BNPL) services, from firms such as Klarna and Affirm, can be tempting when money is tight: Their promise of interest-free borrowing is compelling.

Traditional 0% interest loans have been common for decades. Thousands of people take advantage of them to fund expensive home repairs or renovations.

By enabling large expenditures without having to spend down a savings account, they help buyers afford what they need, such as a roof replacement, and help the sellers make more sales.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

However, that 0% interest comes with a well-disclosed catch: Pay off the loan by the deadline or be charged interest from the beginning of the loan.

For those organized and responsible enough to meet the deadline, these loans can be a wise financial decision: Why not keep your money working for you as long as possible?

However, failure to repay loans on schedule has resulted in financial hardship for less organized people.

It's important to carefully consider your approach to credit before taking out any loan, but especially for loans with unfavorable terms, should you miss a deadline.

New 0% territory

The relatively new "0% loan" environment of BNPL, with shorter-term, lower-cost purchases, represents a seismic shift in the marketing and use of such loans. Often, payments must be made every week until the loan is discharged a month or two later.

As such, BNPL is frequently marketed to would-be borrowers for much smaller loans. It's now even possible to buy lunch on a six-installment weekly repayment plan.

What's worrying is that taking out small loans for lunch might not seem like debt. This is dangerous thinking. Anytime you borrow money that you are required to repay, regardless of whether or not interest is charged, it is debt.

Viewing it otherwise can lead you into trouble, as you may keep racking up "not debt" to the point where you can no longer afford the weekly payments.

That's when the risky side of BNPL rears its head: As with traditional 0% loans, missing a payment can result in painful financial penalties.

A missed payment can lead to late fees of about $30, according to Consumer Reports. If you financed a $5 sandwich, for example, that's the equivalent of 600% interest for just one late payment.

With many short-term BNPL loans, you have six opportunities to miss payments. That could turn into a very expensive sandwich.

Pros and cons of BNPL

Used responsibly, BNPL can be a good stand-in for a depleted, or never-started, emergency fund. Most financial advisers tell their clients to have a healthy emergency fund to cover unexpected expenses, such as car repairs or hospital bills.

But it can be difficult to set aside money for the "what-ifs" in life, and more than one unplanned expenditure can drain your savings quickly.

If you're in need of emergency purchasing power, BNPL can be useful as long as you know you can keep up with the required payments.

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The problem lies in using BNPL for ordinary purchases, such as lunch, gas or groceries. As with other transactions in which cash doesn't change hands, it's easy to lose track of how many purchases you've made and how much you've spent.

Without careful recordkeeping, it's all too easy to overspend, resulting in burdensome installment payments and an endangered credit score.

How to avoid financial trouble

To avoid this happening to you, make sure you understand the terms of any loan you take out:

• Beyond the interest rate, what penalties will you incur if you accidentally miss a payment?
• What other fees or costs are associated with the loans?
• Do you need the loan in the first place, or are you simply tempted to keep money in your own account as long as possible?

By asking yourself these questions before taking out a loan — BNPL or otherwise — you could save yourself significant unplanned expenses and damage to your credit score.

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• Can Buy Now, Pay Later Plans Help You Build Credit?
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• Klarna Buy Now, Pay Later Is Coming to a Walmart Checkout Screen Near You
• How to Take a Break Without Breaking the Bank

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.

Last year, the Trump administration resumed garnishing benefits for delinquent student loans and increased the amount withheld from checks to recover past overpayments from 10% to 50%.

That got me thinking — who else can take a part of a retiree's Social Security benefits? The answer is complex, as it depends on the nature of the debt and the specific circumstances involved.

The list of creditors that can take your benefits to repay a debt is small and filled with an alphabet soup of powerful government agencies that are no strangers to collecting debts.

Even if other creditors can't touch your Social Security benefits, some specific, unavoidable obligations can lead to garnishment. These include debts for back child support, alimony, or restitution to a crime victim.

Here's a bit of good news for anyone who might find their benefits diminished by a debt. The law shelters the total amount of all Social Security benefits — and all other eligible federal benefit payments — that have been directly deposited into that account or loaded onto a benefit debit card within the past two months.

The U.S. Department of the Treasury uses Direct Express Debit Mastercard, a prepaid debit card, to distribute federal benefits to recipients who don't have access to a bank account.

Paper checks lack the same creditor protections as benefits received via direct deposit or loaded on Treasury-approved debit cards. Although federal benefit payments are primarily issued electronically, with paper checks being phased out in most cases, the Social Security Administration can issue paper checks in limited circumstances. You have to file a Request for Payment of Federal Benefits by Check (FS Form 1201W) and state why you need the waiver. You should consider using either direct deposit or a benefit debit card, as both methods keep your benefits safer than a paper check.

This article focuses on retirees' Social Security benefits, not Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) income.

How the law protects Social Security retiree benefits

Social Security benefits are generally protected from commercial creditors under federal law. Section 207 of the Social Security Act states that these benefits are exempt from garnishment, levy, attachment, or other legal processes by most creditors. And the federal Consumer Credit Protection Act (CCPA) provides strong protections for Social Security benefits after they hit your bank account.

This means that private creditors, such as credit card companies, personal lenders, or medical debt collectors, typically cannot take your Social Security benefits to satisfy a debt.

Who can take your Social Security benefits

Many federal benefit payments, including retiree Social Security benefits, are not subject to garnishment in most cases. These payments are sometimes called exempt funds; however, these "exempt funds" are not always safe from garnishment.

Here's a breakdown of who can garnish or levy Social Security benefits:

Federal Agencies

• Social Security Administration (SSA): If you have received an overpayment of Social Security benefits, the SSA can reduce future benefit payments to recover the overpaid amount. The SSA currently imposes a 50% garnishment on benefits until the overpayment is repaid.
• Internal Revenue Service (IRS): The IRS can garnish up to 15% of your Social Security benefits to collect unpaid federal taxes. It does not need a court order to do this
• U.S. Department of Education: If you default on federal student loans, the Department of Education can garnish up to 15% of your benefits. There's a rule that ensures you are left with at least $750 per month in benefits. This number was determined in 1996 and has never been indexed for inflation.
• Other federal agencies (via Treasury Offset Program- TOP): The Treasury Department can offset/reduce your Social Security benefits to collect delinquent debts owed to various other federal agencies. This can include overpayments of other government benefits, such as SNAP/food stamps, or debts owed to agencies such as the Small Business Administration (SBA) or the Department of Veterans Affairs (VA) for non-disability related debts. Generally, it can impose a 15% offset without a court judgment.

Court-ordered obligations, typically enforced by state agencies:

• Delinquent child support and spousal Support: State child support enforcement agencies can garnish Social Security benefits to satisfy court-ordered child support obligations. And, overdue court-ordered alimony payments can also lead to garnishment.
  • The total amount that can be garnished from your Social Security benefits depends on your state’s law, but it can’t exceed 60% of your benefits. If you’re more than 12 weeks behind, though, the cap increases to 65%
• Past due restitution to a crime victim: If a court orders you to pay restitution to a victim of a crime, your Social Security benefits can be garnished to fulfill this obligation

Garnishment vs bank levy

There are two ways creditors can access your income: They can garnish your Social Security check before you're paid, or levy the funds once they're in your bank accounts. The distinction matters because the law protects your money differently at each stage.

Before it's been paid to you, your benefit is protected from most private debts. However, once it's in your account, the legal protection becomes limited and varies based on how the money was deposited.

Standard private creditors, such as credit card companies, medical bill collectors, personal loan lenders, etc., cannot directly garnish your Social Security benefits, even if they obtain a court judgment against you. As discussed above, only the SSA, IRS, Department of Education, and the Treasury Department can garnish your check.

If they can't intercept your Social Security check, the next step would be to levy your bank account. That is something a commercial creditor can do within limits. In this case, the creditor is permitted to levy money from your bank account that is over two months’ worth of benefits. If your account has more than two months’ worth of benefits, your bank can levy or freeze the extra money.

That's why the way you receive and store your benefits matters.

Protection in bank accounts

If your Social Security benefits are directly deposited into your bank account, federal regulations require banks to automatically protect at least two months' worth of benefits from garnishment by most creditors. This "look-back" period ensures that a certain amount remains accessible to you. However, if you deposit paper checks or transfer the funds to another account, this automatic protection may be lost.

That's why it's advisable to open a separate bank account to receive your Social Security benefits; there can't be any confusion about where the money in a dedicated account came from.

Important Considerations:

• Mixed funds: If you mix your Social Security benefits with other income, such as wages or gifts, in the same bank account, it can make it harder to distinguish the protected funds. This could potentially jeopardize the protection. It's often recommended to use a separate account solely for your Social Security deposits
• Being sued: Even if your Social Security benefits are protected, creditors can still sue you for unpaid debts and obtain a judgment. While they may not be able to collect from your protected benefits, they could potentially pursue other non-exempt assets you might have

Four steps to help protect your Social Security benefits

Step 1: Use direct deposit or a benefit debit card: Social Security payments that are directly deposited into your bank account or prepaid benefit card are easier to identify and protect. Benefits received via paper checks do not receive protection.

Step 2: Open a separate account: Using a dedicated account solely for your Social Security benefits will simplify the process of proving the funds' origin if challenged.

Step 3: Don't ignore legal notices: If you receive a garnishment notice, don't ignore it. Responding promptly and/or seeking legal advice to understand your rights and potential redress in complex situations is the best way forward. Your debts aren't going away. Many outstanding debts can grow from interest and penalties that accumulate while the debt remains unpaid.

Step 4: Seek legal advice: If you have questions about garnishment/bank levy or believe your benefits are being improperly garnished, you should consult with a qualified attorney to understand your options and potentially challenge the action.

Manage your debt to maintain your benefits

While Social Security payments are generally immune from most forms of garnishment, there are specific exceptions, especially regarding federal debts and court-issued obligations. It's crucial to understand the rules surrounding garnishment and take measures, such as having a dedicated bank account, to protect your benefits, ensuring that this critical source of income remains safe.

It's important to be proactive when addressing outstanding debts. When it comes to overdue taxes, arranging a payment plan can help you avoid the stress of debt collection and an unbudgeted hit to your Social Security benefits.

Related Content

• Why 'Locking' Your Social Security Number Is the New Credit Freeze
• How Much Would Social Security's 2033 Shortfall Cost You?
• Four Things You Need to Know Before Applying For Social Security
• The Average Social Security Check in Every State

Debt casts a shadow on your financial outlook. While having some debt is good, in the case of mortgages or making home improvements to improve your property value, other debt can prevent you from reaching your financial goals.

The key is knowing the difference and recognizing when your money habits are holding you back.

That’s where a little guidance can make a big difference. With the right strategies, you can shift from just getting by to building long-term financial stability.

Radio personality and financial adviser Dave Ramsey targets five behaviors that keep you in the revolving door of debt. Along with these habits, we'll show you ways to break them.

1. Living without a budget

A budget is your financial roadmap, directing you to your goals. However, if you don't have one, it can leave you in the dark about spending patterns and prevent you from reaching your goals.

This is why a budgeting app can come in handy. They're like the nonjudgmental best friend who helps you make sense of where your money goes.

You link your bank accounts, and they track your spending for you. You can also set savings and retirement goals. Some apps, such as Honeydue, can keep you on the same financial page as your loved ones, which is integral for couples or adults caring for aging parents.

If you're looking to try one out, this option from Quicken is easy to use and offers you a risk-free 30-day money-back guarantee.

2. Impulse buying

It's fun to treat yourself; however, if it isn't an occasional treat and more of a regular one, that's money you could be devoting to pay down debt or save.

It's why Ramsey recommends shopping with a plan in mind and cash in hand. Doing this keeps your focus narrowed to the task at hand. What's more, by paying in cash, it forces you to budget your expenses, reducing the likelihood of having the funds for impulse items.

If you're thinking about buying something a little bigger, wait for 24 hours. Taking a step back helps you assess whether the purchase is essential or a want.

3. Not having emergency savings

Life becomes unpredictable, and with it can come unexpected expenses. When those arise, having an emergency savings account is vital, as it helps you avoid going into further debt.

How much emergency savings should you have? Ramsey recommends saving from three to six months of expenses. That way, if a job loss or a high bill comes due, you have the funds to cover you.

If you're looking for quicker ways to reach this savings goal, consider a high-yield savings account. They earn rates far outpacing inflation, and many come with no account minimums or fees.

Use the tool below, powered by Bankrate, to search for some of today's top savings account offers:

4. Over-relying on credit cards

Credit cards can be great financial tools for saving money on everyday purchases. The best rewards credit cards offer cash back on groceries, dining out, streaming and traveling.

However, if you carry credit card debt, you're losing money. The interest fees alone will eat into your payments, especially if you only make the minimum amount. Every dollar you spend on interest is one dollar less you can invest or save.

If you have credit card debt you can't pay off monthly, consider paying cash for all expenses until you can. Doing this achieves several things: One, you won't add to your credit card debt. Two, it can help you spot areas in your budget you might need to trim to pay off your debt quicker.

Meanwhile, if you're struggling with credit card debt, contact your credit card issuer to tell them about your situation. They could customize a repayment plan that reduces interest rates. The benefit of this approach is that it'll close card use while on the plan, thus giving you a narrower focus on tackling debt.

5. Lifestyle creep

Lifestyle creep is when your income rises, so you decide to spend more. I get it, when you receive that raise, you want to treat yourself. However, as your income rises, you want to resist the temptation to spend more so your future self is in a better financial position.

Here are a few signs you might have lifestyle creep:

• Your income increases, but your savings remain the same
• Your impulse buys become a habit, not an outlier
• A failure to reach your financial goals

If you have lifestyle creep, there are ways to mitigate it quickly. The first is to set up a budget and review all of your expenses, as it can help spot patterns of overspending.

Next, set up automatic transfers from your checking account to a high-yield savings account on paydays. Doing this allows you to earmark money before spending, making you much more likely to reach your savings goals.

You should also get to know your money mindset. This is the belief you have about your money, savings habits and goals. Spending time analyzing the decisions you made can help you chart a course of action that helps you reach your goals and pay off debt quicker.

Related content

• 3 Things Dave Ramsey Says to Stop Buying — and 2 That Are Worth It
• Kiplinger's Best Budgeting Apps of 2026
• 6 to Pay Off High-Interest Debt (and Still Save for the Future)

Editor's note: This is the last of a four-part series about wealth planning for different generations. Part one was Talkin' 'Bout My Generational Wealth: Baby Boomers, part two was Come as You Are: Wealth Management for Gen X, and part three was Bouncing Back: New Tunes for Millennials Trying to Make It.

In the last months, I shared wealth planning tips for different generations. This final installment focuses on Gen Z — a generation especially dear to me as it happens to also include my children.

As I think about the financial journey that they are about to begin, I hear Olivia Rodrigo's "Drivers License" in my head, with themes of youthful exploration and the uncertainties that come with it.

Generation Z, born from 1997 to 2012, is entering adulthood in a time of economic and global tremors, technological advancements and a very different career landscape than the one that generations prior faced.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

Just as obtaining a driver's license symbolizes new freedoms and responsibilities, so does the journey toward financial independence.

'Work From Home': Embracing the gig economy

The rise of the gig economy is redefining traditional employment — leading many Gen Zers to work as freelancers, independent contractors or part-timers.

Some of this trend is by choice, and some is a result of the evolving employment market. Like everything, this move to the gig economy is going to provide workers with interesting opportunities, but some daunting challenges as well.

Without a steady salary that a typical full-time employer would provide, it is even more important for this generation to have a sound budget and financial plan in place. Two key considerations are:

Budgeting for variability. Establishing a monthly budget that accounts for fluctuating income is crucial. Allocating funds for essentials, savings and discretionary spending can help provide financial stability should income flow vary due to the nature of your work.

Building an emergency fund that could last for at least six months is a helpful benchmark.

Tax preparedness. Unlike traditional employees, "gig" workers must manage their own tax withholdings. Setting aside a portion of each paycheck for taxes is a prudent way to manage and prevent year-end tax surprises.

Note that in certain cases, they may need to make quarterly estimated tax payments throughout the year to avoid underpayment penalties. Therefore, it is not only about having the liquidity to pay the taxes, but also satisfying the timing of such payments.

When your income is variable, rather than a steady income stream, it can make it harder to manage your day-to-day life. A focus on sticking to a budget and making a financial plan is even more important.

The traditional ease of having a payroll system with automatic deductions is not available for those in this category.

Be proactive! A degree of discipline is required to ensure you're following your budget and financial plan.

'Good 4 U': Maximizing tax-advantaged accounts

Starting early with tax-advantaged accounts can yield long-term benefits.

Understandably, retirement may seem like a far-away idea for this generation just entering the workforce. However, the long-term benefits realized from tax-deferred or tax-free compounded growth are significant.

The earlier you start, the more you can maximize the benefits of these tax-advantaged accounts. Two possible considerations include:

Roth IRA. Ideal for young earners, Roth IRAs allow after-tax contributions to build future tax-free growth. These accounts have an income threshold by which one is prohibited from contributing.

In 2025, that income limit is $150,000 for a single person and $236,000 if you are married filing jointly. If your income is higher, there is a phase-out. So, with an income level of $165,000 or above (or $246,000 for married couples), you are prohibited from making a Roth IRA contribution.

Many early-career Gen Z individuals fall below these thresholds and should take advantage of this opportunity while it's eligible to them.

Health savings account (HSA). Another tax-advantaged account that may not be obvious is the health savings account, or HSA, which offers triple tax benefits — tax-deductible contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses.

While many young people may not see a need for significant health care expenses on a yearly basis and may therefore assume that this is not applicable to them, a longer view is beneficial.

Having a conversation with your children about the costs associated with a serious health event (cancer, injury, etc.) can be illuminating for them.

HSAs can be flexible because the money held in the account can be invested and withdrawn later in life. With that perspective, an HSA is more like a "retirement" account for future health care expenses.

Note that HSAs are available only to those with high-deductible health plans, meaning a deductible of at least $1,650 for individual coverage or $3,300 for family coverage in 2025.

'When I Was Older': Illuminating retirement planning

The evolution of the employment market and compensation trends suggest that few Gen Zers will have a pension upon retirement.

Independent contractors and gig workers do not have the benefit of an employer-sponsored 401(k) plan or company contribution match. Therefore, this group may have to consider self-created retirement accounts.

In addition to the Roth IRA and HSA mentioned above, a SEP IRA and Solo 401(k) are also good options. The type of account will depend on your income level, contribution amount and your financial circumstances.

Regardless of the vehicle, it is important to be vigilant and make regular and consistent contributions. Without the (often) forced discipline of an employer-sponsored plan, where contributions are automatically drawn from a regular paycheck, the onus is on the individual to ensure proper funding.

'Save Your Tears': Understanding debt management

The rising cost of education has left many Gen Zers with significant student debt. Navigating student loans and other debts requires strategic planning about many factors, chiefly:

Loan awareness. It's essential to understand the terms, interest rates and repayment options of your student loans. Certain loan forgiveness and subsidy programs may be available, depending on your situation.

Although interest rates have risen in the last years, keeping an eye on the prevailing market interest rate is a good idea. If rates do drop, it could present an opportunity to consolidate student debt at a lower rate.

Interest deduction. Not all debt is equal. There is some "good" debt because it qualifies for a tax deduction.

For example, one may deduct up to $2,500 of student loan interest, with income phase-outs starting at $80,000 for a single individual ($165,000 if filing jointly) in 2025. The availability of a tax deduction reduces the effective cost of the debt.

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In contrast, interest on "bad" debt, such as credit card debt, is not tax-deductible. If cash flow is an issue, then repaying non-tax-deductible debt should be a priority.

'Truth Hurts': Prioritizing financial literacy

In this age of information overload, discerning accurate financial advice is vital.

Many young people in my kids' generation get their news and information from social media. Consider the rise of the so-called "finfluencer" — a social media influencer who offers financial-type advice.

Many apps and robo-financial platforms also provide basic financial information. If all else fails, there is also ChatGPT, which is readily available to answer almost any question. There is no shortage of "advice" one can get on this topic.

Financial literacy is more than knowing definitions — it is about creating an understanding about how financial rules and strategies apply to your situation.

It is, therefore, vitally important to verify information through reputable sources and consult with (human) professionals to understand the nuances when necessary.

I often remind young adults of a phrase I learned early on in my career … you don't know what you don't know. That is why it is critical to question what you read and see, verify information with trusted sources and seek out advice with a critical eye.

The bottom line for those in Gen Z? With challenges come opportunities.

Like all previous generations we discussed in this series, Gen Z will navigate the complexities of modern finance and find their own levels of growth and stability.

Just as that driver's license opens the road to new adventures, smart financial decisions will pave the way to a secure and prosperous future.

Wilmington Trust is not authorized to and does not provide legal or tax advice. Our advice and recommendations provided to you are illustrative only and subject to the opinions and advice of your own attorney, tax adviser or other professional adviser.

Related Content

• Nine Key Tips Self-Employed and Gig Workers Should Know About Retirement
• Median Income by Generation: How Do You Compare?
• 10 Best Places For Gen Z To Buy A Home
• The Wealth-Building Powers of Health Savings Accounts (HSAs)
• A Little-Known Tax-Free Way To Help Pay Your Student Loan

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.

When most people hear about building wealth, their thoughts often turn to billionaires, mansions or viral success stories.

A select few imagine themselves beating the market and chasing risky investments, while others think that living like a monk for 10 or so years is the right approach.

In reality, building wealth is none of these things. At its core, building wealth means increasing your net worth (your assets minus your debts) over time and doing it in a way that gives you freedom, stability and options.

Financial prosperity is not something someone stumbles upon on a lucky day. Instead, it's a consistent exercise of developing habits, using smart tools and making decisions that push you in the right direction.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

And here's the good news: If you've got 10 years, you've got time.

Today, I'm here to help you create a blueprint for achieving real financial progress in the decade to come. For deeper insight, I've also consulted with a few industry experts, so buckle up and let's get you started on the path to building wealth.

Set a clear financial baseline and direction

Before you can build wealth, you need to know where you're starting from.

Start by answering these five questions:

• How much do I earn each month (after taxes)?
• What are my expenses (fixed and variable)?
• Do I have any high-interest debt?
• What do I currently have saved, and where is it?
• What's my credit score?

A clear view of these financial aspects helps you identify strengths and weak spots in your financial strategy.

"Most people keep disorganized records and have no real sense of their income, expenses or liabilities," says Ian Gardner, the director of Sales and Business Development at Sigma Tax Pro.

"What I've learned after working with countless tax professionals over the years is this: Understanding your financial baseline is the first step to building wealth."

Get comfortable with budgeting

Once you know where you stand, it's time to build the plan for where you want to go. Here is where a well-designed budget comes in.

Oftentimes, we associate budgeting with restricting spending, but you can change the meaning. Don't look at it as cutting expenses, but as giving your money direction.

You can establish whatever budgeting rules work for your needs, but for beginners, I recommend two easy-to-follow rules:

1. The 50/30/20 rule. This is a simple yet effective way to break down your after-tax income:

• 50% for needs (housing, groceries, bills)
• 30% for wants (dining out, entertainment, travel)
• 20% for savings and debt repayment

It's not a rigid formula, which makes it a great starting point. Once you get into the habit, you can tweak your ratios to match your goals, like shifting more into savings as your income grows or wants decrease.

2. The "pay yourself first" rule. This rule teaches you to treat savings and investments as non-negotiable bills. Automate them if you have to.

"Too many people wait to save 'what's left over,'" says Gary Hemming, Owner & Finance Director at ABC Finance, "and there's rarely anything left.

"Experience has taught me that those who consistently grow their wealth aren't necessarily the highest earners. The ones who pay themselves first are. It's a simple habit, but it builds financial discipline and long-term security."

Savings and investments are some of the most powerful wealth-building tools you have. And yet, we often treat them as optional.

For instance, even if about 60% of Americans have some retirement savings, only 30% are confident they've managed to save enough, according to Gallup.

For automation, I strongly recommend ditching any manual methods you're using to track your cash flow. Budgeting apps like YNAB (You Need a Budget) and Empower make it easy to link your accounts, track spending and visualize where your money's really going.

Break the debt cycle

Before you can grow your wealth, you have to identify and stop the financial bleeding, and high-interest debt is often the biggest wound.

Credit cards are the usual culprits here, with average APRs hovering around 20% to 25%, which far outpace what most investments could earn.

If you carry a $5,000 balance at 24% interest and make only minimum payments, you could end up paying more than $7,000 in interest and still owe money years later.

According to an Experian study, Americans carry an average of $6,730 in credit card debt, and more than 40% of cardholders carry a balance month to month. That kind of debt doesn't just hold you back — it quietly erodes your future wealth.

Jason Pack, chief revenue officer at Freedom Debt Relief, puts it well when he says, "High-interest debt seeps into your entire life. We often see clients who delay major life milestones, like buying a home or starting a family, because debt is dictating their decisions.

"Compounding interest and minimum payments can turn a manageable balance into an out-of-control financial spiral before you even know it."

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In short, the best thing you can do to start building wealth is to focus on paying off your debt as fast as possible. If you don't know how, consider consulting with a fiduciary financial adviser.

Earn more, learn more: Your wealth grows as you do

If you're serious about building wealth in 10 years, you can't rely solely on managing spending and reducing debt. These are essential first steps, but you also need to adopt a growth mindset when it comes to income and financial literacy.

This is a lesson you can learn from any successful individual, regardless of their field of interest and goals. Michael Melen, co-founder of SmartSites, emphasizes the importance of having a growth mindset: "This has been one of the most important drivers of success for us. Like most beginners, we didn't have all the answers, but our commitment to learning, improving and staying adaptable helped us move forward. A growth mindset creates momentum."

The same goes for your wealth-building journey. Your commitment to expanding your income capacity and knowledge will be your driver.

Whether you're working a traditional 9-to-5 job, freelancing or building a business, always look for opportunities to increase your earning potential.

That might mean:

• Asking for a raise based on performance and market value
• Learning high-value, in-demand skills (like coding, digital marketing or data analysis)
• Starting a profitable side hustle or freelance gig
• Turning a hobby into a small business

Even modest income boosts, such as an extra $300 to 500 a month, can fast-track savings, debt payoff and investing when used wisely.

Financial literacy is a force multiplier

The difference between building wealth with the extra income you earn and blowing it on things that lose value the moment you take them off the shelf lies in knowing how to grow your money.

"Most people don't realize how limited their financial literacy is until it starts costing them," Shawn Plummer, CEO of The Annuity Expert, notes. "I've seen smart, capable individuals miss out on thousands simply because they didn't understand basic financial tools.

"But once they become aware, there's often a mindset shift. They get curious, take control, and that's when real progress begins. In my view, financial literacy empowers anyone at any age."

Learn how compound interest works. Understand risk and reward in investing. Get clear on taxes and how to legally minimize them. The more you learn, the more confident (and profitable) your choices become.

You don't have to go back to school for this, but you should consider looking into reliable courses, certifications and talking to personal finance experts. Sure, one hour with a financial consultant is more expensive than listening to respected podcasts, but these are high-return investments in yourself.

The $500 you spend today may give you the knowledge and confidence to earn $5,000 more next year.

At the end of the day, wealth-building isn't just about what you do with your money — it's about who you become in the process.

Assess your current situation. Cut off debt. Level up your income. Level up your knowledge. And watch how quickly your financial future transforms.

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• Why Does Talking About Money Still Feel So Taboo in 2025?

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.

Eighty percent of Americans are concerned about affordability of everyday living costs regardless of income level, according to consumer research from Equitable.

And that was before the stock market took a plunge and tariffs shot up, both of which could kickstart another period of high inflation.

With key purchases and even necessities increasingly out of reach, going into debt might seem likely.

It's incredibly common already: According to TransUnion's Q4 2024 Quarterly Credit Industry Insights Report, American households had an average of $263,923 in mortgage debt, $24,373 in auto loan debt, $6,580 in credit card debt and $11,607 in personal loan debt, not to mention student loans or medical debt.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

The problem? This debt can spiral out of control as interest payments pile up, making loans more challenging to pay back and credit harder to access. After all, Fortune reports, nearly 1 in 5 Americans have maxed out their credit cards.

According to the New York Fed, almost two-thirds of credit cardholders carry debt month over month, paying an average of 23% in interest — meaning these purchases are ultimately far more expensive than the sticker price.

While it might seem like a tough time to manage debt, the reality is that this is a crucial moment to get it under control. In the long run, handling debt effectively offers financial freedom, flexibility and the ability to weather hard times and enjoy your hard-earned money.

Here's how to get started.

Step No. 1: Avoid unnecessary debt

Steering clear of unnecessary loans might seem obvious, and it may not feel like helpful advice when you're trying to manage your existing debt. But especially when times are tough, it's worth remembering that just because you can access a certain amount of credit doesn't mean you should.

Consider what you actually need vs where you can cut costs.

For example, if you're looking to buy a house in the next few months, you may hear lenders refer to the "30% rule," which recommends that your monthly housing payment should not exceed 30% of your gross monthly income.

If you make $10,000 a month before taxes, you might think this means your budget is $3,000 a month and look at property that fits that price range.

A safer approach, however, would be to set a smaller budget that meets your needs, even if it means not getting everything you may want.

Instead of searching with the maximum allowable budget, look at properties with monthly payments that equal just 20% of your net take-home pay (or about $1,500 in this example, assuming a $7,500 monthly income after taxes).

The extra cash you save by avoiding unnecessary debt will not only give you financial breathing room, but also can enable you to pay back other debts.

Step No. 2: Calculate with clarity

To get a handle on how to repay your debt, you need to know exactly what you owe and when.

Assemble specific information about your balances, the interest rates on your loans and the terms of said loans. Calculate how long it will take to pay off your loans at the minimum monthly amount and how much interest will be paid to the lender under this framework.

If you're able, try to restructure your debt. Work with your lenders to see if you can get a lower interest rate. You should also consider whether consolidating or refinancing your debt saves you interest payments over time.

Once you have this information in hand, prioritize:

• Mathematically, debt with the highest interest rate should be paid down first to minimize the overall amount you will pay in interest.
• Emotionally, you can also consider attacking the debt with the lowest balance first, so you have a quick win to sustain you.

Whichever route you choose, you should calculate how much you are able to put toward repayment every month and commit to that plan.

Step No. 3: Make payments and boost income

Once you've done the calculations and finalized your payment plans, the next part is easy (at least on paper): Pay back your debt.

If you can, look for opportunities to boost your income, too, be it through extra hours at work, side hustles or a part-time job. If you receive bonuses or gifts, resist the temptation to buy something you don't need.

Instead, put that amount toward repayment. And if you're really ready to go the extra mile to become debt-free, you can even consider downsizing your home (including by selling and moving to a cheaper rental) or downgrading your car.

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Putting even a little extra money toward your repayment efforts each month can make a big difference.

For example, if you have a $10,000 credit card balance with an 18% annual rate, it will take more than 15 years to pay down that amount (and you would pay nearly $19,800 in interest alone) if you paid $160 a month.

But if you paid an additional $50 a month? You would pay off that debt in half the time — a little over seven years — and would save about $12,000 in interest. It adds up.

Remember, whatever amount you pay, make sure it's at least enough to cover the interest.

All too often, people simply pay their card's minimum payment amount without realizing it might not be sufficient to cover the accrued interest. At that rate, they'll never pay off the balance.

Short-term pain, long-term gain

Paying down debt will require short-term sacrifices, and it can take an emotional toll. But when times get tough, just remember: You're securing a debt-free future and your financial freedom.

I promise it'll be worth it.

This article, which has been written by an outside source and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU (AR Insurance Lic. #15714673), Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors LLC, does not offer or constitute, and should not be relied upon, as financial, investment, debt management or legal advice. Equitable Advisors LLC and its affiliates do not make any representations as to the accuracy, completeness or appropriateness of any part of any content hyperlinked to from this article. Your unique needs, goals and circumstances require the individualized attention of your own tax, legal, debt management and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors LLC and its affiliates do not provide tax or legal advice or services. Stephen B. Dunbar III offers securities through Equitable Advisors LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors LLC, an SEC-registered investment adviser, and offers annuity and insurance products through Equitable Network LLC (Equitable Network Insurance Agency of California LLC). Financial professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. AGE-7957140.1(05/25)(exp.05/29)

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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.

It’s easy to think of student loans as a young person’s problem. But the reality is that a good number of older Americans, including near-retirees, are juggling student loans, either because they’re still paying off their own education or they took out loans to help finance a child or grandchild’s education.

The Urban Institute reports that as of August 2022, about 6% of Americans ages 50 and over had student debt. That amounts to roughly 7.2 million in this age group.

Meanwhile, as of 2022, the Federal Reserve reported an average student loan balance among Americans aged 55 to 64 at nearly $62,000. For those between the ages of 65 and 74, the average balance was about $58,000.

Not only can student loans be burdensome, but they can also hinder achieving financial goals, such as retirement savings. And while it’s clear that plenty of people carry student debt with them into retirement, that’s not ideal.

Many retirees are limited to a fixed income from Social Security and modest withdrawals from IRA or 401(k) accounts. Having to worry about student loan payments at that stage of life can make money management more stressful. That’s why it’s important to be strategic with your student loans if you’re over 50 and still carrying a balance.

One piece of good news is that the Trump administration has paused plans to garnish the Social Security checks of borrowers who are in default on their student loans, according to AP News. That potentially alleviates one source of stress for older adults on a fixed income. But it doesn't address the overall problem of needing to juggle those loans and other bills. That’s why it’s important to be strategic with your student loans if you’re over 50 and still carrying a balance.

Don't stop saving for retirement

If you’re still on the hook for student loans and you’re creeping closer to the end of your career, you may be inclined to funnel all of your spare money into those loans to knock them out ahead of retirement. It’s an understandable line of thinking, but it may not be the best way to go if it means neglecting your nest egg.

Domenick D’Andrea, Co-Founder/Financial Advisor at DanDarah Wealth Management, says, “People over 50 don’t have as many opportunities in the workforce with guaranteed pensions, so they must do planning on their own through a variety of retirement savings accounts like 401(k)s or IRAs. With a large percentage of this age group having to repay student loans, where the payments are a considerable portion of their monthly expenses, it is becoming harder and harder to save for goals like retirement.”

That said, pausing retirement plan contributions could mean giving up a lucrative tax break, since traditional 401(k)s and traditional IRAs are funded with pre-tax dollars. There’s also the possibility of leaving free money on the table if your employer offers a 401(k) match. And of course, there’s the danger that halting retirement plan contributions will leave you short on savings once your career ends.

Rather than put retirement plan contributions on the back burner to focus on student loan repayment, D’Andrea says older borrowers should figure out what their monthly budgets look like and see if there are ways to cut back on expenses.

That said, some employers may offer a student loan match in lieu of a traditional 401(k) match. If your workplace offers this benefit, it’s one you may want to look into.

One advantage older borrowers may have is a fair amount of equity in their homes. And borrowers 50 and over may be reaching the point where their children are growing up and moving out.

Downsizing out of a more expensive home could free up equity that can be used to repay student loan balances sooner. And if there’s limited equity, reducing your housing costs could make it easier to get ahead of your student debt while also finding the money to fund your 401(k) or IRA.

See if it pays to refinance your student debt

If you can’t cut back on expenses, or if doing so only minimally helps you repay your student loans more quickly while saving for retirement, then D’Andrea suggests looking into refinancing. This especially makes sense when you borrowed privately.

If you’re still carrying federal student loans, it may not make sense to refinance them. Not only do federal loans tend to offer competitive interest rates, but they also come with different protections that private loans are not guaranteed to offer.

Joseph Patrick Roop, President at Belmont Capital Advisors, suggests using these protections to your advantage.

“In some cases, refinancing can help ease the monthly burden. For others, especially those with federal loans, income-driven repayment plans or even loan forgiveness programs might make sense, even for folks in their 50s or 60s,” he says.

The key is to have a plan

It’s natural to get down on yourself for carrying student loan debt later in life. But Roop insists that you shouldn’t

“Do not be ashamed that you have student loan debt into your 50s, 60s, or even retirement years, as it is more common than most people realize,” he says. “Many folks took on loans to help their kids through school or went back to finish their own degree. There’s no shame in it, but there does need to be a plan.”

If it doesn’t seem like you’ll be able to pay off your student loans ahead of retirement, you still have options. Those could include working a bit longer, working part-time as a retiree, or making lifestyle changes in retirement (which could include relocating to stretch your income).

“Ultimately, it’s not just about getting rid of the loan,” says Roop. “It’s about putting together a plan that includes your debt, Social Security, retirement income, and taxes. You can still retire comfortably with student loan debt, but it takes a clear plan and the right guidance.”

Read More

• The Average 401(k) Balance by Age
• How the One Big Beautiful Bill Act Could Reshape 529 Plans
• Is a 401(k) Worth It? Here Are the Pros and Cons
• A 10-Year Checklist for Retirement Planning

President Trump's tax package, the One Big Beautiful Bill Act (OBBBA), passed the House in May and the Senate this past week. On July 4th, Trump signed the bill into law, with some provisions taking effect immediately. However, the exact timeline for 529 expansions may depend on guidance from the Treasury and IRS.

Among its key proposals is an expansion of 529 education savings plans created to help families save for future education expenses. Not just a college savings vehicle, 529 plans can also be useful estate planning and retirement savings tools.

With a 529 plan, contributions grow tax-free, and withdrawals for qualified education costs are also tax-free. Considering the cost of college, a little help now could go a long way in planning for your child’s education.

A 4-year college degree at a public in-state school costs approximately $120,000 (including tuition, books, supplies, dorm room, and other expenses). On average, a college student graduates with about $39,000 in student loan debt. And that’s just the average. Multiply that amount by the number of students attending college (about 43 million), and you get about $1.6 trillion in federal student loan debt as of early 2025, per the U.S. Department of Education. Yikes.

Good news — your 529 savings plans just got a sweet upgrade.

Bad news — the new law limits financing options, making it harder for student borrowers to manage their debt.

Read: Trump Targets Student Loan Forgiveness: Here’s How Taxes and Repayment Could Soon Change

Enhanced 529 plans

Enhancements to 529 plans under the One Big Beautiful Bill Act call for a significant expansion of 529 plan benefits and include a brand-new Kids' Savings Program called the MAGA account, withdrawal limit increases and the expansion of qualified expenses.

Read: Should You Start a Trump Account For Your Child?

Increased K-12 Withdrawal Limit

The OBBBA expands the definition of qualifying education expenses for 529 withdrawals. Currently, families can withdraw up to $10,000 per year for elementary or secondary education. The law expands the maximum limit to $20,000.

Expanded K-12 Qualified Expenses

The law expands the definition of "qualified expenses" for K-12 education to include non-tuition costs such as:

• Curriculum materials
• Fees for nationally standardized tests
• Books and other instructional materials
• Dual-enrollment fees for college courses taken in high school
• Online educational materials
• Tutoring or educational classes outside the home
• Specialized strategies designed to support students with disabilities

On top of that, you can tap your 529 for these costs without federal tax worries. At the same time, any expansion of K-12 benefits may require new legislation on a state-by-state basis, as not all states currently consider K-12 expenses as qualified expenses for tax purposes.

Additional qualified higher education expenses

The new law allows tax-free withdrawals for a wider workforce, on-the-job training, and continuing education programs. This includes tuition, miscellaneous fees, books, exam costs and supplies for programs listed under the Workforce Innovation and Opportunity Act.

• Programs that appear on a state or federal Workforce Innovation and Opportunity Act list
• Programs listed in the VA’s WEAMS database
• Programs that prepare students for industry-recognized licensing exams
• Continuing education fees that may be required to keep a credential active

Fixed ABLE-account flexibility

The three Achieving a Better Life Experience (ABLE) provisions, currently set to expire at the end of 2025, will become permanent. The law makes it possible to roll over funds tax-free from 529 plans to ABLE accounts, along with the "ABLE-to-Work" contribution limit and the Saver’s Credit for ABLE contributions.

A brand-new “MAGA” kids’ account in 2026

While not a 529 plan, the Money Accounts for Growth and Advancement (MAGA) program can also be used for saving for your child's education. Under the terms of the OBBBA, funding of up to $5,000 per year is allowed. Contributions can come from a parent or guardian for a child under 8, and any gains would be taxed at the long-term capital gains rate when used for higher education, a first-home purchase, or starting a small business.

The law also calls for a one-time contribution of $1,000 from the federal government to the accounts of children who are U.S. citizens at birth born between January 1, 2025, and January 1, 2029. At least one parent must provide a valid Social Security number.

Parents and relatives can contribute up to $5,000 annually (adjusted for inflation) to the account, with funds growing tax-deferred until the child reaches age 18.

Funds can be used for higher education, small business startup costs, or first-time homebuyer expenses, with withdrawals taxed at the long-term capital gains rate for qualified expenses. Non-qualified withdrawals are taxed as ordinary income with penalties.

Any unused funds could be withdrawn for any reason after age 30. The first withdrawal would be at age 18 (up to 50% of the balance). Earlier withdrawals for non-qualified expenses would be taxed at ordinary income rates.

What 529 rules stay the same

Although the new law expands how you can use 529 money, many of the current rules remain the same.

• No change to federal 529 contribution rules
• Lifetime caps on contributions remain state-specific
• Earnings in 529 plans continue to grow tax-free when used for qualified education expenses.
• State-specific tax deductions or credits for 529 contributions remain unaffected by the bill. (States may need to enact legislation to align with the expanded federal definition of qualified K-12 expenses for state tax purposes).
• The existing provision allows tax-free rollovers from 529 plans to Roth IRAs, up to a lifetime limit of $35,000 (subject to annual Roth contribution limits).
• Withdrawals for non-qualified expenses continue to incur ordinary income tax, plus a 10% penalty on earnings.

Proposed timeline

President Trump's "One Big Beautiful Bill Act" was signed into law on July 4, 2025, during a ceremony at the White House. However, the various provisions within the bill take effect at different times.

MAGA accounts are now open, and the federally funded $1,000 newborn deposits will begin on January 1, 2026.

Why you should have a 529

It doesn’t matter if your child is a teen or a toddler; it’s never too soon to start saving for college with a 529 plan — just make sure you’ve paid down or paid off your debt, set up an emergency fund, and are saving for your retirement first.

If you’re already using a 529, the One Big Beautiful Bill Act only sweetened the deal. A college education follows your kids for life, just make sure the cost of funding doesn't take a toll on your finances for the rest of your life.

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Last month, I wrote about a survey in which the Employee Benefit Research Institute interviewed retirees on how satisfied they are with their financial situation in retirement. Among the respondents, those who were separated or divorced were least satisfied with their financial well-being.

That’s not surprising when you consider that after divorce, “income drops for the vast majority of people,” says Stacy Francis, CEO of Francis Financial, in New York City. That’s especially true for women who were not the primary breadwinners in their households or had spent years out of the workforce.

Getting your finances back on track should start even before you sign the divorce papers. “People who come to grips with the divorce early in the process will be in a much better position afterwards,” says Lisa Zeiderman, managing partner at the law firm Miller Zeiderman, in New York City.

That means staying on top of your finances so that, for example, you have credit in your own name, know where the money is, and are familiar with the divorce laws in your state.

And keep in mind that “the divorce doesn’t end when the decree is final,” says Leslie Thompson, cofounder and chief investment officer at Spectrum Wealth Management, in Indianapolis. Thompson helps her clients work through details such as splitting assets and tax liabilities equitably, making sure that credit cards are paid off and joint accounts closed, and monitoring child-support payments. She recommends checking your credit reports for the next year to make sure no new credit has been opened jointly.

Create a budget and assess your net worth

Once you’re ready to begin your post-divorce life, take a deep breath and “take stock of your new situation,” says Francis. Draw up a budget that lets you live within what’s likely to be a lower income by listing all your sources of income and your expenses — even ones that are easy to overlook, such as the annual premium on your homeowners insurance or unexpected trips to the vet.

Next, tally up your assets and liabilities. If, as is likely, you find that your net worth is about half what it used to be, you may have to make up for lost time, especially when it comes to planning for retirement. Depending on your age, that could mean investing more aggressively in the stock market, taking advantage of catch-up contributions to retirement accounts starting at age 50 (and beefed-up contributions at ages 60 to 63), or working longer than you had planned.

Review your insurance policies and estate plan

Now that you’re on your own, you’ll need to review all your insurance policies: homeowners, auto and liability, as well as life insurance if you still have minor children and possibly long-term-care coverage for yourself. Finally, you’ll need to update your will and your estate plan. You probably don’t want your ex-spouse to be the beneficiary of your retirement accounts.

Overwhelmed? Francis recommends tackling one task at a time over the course of a year. For instance, get a handle on your budget during the first quarter, followed by retirement planning and investing in the second quarter, then insurance and your estate plan. You don’t have to go it alone; seek help from a financial adviser (find one at www.napfa.org) and an estate planning attorney.

One important member of your team could turn out to be an employment counselor or career coach to help you find the right fit to maximize your talents and income. “The biggest things under your control are the income you bring in and your spending,” says Francis. “Don’t let your own thinking put a ceiling on the possibilities.”

Janet Bodnar is editor at large of Kiplinger Personal Finance. Contact her at Janet.Bodnar@futurenet.com.

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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Editor’s note: This is the third article of a series about wealth planning for different generations. Part one is Talkin' 'Bout My Generational Wealth: Baby Boomers, and part two is Come as You Are: Wealth Management for Gen X. Part four will address financial planning for Generation Z.

Just as a great club DJ crafts a mix that transitions smoothly between tracks, effective wealth management for Millennials involves navigating a landscape marked by a mix of modern challenges and rebounds.

For a primer on how to craft a great music playlist, I recommend watching the movie High Fidelity.

The Millennial generation, also known as Gen Y, was born from 1981 to 1996. They are now 29 to 44 years old and find themselves in the midst of the wealth accumulation phase of life.

This article, the third in a series drawing inspiration from iconic songs, moves from the grunge of Nirvana to the digital beat that has defined a generation shaped by early economic upheaval.

Using the sounds of our time, I have a few recommendations to keep the music hopping and make this time of life an important period of wealth creation.

'Rolling in the Deep': A dark economic backdrop

The first song of a playlist is important, and this playlist’s first song is pretty dark.

This generation’s entry into adulthood accompanied the 2008 financial crisis, which echoed the somber tones of Adele’s "Rolling in the Deep" — where opportunities for growth and prosperity seemed deep in the abyss.

Just as this age group was graduating from college and entering the workforce, the market downturn of the financial crisis disrupted early career trajectories, which in turn delayed wealth building and stability.

Despite technological advancements and economic recoveries, real wage growth has not kept pace with inflation, widening the gap between financial expectations for adulthood and reality.

The relative wage stagnation has forced many to face the grim music of financial instability, delaying this generation from advancing from saving to investing.

'Can’t Hold Us': Strategic financial beats

Despite a slower start and continual economic uncertainties, the second song on Millennials’ playlist, by hip-hop duo Macklemore & Ryan Lewis, will help improve the mood a little.

Using the high-energy song “Can’t Hold Us” as motivation, sound financial planning can help this generation push forward.

Foundations of financial planning. Effective financial planning for Millennials involves a comprehensive understanding of both income and expenses. It's crucial to create a budget that accommodates longer-term savings goals, while still managing day-to-day expenses.

This generation also needs to consider how they can use financial planning tools and technology to better track their progress and adjust their plans in real-time.

Navigating homeownership. The impact of past economic instability has left many Millennials cautious about buying that first home. Post-Financial Crisis, higher housing prices, coupled with more stringent lending standards and heightened mortgage interest rates, have meant that many in this generation may delay or forgo home purchase.

For those opting out of immediate homeownership, investments in real estate investment trusts (or REITs) may provide a less burdensome way to benefit from real estate appreciation and income without the direct challenges of a significant down payment and mortgage payment.

Emergency funds. Creating an emergency fund is essential for mitigating risks associated with sudden job loss or unexpected financial expenses. This fund acts as a financial buffer that can help maintain stability during economic downturns or personal crises.

For Millennials, who value security but may face more frequent career transitions, having an emergency fund of at least six months is a critical component of a sound financial plan.

Debt and cash management. With student loans being a significant burden, understanding how to manage and prioritize different types of debt is essential for financial health. Millennials should focus on paying down high-interest debts first, as these are costlier over time.

Knowing how to leverage debt effectively — such as choosing when to refinance or consolidate — can also lead to significant savings and better credit scores.

Some debts are also better than others when taking into consideration the possibility of potential tax deductions, which could enhance your bottom line.

Remember: Money is fungible, so be smart about which debt to pay down first.

Education savings. For those with young children, it’s never too soon to start saving for the next generation.College Maximizing tax-preferred savings vehicles like 529 plans can greatly reduce the future burden of education expenses.

By starting early, Millennials can take advantage of tax-free, compounded growth, making it easier to manage higher-education costs for their children.

Retirement savings. Given this generation is expected to not only live longer, but also work longer to enjoy a well-funded retirement, Millennials need to be strategic about their retirement planning.

This involves not only saving but also investing wisely to ensure that their retirement funds can withstand longer periods of inflation and potential market fluctuations.

A diverse portfolio that includes a mix of equities, bonds and other investments can help achieve the growth needed to support a longer retirement.

'Count on Me': Young families require estate planning

Last up for this playlist: Can it be anyone but Bruno Mars?

In addition to securing one’s financial future with a sound estate plan, this generation also needs to start thinking about their families’ future — and recognize that there are others who are counting on them for support — financial, emotional and otherwise.

Many Millennials have started families and have small children. While their assets level may not be at the point where significant and complex tax planning is necessary, please keep in mind the following “musts” for families with young kids:

Guardianships. At this stage in life, the most critical part of an estate plan is arguably naming a guardian for your minor children. Without a properly executed will in place naming a guardian, this decision would be determined by the courts.

In most cases, interested parties, including family members or friends, will likely step in and petition the court to be appointed as guardian — but this would cause unnecessary delays and uncertainty at a time when stability for young children is most needed.

This is such an important decision and provision in the will that I often advise clients to name at least two layers of successors should your first and second choice not be able to serve.

Risk mitigation. From a risk mitigation perspective, life insurance is a critical component. If a parent were to pass away and his/her income is cut off, would there be enough of a reserve to take care of the family going forward?

Here is where a simple term insurance policy may be helpful. The premiums are relatively inexpensive when the insured is young and healthy. I often get asked, how much insurance coverage do I need? That depends on what problem you’re trying to solve.

One recommendation is to identify a financial need, consider its associated time horizon, and then back into the number.

For example, if you’re looking to have enough insurance coverage to pay off your mortgage and/or college tuition, what is the amount you need today, assuming a reasonable rate of return, that would cover your mortgage and your children’s future college expenses?

Once you have the amount in today’s dollars, then you can price out how much those premiums would be and adjust from there to fit your budget.

Millennials and Gen Ys got off to a challenging start. But with proper planning, the future can be as bright as Beyonce’s catchy “Break My Soul,” which talks about finding a new drive, fresh motivation and a new foundation.

Many Millennials have navigated successfully the choppy waters of a post-financial crisis world and moved into the wealth accumulation phase.

No reason that the last song in this generation’s playlist can’t be a great one!

Up next: We move to Billie Eilish and continue with the financial journey of Gen Z, born from 1997 to 2012.

Wilmington Trust is not authorized to and does not provide legal or tax advice. Our advice and recommendations provided to you is illustrative only and subject to the opinions and advice of your own attorney, tax advisor or other professional advisor.

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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.

As you read today’s article, imagine yourself in the shoes of my reader, Dr. Tom, who, like millions of us, has seen customer service vanish at just about every large bank in the country.

We begin with a question: When was the last time that you turned on the evening news and did not see a story about the problem of dangerous narcotics? Now, for a moment, imagine, instead of a warning not to use drugs, you see a commercial encouraging their use.

“Not happening,” you’re thinking. But that is exactly what we all are exposed to when we are urged to use powerful drugs that can ruin families if they’re not managed properly — credit cards.

Many of us have received a preapproved credit card in the mail with literature that says, “To activate, make a purchase of up to X dollars.”

Credit card issuers want us to take vacations we can’t afford and buy things we do not need and cannot pay for with cash.

And, ironically, the more credit card debt we have, the easier it is sometimes to get more credit cards.

Planning a trip and responded to a promotion

But what if you have no credit card debt? Perhaps you pay off monthly charges in full and have no other debt because long ago you said “no!” to taking on debt of any kind?

Dr. Tom has lived within his means and stays out of debt. Through no fault of his own, he created a problem for himself.

“Our family was planning a trip to England and Italy,” wrote retired West Coast dentist Dr. Tom in his email to me. “For over 30 years, I have had a credit card with a big bank and pay all charges in full every month. I applied for their airline-branded card that advertises 75,000 miles for signing up — that I could use for airfare — but was turned down!”

No credit history with the reporting bureaus

He related how he spoke with a customer service rep, who had his payment history on her computer screen but told him the credit bureaus had no record of him or his payments to the credit card company. “‘That’s why you were declined,’” he said she told him.

He escalated the issue to a supervisor and said, “Just look at my 30 years with you. I’ve never been late. You can see that. Besides, you could have reported my payment activity all these years to the credit bureaus, but obviously you didn’t. Come on, someone has to have an ounce of common sense. Please speak with the department that issues the airlines card, explain the mistake and send me the card.”

Dr. Tom took this as high as he could but was turned down each time. He concluded, “Nobody cares. Common sense is not a job requirement at this bank.”

A solution but not at all timely

But it was not over, not yet, because after receiving his email, I got him on the line and called the unit of the bank that handles customer complaints at the highest level and explained the problem. The customer service rep asked Dr. Tom, “Why don’t you have more credit?”

Translation: We can’t make money off of you with interest charges because you pay in full, so why should I help you?

However, he finally agreed to send Dr. Tom’s payment history to Experian. “They will send his credit rating back to us, which will allow us to issue the new credit card, but it will take a month or so.”

“A month or so?” I blurted. “Are you kidding? His European trip is in three weeks. You have the ability to pick up the phone, call your department that issues the airlines cards and tell them that Dr. Tom has a perfect payment history and to send him a new card. Come on, he is a 30-year customer. Do the right thing — fix the problem you guys created by not reporting his payment history to Experian.”

And then, exhibiting his utmost concern for the bank’s loyal customer, the customer service rep hung up.

When faced with arrogant, uncaring people who refuse to act reasonably and solve a problem their organization created, my next step is to contact their media department, because those are the people who can pull strings.

Please help my reader, your longtime customer

In early March, I emailed the media contact at the bank, summarized Dr. Tom’s situation, gave the names of the bank employees we had spoken with and concluded by saying: “Dr. Tom needs someone with common sense to speak with the issuing department and tell them, ‘Look at his history with us. He has been a good customer. Please give him that card in time to use it on the family’s trip to Europe.’”

A week later, Dr. Tom’s new credit card arrived in the mail.

The moral to this story: While most credit card companies report their customers’ payment histories to the credit bureaus, they are not legally required to do so.

How can you check to make sure your payment history is being fairly reported? You can get free copies of your credit reports from all three credit-reporting bureaus (Experian, TransUnion and Equifax) by going to AnnualCreditReport.com.

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.

Trying to dig yourself out from underneath a growing pile of high-interest debt can often feel like you’re working hard to defeat something that will never truly end. Once you shovel out a nicely sized hole, a high interest rate fills it right back in, adding a little extra on the top.

Add trying to save money toward your future goals, and you have what seems like an impossible task to achieve. However, it’s a real challenge many people are facing — and one that is possible to overcome.

Whether it's student loans, credit cards or personal loans, paying down debt without sacrificing your long-term financial goals requires a smart, strategic approach.

Here, financial industry experts from Kiplinger Advisor Collective offer tips for how to best navigate this all-too-common obstacle, as well as how to build momentum, reduce financial stress and make meaningful progress without putting your future on pause.

Boost your income
“One key tip for paying down high-interest debt while saving is to boost your income beyond the interest payments. Use skills or side hustles to generate extra cash, directing it to debt first and then savings. This works because exceeding the interest rate accelerates debt reduction, freeing up funds faster for future goals without sacrificing savings momentum.” — Dr. Clemen Chiang, Spiking

Try the 'debt snowball' method
“Use a debt repayment strategy like the debt snowball method: Pay minimums on all debts, but throw extra cash at the smallest balance first. Once that balance is paid off, roll that amount into the next debt. Meanwhile, contribute enough to get a 401(k) match and build a small emergency fund. This keeps you motivated, eliminates high-interest debt and ensures you're still growing wealth!” — Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management

Lower your interest rates
“One powerful strategy is to reduce your interest rates. Refinancing a mortgage from 7% to 5% or transferring credit card debt to a lower-rate card saves money instantly and accelerates how fast you attack the principal. It’s not just about paying — it's about paying smart. Lower rates create a margin to invest and build for your future while still knocking out debt.” — Justin Donald, Lifestyle Investor

Follow the 50/30/20 rule
“Implement the 50/30/20 rule: Allocate 50% of your income to needs, 30% to wants and 20% to debt repayment and savings. If possible, direct financial windfalls (for example, bonuses and tax refunds) toward high-interest debt while maintaining steady retirement contributions. This balances debt reduction with future financial security, preventing lost investment growth.” — Greg Welborn, First Financial Consulting

Ensure you're paying down your actual balance
“Use a balance transfer credit card to avoid paying interest for up to 21 months. This way, your entire monthly payment goes toward reducing your actual balance, and nothing is wasted on interest fees, so you pay debt down faster. Compare balance transfer cards to find the option with the longest no-interest term that meets your needs and credit rating.” — Andrea Woroch, Woroch Media Inc. / Andrea Woroch

Leverage the 'avalanche' method and automation
“Use the debt avalanche method by listing your debts from the highest to lowest interest rate and then attacking the most expensive one with every extra dollar you can spare while making minimum payments on the rest. At the same time, automate putting a small, consistent amount into a savings or investment account. This way, you’re not just reacting to financial pressure but also taking proactive steps toward the future.” — Zain Jaffer, Zain Ventures

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Many people were caught off guard when inflation surged in 2021 and 2022. And though things have cooled substantially since then, the impact was (and still is) painful for some.

It’s hard to prepare for such a significant surge in prices across such a wide spectrum — from gas and groceries to utilities and housing costs. (And, let’s face it, we had gotten used to the inflation rate hovering around 2% for several years before it spiked to 9.1% in June 2022.)

But the reality is inflation should always be a factor when it comes to planning your finances.

Even when inflation is low, you can expect the cost of goods and services to rise over time and affect your purchasing power.

This is why it’s essential to have a financial plan that helps you keep pace with inflation — whether you’re a young professional working and saving for your future or a retiree trying to get the most from your savings.

Here’s a look at how inflation can affect both your pocketbook and your portfolio, along with practical strategies to help you stay financially resilient.

Erosion of purchasing power

One of the most immediate effects of inflation is the reduction of purchasing power. As prices rise, the same amount of money buys less. That can put a financial strain on just about everyone, especially low- or moderate-income workers and retirees on a fixed income.

Both younger workers as well as retirees and soon-to-be retirees can benefit from thoughtful budgeting, cutting out unnecessary expenses and carefully weighing their priorities before making major purchases.

Younger workers may also want to focus on increasing their earning potential through skill development, career growth and strategic investing.

Impact on investments and savings

Inflation can erode the real value of savings, which makes it crucial to invest in assets that have the potential to outpace rising prices. Market volatility can make “safe” investments (CDs, savings accounts, etc.) seem more appealing to investors of all ages.

But you may actually be losing money if those investments can’t keep up with inflation. A carefully planned portfolio mix that aligns with your time horizon and risk tolerance can help you stay secure while also earning enough to combat rising costs.

For example, investing in diversified and long-term growth assets, including equities and real estate, can help younger workers grow their money for the future.

Signing up for your workplace retirement plan also is an easy way to make investing automatic — and you can take advantage of your employer’s matching contributions to accelerate your savings.

Contributing or converting to a Roth IRA can also be a smart way to mitigate both tax and inflation risk in retirement.

Meanwhile, retirees and soon-to-be-retirees should consider a diversified portfolio that might include dividend-paying stocks, Treasury inflation-protected securities (TIPS) and other income-generating assets designed to keep pace with inflation.

Effects on the broader economy

Although the effects of inflation may feel very personal when you’re paying for your groceries or checking your bank balance, inflation also influences the economy as a whole.

When inflation rises, central banks often respond by increasing interest rates to slow down excessive price growth. Higher interest rates can make borrowing more expensive for businesses and individuals.

This is why, when possible, younger workers should comparison-shop for the best loan offers and lock in lower interest rates. This can help with the cost of buying a home or car or starting and growing a business. Keeping your credit in good standing can help you score the lowest rates.

Retirees and soon-to-be retirees should build a balanced portfolio that can withstand changes in interest rates and inflation. A financial professional can help stress-test your portfolio to determine if you’re prepared for retirement risks like market volatility and inflation.

Dealing with debt in an inflationary environment

While inflation increases the cost of goods and services, it can also reduce the burden of certain types of long-term debt. Those with fixed-rate mortgages and student loans may benefit, for example, but retirees need to be cautious about taking on new debt.

Younger workers with too much debt may want to prioritize paying off high-interest credit card debt while maximizing the long-term benefits of low-interest, fixed-rate loans.

Retirees and soon-to-be retirees can also benefit from managing their expenses and keeping credit card balances low, as well as avoiding excessive borrowing that could strain their retirement income.

Inflation-proofing your plan for the long haul

Investing and saving wisely, managing debt strategically and building a reliable income stream you can live on now and in the future can help ensure long-term financial security.

If you don’t know where to start, a financial adviser can assist you with creating or assessing your overall financial plan. They can also help you identify and implement appropriate inflation-fighting strategies.

Inflation is a natural part of the economic cycle, but it doesn’t have to derail your financial goals. By taking proactive steps to mitigate its effects, both retirees and those who are still working to build their wealth can navigate inflationary periods with confidence.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any 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.

Whether you’re planning to consolidate credit card debt, renovate your home or embark on a dream vacation, personal loans can be a powerful tool to help you achieve your financial aspirations.

However, not all loans — or lenders — are created equal. Carefully choosing the right loan can help set you up for success. It requires asking the right questions to ensure your loan fits your needs, aligns with your goals and comes from a trustworthy provider.

To help you make confident and informed choices, here are seven essential questions that Americans should ask when evaluating personal loan options.

1. How will it affect my credit rating?

When you apply for a loan, your credit will typically be checked through either a "soft pull" or a "hard pull." A soft pull, often used during the initial application process by some lenders, doesn’t affect your credit score or appear on your credit history.

However, once you accept a loan, a hard pull is usually conducted, which may temporarily impact your credit score and will appear on your credit report. It’s important to verify that a lender’s initial application process involves only a soft pull to avoid any unnecessary impacts to your credit score during the evaluation stage.

Be diligent in understanding how each step of the process may affect your credit.

Additionally, personal loans, classified as installment credit, can complement revolving credit like credit cards and help diversify your credit profile.

Using a personal loan to pay off credit card debt, for example, may lead to an improvement in your credit score when managed responsibly.

2. What should I know before taking out a loan?

A personal loan is not free money — it’s a financial commitment. Take the time to understand interest rates and loan terms, and how factors like credit history and debt-to-income ratio can impact your loan eligibility.

Educating yourself about these elements helps ensure you’re choosing a loan that fits your situation and goals.

3. How quickly do I need the money?

Timing matters. Online lending platforms often offer faster application and approval processes than traditional brick-and-mortar banks.

Some of these platforms will facilitate loan funding in as little as one business day after final approval, depending on your bank’s transaction processing speed.

4. Is this lender trustworthy?

Research is key to finding a reliable lender. Consumers can visit the local or regional Better Business Bureau (BBB) website or call to find customer feedback and complaints about lenders or lending platforms based in their communities or home states.

Similarly, they can explore the Consumer Financial Protection Bureau (CFPB) website and search its Consumer Complaint Database for customer complaints filed with that organization about specific lenders.

A quick online search on sites like Trustpilot can also reveal customer experiences and help you avoid untrustworthy providers.

5. Can I afford the monthly payments?

Borrowing beyond your means can make your financial situation considerably worse. If you accept a loan with a monthly payment that is more than you can manage, you can quickly rack up penalties and late fees and increase your risk of default.

Review all loan costs, including fees like origination fees, and ensure the monthly payments fit comfortably within your budget.

6. What are the repayment terms?

Depending on the size of the loan, it may take months or several years to repay it. The length of your loan term affects both your monthly payments and total interest.

Shorter-term loans have higher monthly payments, but the total interest paid will be lower when compared to longer-term loans.

Carefully review a loan’s terms, including length, payment schedule, the total interest or finance charge and any penalties, during your evaluation process. Choose terms that align with your budget and financial goals.

Also, check to see if the lending platform offers any hardship programs if your circumstances should change during loan repayment.

7. Is this the right financial option for me?

Personal loans are versatile but may not always be an ideal choice for your situation and financial goals.

For example, if you’re a homeowner, a home equity loan or line of credit could offer better terms than a personal loan. Take the time to shop around and figure out what solution best aligns with your financial circumstances, needs and other factors.

While personal loans can help you achieve financial milestones — whether it’s paying off and consolidating debt, covering emergency expenses, or making home renovations — they are just one piece of a larger financial puzzle.

The path to improving your financial well-being requires an ongoing commitment to manage your spending and saving habits. Remember to ask the right questions and choose a loan that supports — not hinders — your journey to financial success.

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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.

Financial planning isn’t just about making money — it’s about making smart choices at every stage of life. As a financial adviser, I’ve seen firsthand how the right decisions (and the wrong ones) can shape your future. Every decade has financial challenges, and avoiding common missteps is as important as growing your assets. Here are some of the biggest financial pitfalls to avoid in your 30s, 40s and 50s.

Your 30s: Building a strong foundation

Your 30s are often a time of career growth, major life milestones and increased financial responsibility. The decisions you make now will set the tone for decades to come. According to Ascensus, starting to save at age 25 instead of 35 can result in nearly double the retirement savings by age 65. Pitfalls to avoid:

Neglecting retirement savings

It’s tempting to put off saving for retirement while managing student loans or a mortgage, or starting a family. However, delaying contributions means missing out on compound growth. If your workplace offers a 401(k), take advantage; if they offer a company match, even better. Save at least what they are willing to match and target an overall saving of 15% to 20% of your gross paycheck.

At this age, you can still enjoy the magic of compound interest, so be sure to take advantage of that while you can.

Overspending on lifestyle upgrades

A higher income often leads to lifestyle creep — bigger homes, nicer cars and expensive vacations. While enjoying your hard-earned money is important, avoid stretching your budget too thin. Prioritize savings and investments before increasing discretionary spending and spend some time defining your goals and what they mean for you.

Relying too much on debt

Credit card debt, car loans and personal loans can add up quickly, eroding wealth-building potential. Have an aggressive plan to eliminate those loans, starting with the highest interest rates first. Consider automating your payments so you never miss one. Do your best to avoid taking on any additional debt by creating a budget that works for your lifestyle.

Your 40s: Maximizing growth and stability

Your 40s should be a time of peak earning potential, but financial missteps can now lead to long-term consequences. Use this time to take proactive steps towards your finances to make sure you’re on track to enjoy your golden years. Pitfalls to avoid:

Not increasing retirement contributions

If you started saving in your 20s and 30s, great. But as your income grows, so should your retirement contributions. If you get a raise, consider increasing your savings by the amount of your raise or most of it. This also helps prevent overspending and lifestyle creep. If your workplace 401(k) allows employees to enroll in automatic contribution increases, sign up, and your savings will automatically increase by a certain percentage (often 1%) each year.

Not protecting your assets

As you build wealth and acquire valuable assets like a home or a car, it’s crucial to help safeguard them against unexpected risks. Without appropriate property and casualty insurance, you could face significant financial losses due to accidents, natural disasters or lawsuits.

Ensure you have adequate coverage and appropriate policy limits to protect yourself. If you own a home, consider adding an umbrella policy — an extra layer of liability protection that extends beyond the limits of your auto insurance and homeowners insurance. This added coverage can help shield your assets from potential costly legal claims.

Not getting serious about having an estate plan

Many people assume estate planning is for older individuals or people with significant assets. However, unexpected events happen all the time. It’s important to have a will, power of attorney and advance health care directive. These documents will select who will be in charge and set the rules for the distribution of your assets.

They also allow you to nominate guardians for your children should something happen and allow you to choose loved ones to make financial and medical decisions on your behalf.

Your 50s: Preparing for retirement

With retirement getting closer, your 50s should be about solidifying your financial security. Here are some things that are sometimes overlooked. Pitfalls to avoid:

Underestimating healthcare costs and longevity

It’s no secret that people are living longer lives, and retirement can be more dynamic and active than it was for older generations. However, what may not come to mind right away is that we need to prepare financially for these longer lifespans and potential health-care costs, which can sometimes reach hundreds of thousands of dollars.

To help stay ahead and prepare for future medical costs, explore options like health savings accounts (HSAs), Medicare planning and long-term care insurance.

Taking on too much risk — or not enough

Some investors in their 50s take excessive risks in an attempt to “catch up” on retirement savings, while others become too conservative. A well-balanced portfolio should reflect your risk tolerance, time horizon and retirement goals.

A financial adviser can help you adjust your investment strategy accordingly. And don’t forget to rebalance your portfolio periodically, especially when there are significant market movements.

Not having a clear retirement plan

Retirement isn’t just about reaching a certain number in savings — it’s about knowing how and when to withdraw assets efficiently. Failing to plan for taxes, withdrawal strategies and Social Security optimization can leave money on the table.

According to retirement plan provider Fidelity Investments, the rule of thumb is to save 10 times your income if you want to retire by age 67 — including anything in a retirement account and investments. Work with a financial professional to create a road map for sustainable retirement income. Review your retirement plan to help make sure you’re on track for your goal date. Crunch the numbers and figure out what you’ll need to live on during retirement and assess how close you are to that number.

If you determine that you’re behind, that’s OK — there’s still plenty of time to correct. Involve your financial adviser during life milestones for guidance to help with a smooth transition.

Every decade contains different financial pitfalls. But if you’re proactive, disciplined and strategic, you can take steps to avoid them and build a financial future designed to provide security, flexibility and peace of mind. No matter where you are in your financial journey, the best time to make smart money decisions is now.

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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.

As we look to the rest of the year ahead, it’s a great time to revisit your finances and position yourself to make the most of your workplace benefits and broader financial life. We all know money can be a source of stress — especially after holidays — but your finances can also become a source of empowerment by taking thoughtful steps today to build for the future you want.

First, consider the goals you want to prioritize this year. According to the CFP Board’s Debt and New Year's Resolutions Report, the top financial goals of Americans in 2025 are to reduce debt (42%), save for a major purchase such as a car, home or vacation (21%) and work toward long-term goals such as retirement planning (14%), building an emergency fund (11%) and developing or updating a financial plan (7%).

Prioritizing your financial well-being can set you up for financial success in the long run, but like any new habit, it will take time and practice. So, here are three ways to help yourself make the most of your finances in 2025 — and, in turn, help you move toward a more secure financial future.

1. Holistically review the year ahead

Between gifts, celebrations and travel, it can feel difficult to get back on track financially after the holidays. If you overspent, don’t be too hard on yourself. Take a deep breath and move forward. As a first step, review any holiday spending, gifts and bonuses, as well as income sources, debt payments, credit cards and bills.

If you aren’t sure how to track your monthly income and expenses, consider using online tools such as debt calculators, retirement calculators and budgeting apps. You likely have access to these tools through your workplace. If not, you may also be able to create a budget through your credit card app.

Next, separate fixed and variable expenses. Think about crucial payments like housing and groceries vs nice-to-haves, such as taking a vacation. One easy method is the 50-30-20 budgeting rule: 50% of your budget would cover needs, 30% wants, and 20% savings and investments. Break it down by month, paycheck, or any way that’s compatible with your lifestyle.

Assess what your long-term financial goals are and create a timeline of when you’d like to achieve them. For example, are you planning to buy a home? Is your family complete, or do you anticipate having more kids? Are you setting aside money for college? What age would you ideally like to retire?

No matter how distant your long-term goals seem, it’s crucial to invest in your financial future at every stage of life. The longer you invest, the more you’ll allow your returns to compound — and potentially build in your nest egg by the time you retire. According to our latest Wealth Management Pulse Survey, most people are primarily saving in the long term for retirement (71%), an unknown emergency (53%) and simply because it's the right thing to do (45%).

2. Take advantage of employer benefits, including educational resources

The workplace is an accessible way to invest in your financial future: According to our State of the Workplace Financial Benefits Study, most employees (89%) consider workplace financial benefits essential in meeting long-term financial goals. Take the time to understand any workplace benefits that are available to you — including health insurance, retirement benefits such as an employer 401(k) match, life insurance, disability insurance and more.

Assess your current financial status, including any wiggle room to allocate paycheck deductions and savings toward different benefits. For example, if your company offers a retirement benefit such as a 401(k), enroll — and make sure to max out any available employer match, if possible. If you’re planning to pay for a college education, take advantage of resources such as tuition reimbursement or workplace 529 programs. From there, you’ll be better able to identify areas where you can apply workplace benefits more effectively.

Your workplace may also offer additional benefits, such as discount programs, an emergency savings account match or equity compensation, which can potentially help you cut costs to free up your budget and build savings or investments over time.

Also, use any educational resources that your employer provides so you can better understand how your workplace benefits can help you address various financial challenges. Many companies offer webinars, events and on-demand content as a part of their benefits throughout the year. Even if you’re a veteran employee who has been around for a while, it’s usually worthwhile to participate so you don’t miss out on any new opportunities, updates or helpful information.

3. Prepare for the future and the unexpected

Keep in mind that life is unpredictable; one of the easiest ways to prepare for whatever life throws your way is to set money aside for emergencies. If you don’t have an emergency fund already, consider setting aside even $10 a month to start building in case of a rainy day. An emergency fund can help keep you financially afloat in unforeseen life circumstances, such as a change in your family’s employment situation or a medical emergency.

A good baseline is to set aside three to six months’ worth of living expenses in a separate, easily accessible account — such as a savings account, money market account or CD account. But your lifestyle can change over time, so if you have an emergency fund make sure it’s still adequate for your current needs. Ask your employer if they offer an emergency savings account match or any additional savings, budgeting or financial planning support.

If you aren’t sure where to start, talk to your employer: Our research shows nearly nine in 10 HR leaders offer financial wellness programs to help counterbalance work-life stressors. Your employer may be able to help answer questions, provide information to help you take advantage of your workplace benefits and even direct you toward additional resources to help you navigate your financial life. Additionally, you may have access to a financial coach or advisor through your employer’s financial wellness or retirement program.

Revisiting your finances near the start of a new year may be overwhelming, and new goals work only if you stick to them, but you won’t regret investing in your financial future.

This material has been prepared for informational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

This material may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the firm has not reviewed the linked site. Equally, except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the firm takes no responsibility for, and makes no representations or warranties whatsoever as to, the data and information contained therein. Such address or hyperlink (including addresses or hyperlinks to website material of Morgan Stanley Wealth Management) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through the material or the website of the firm shall be at your own risk and we shall have no liability arising out of, or in connection with, any such referenced website. CRC# 4169466 1/2025

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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.

Over the past decade, I’ve worked with all sorts of people preparing for retirement. What’s interesting is I cannot find a reliable correlation between income received from employment in relation to how much someone has saved. Some have higher incomes with little savings for retirement. Some have never made more than a modest income while living a happy life and have saved more than seven figures for retirement.

Everyone’s situation is different. The financial variables are endless. However, over the years, I have noticed a theme between those who have enough saved for retirement (based on their expectations) and those who do not have enough.

To be clear, the word “enough” in relation to retirement savings is a very subjective term and should be assessed on an individual basis. Also, I want to clarify that in each situation, the individual or couple made more than their total basic expenses. There is a tipping point everyone needs to reach before they can afford to start saving for retirement. However, once a person crosses that threshold, based on what I have seen, their ability to save for retirement seems to have more to do with how they manage their cash flow than anything else.

The following are three common cash flow mistakes I have noticed many people make. These mistakes can hurt your ability to enjoy your life in the present while also saving for retirement.

Mistake No. 1: Automating your budget

When you automate your budget, you can create cash flow blind spots. Many of my wealthiest clients seem to have one common behavior: They manually track every transaction. They know exactly where their money goes. They notice when certain expenses, such as auto insurance, utilities or certain subscriptions, go up. They are not old-school because they are older. They do not resist using apps because they hate technology. They manually track everything because they want to know where their hard-earned money is going.

Manually categorizing and sorting every transaction raises your cash flow awareness, which allows you to make more informed decisions. You cannot fix problems if you don’t know what they are. Manual categorization is key to helping you have more control and awareness over your monthly cash flow.

If you don’t want to use a spreadsheet to manage your budget, consider using an app called Cash Flow & Capital. It’s the only one I have found that automatically uploads your transactions while allowing you to manually categorize them within your custom spending plan.

Mistake No. 2: Not shopping around

It is easier to assume the price you pay for a specific service is the best price and that you don’t need to check it again. The reality is you have a lot more power over price than you may realize.

For example, have you ever considered switching phone carriers? It may seem scary at first. However, when you understand the difference between companies like Mint Mobile and AT&T or Visible and Verizon, you may realize that you are paying for more features than you need. Sometimes, it may make sense to switch and save money.

Another example is shopping for insurance. This is tricky because insurance is not an investment. When you pay more, you typically have more coverage or benefits. This is why you hear certain commercials warning you about “cut-rate insurance.” That said, you get to decide what you are willing to pay for and what you don’t want to pay for.

Shopping around can make a big difference in your savings. Let’s say you make a few adjustments and end up spending $250 less per month. If you invest that $250 per month ($3,000 per year), assuming a 7% growth rate, you’d have about $41,000 after 10 years or $122,000 after 20 years. If you identified and adjusted $1,000 per month of unnecessary expenses or inefficiencies, that could mean $165,000 in 10 years or $491,000 in 20 years.

If your quality of life is not negatively affected by making a few adjustments, then why not take the time to shop around? It’s not just about saving for retirement. It’s about having more control over how you spend your money.

Mistake No. 3: Holding on to too much bad debt

Not all debt is bad. In my opinion, debt that is associated with an asset that can appreciate in value, like your home mortgage, can be a good thing. Another way to say that: You appreciate debt that is tied to something that appreciates in value.

Bad debt, in my opinion, is any debt associated with something that depreciates in value, like a car. Bad debt also includes credit card debt because it doesn’t really have any value tied to it. Another way to spot bad debt is any debt that has a high interest rate. As a rule of thumb, if your interest rate is 1.5 times more than the 10-year Treasury yield, your interest rate may be a little higher than is desirable. Consider paying down that debt as fast as possible or refinance it at a better rate.

Many times, we rationalize the payments on bad debt without realizing how much of our cash flow is taken up by interest. If you have debt that is tied to something that is losing value or has a higher interest rate, pay it off as fast as you can. Free up your cash flow so you can be more productive with your money.

Conclusion

To quote Benjamin Franklin, “Beware of little expenses; a small leak will sink a great ship.” Sometimes, the answer isn’t more income — it’s better cash flow management. You cannot solve problems you do not know exist. Track your cash flow. Identify any imbalances. Create systems that can guide you on your path to success. If there’s a spending addiction, allow your cash flow management system to help you spend within your means as you heal along the 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.

There’s a lot of talk about debt and whether it is good or bad. As a general rule, when discussing money matters or, really, anything in life, whenever superlatives are used, something is probably missing from the conversation. The reality is debt is just a tool that allows you to use other people’s money for your benefit (or detriment).

This article is intended to clarify when it may make sense to take on debt and when it may make sense to avoid debt. In addition, I hope to offer some clarity on two types of debt that seem to be in the news a lot: mortgages and student loans. My intention is to teach the underlying principles of debt so you can make healthier personal financial decisions.

What is good debt?

Good debt, in my opinion, is any debt that is used to acquire an asset that is expected to appreciate in value. In other words, you appreciate debt that is associated with something that appreciates in value (e.g., your home).

Second, to qualify as good debt, it must have a reasonable interest rate. As a rule of thumb, I like to think that a reasonable rate would be anything around 1.5 times the current 10-year Treasury yield or less.

Lastly, good debt does not compromise your overall quality of life. That means you can afford to make payments comfortably. It is important to live within our emotional and economic limits. That means your debt does not stress you out.

What is bad debt?

Bad debt, in my opinion, is any debt used to acquire a depreciating asset. Bad debt can also be any debt that has a high interest rate (think credit card debt). Once you take on bad debt, it becomes challenging to pay off.

Bad debt can overwhelm your budget or spending plan while preventing you from being able to save for the future. Too much of a good thing, even if it may look like “good debt,” can be bad. If you have bad debt, pay it off as fast as you can. Consider cutting back on dining out, going on vacation or taking on any other non-essential expenses so you can free yourself from the influence bad debt has over you.

Find a system that can help you pay it off as fast as possible. If you want an app that can help you get rid of bad debt while gaining a better understanding of how to manage your cash flow, I’d recommend Cash Flow & Capital. It was designed to help people develop a healthier relationship with money.

Sometimes, it can be difficult to determine if taking on debt is a good thing or a bad thing. Here are a few examples that may be able to help you understand where the line is.

Mortgage debt

Real estate can be a wonderful investment. Whether you are looking to buy a home for yourself or to rent to tenants, there’s a good chance you don’t have sufficient cash for the purchase. That’s where mortgages come in.

You need a place to live. That means you are either paying rent or paying a mortgage. Let’s say you have enough of a down payment, but the mortgage payment would still be more than your rent payment. Is it still worth it?

The basic question is, “Can you afford the payments?” If the payment fits in nicely with your overall spending plan, then all is well. If your payment causes you to tighten the belt, then it might not be a good idea.

Over time, you’ll be able to pay down the debt while the home appreciates in value. If you can pay down the mortgage more aggressively during the first few years, it can help you pay off your mortgage significantly faster than had you made the minimum payments.

All things considered, a mortgage often falls under the “good debt” category, especially when you consider rent as the alternative. Also, the home equity you build can be used to buy your next home. Lastly, if you pay off your home before you retire, then you don’t need to be worried about that expense in retirement.

Student loan debt

Another type of debt that I believe could be considered either good debt or bad debt is student debt. Let me explain.

According to the National Center for Education Statistics, a 25- to 34-year-old who works full time and has a high school diploma is expected to make up to $41,800 per year. If that same person were to go to college with the intention of getting, say, an engineering degree, their income potential would increase to $76,000 out of college. As these individuals gain experience, they may be able to increase their income to $130,000 or more.

In this situation, the individual is the asset, or investment, that can appreciate in value. Because their new skill helps them become more valuable in the workplace, they increase their overall earning potential. As mentioned earlier, you appreciate debt that is associated with something that appreciates in value, even if that is you.

Let’s run another example. Let’s say someone wants to go to school to become a teacher. Student debt may make sense if you can get a job where the state pays off your loan for you. Make sure you understand the options available to you and the probability of getting hired. When you take on debt, you take on risk. It is possible not to get hired in the field you desire.

Lastly, let’s discuss a situation where student debt would be considered bad debt. If you wanted to go to school and get a degree in something that may not give you in-demand skills for the workplace, your expected income may only be slightly higher than if you had gone straight into the workforce with a high school diploma.

This may sound harsh, but the reality is some degrees may not give you sufficient or relevant skills to increase your earning potential once you graduate to rationalize the risk or financial burden of student loan debt. In this situation, it would be better to go through school slowly while working at the same time. That way, you can pay as you go without taking on the burden of student debt.

Student debt should also be considered bad debt when the debt is so high that it can’t be paid off in a reasonable amount of time. Even if you are going to school for a skill that is in demand, you can still take on too much student debt.

In my opinion, students should consider student debt as the last resource to help them get through college or trade school. Consider paying for your education by applying for scholarships while working part time or full time. You can also help lower your education costs by first getting an associate degree at a community college before getting a bachelor’s degree or higher at another college.

Conclusion

There are many other forms of debt, good and bad. However, in the end, it is important to understand that debt is nothing more than a tool. When you take on debt, you take on risk. That risk must be rationalized by associating itself with an asset that has a high probability of appreciating in value. All debt should be limited so that it does not overwhelm your personal cash flow and overall quality of life.

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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.

When you have extra money, it can suddenly become a problem. Why? Instead of enjoying the windfall, you may face a difficult decision: Should you pay off your debts or invest the money? This is a valid question, and the answer may be: both.

Here's the thing: Investing is optional — you don't have to do it. Debt is a different story. If you don't pay it off on time, the interest adds up and your debt grows. With this big difference between managing debt and investing, the next step may seem clear. Before making any decisions, consider what it means to invest and what it means to have debt.

Investing

You’ve got plenty of investment options — stocks, bonds, mutual funds and more. Want to take it a step further? Consider investing in startups. Right now, industries like artificial intelligence (AI), health care and fintech are booming. Think of startup investing as financially backing an IT team that’s creating an online banking system or a health care app that could lead to potentially serious returns.

However, you should know that the investment market, whatever it is, can be volatile:

• The stock market fluctuates all the time: One day you're up, the next day you're down
• Startups can go over budget early or demand might not materialize for the product

Having a solid investment management strategy is essential. And remember, investing is a long game. Seeing meaningful results can take three to five years or more.

Before you invest, consider first setting aside money in an emergency fund. This should be money in a separate account that will allow you to pay your everyday expenses for three to six months.

Debt payment

Did you know that your credit score can have a huge impact on your financial security? A good credit score (670 or higher) signals to banks, landlords and even employers that you are reliable and trustworthy. A lower score could mean you won’t be considered for loans, rentals or even employment. Your credit score also can affect your insurance premiums.

Your credit score is based on how you manage payments on your mortgage, credit cards and personal loans (such as for your car) as well as the amount of credit available to you and how much you’re using. A person who makes payments late, misses payments or stops paying altogether will have a much lower credit score. A person who makes regular on-time payments and has a lower debt load will have a higher credit score.

Interest rates on credit card debt are usually much higher when compared to what investment returns you could get.

Debt repayment vs investment: Which is right for you?

Here are some ways to manage extra money depending on your financial and personal situation.

For young families with children

Families who are balancing debt and future goals while also finding themselves with some extra money may benefit from:

• Paying off high-interest debt (over 6%)
• Investing a smaller portion of your extra funds (while also paying off debt) in growth-oriented accounts. These could be exchange-traded funds (ETFs) or tax-advantaged accounts such as 529 college savings plans to save for your children's education or a Roth IRA to save for your own retirement.
• By combining both options, you can reduce your debt while also looking to the future with peace of mind.

For people approaching retirement

As you approach retirement age, debt and investments need to be balanced with special care. Consider:

• Paying off debt from cash reserves or investments not tied to retirement savings.
• Using investments and/or savings to cover your living expenses to avoid early reliance on Social Security. Each year you put off claiming your Social Security benefits (until age 70), your check could be 8% higher.
• Getting a reverse mortgage. This option is available to people age 62 and older. To thoroughly understand the benefits and drawbacks of a reverse mortgage, you should discuss the concept with a financial adviser.

For singles

Even when you’re the only one depending on your financial security, it’s key to stay disciplined and consistent. If you have expensive debt — typically high-interest credit cards — start by paying that off. Explore options such as balance transfers or refinancing to lower your interest rates and make repayment more manageable.

Adding a side hustle can also be a smart move, giving you extra income to tackle debt faster while building financial security.

Last but not least

When you have extra money and need to choose between paying down debt and investing, everyone, no matter their personal or financial situation, should consider the following:

• Adjustable interest rates. Credit card debt often has a variable interest rate. That means that when the prime rate goes up, so does the rate on your debt. Usually, the new rate affects only debt that you acquire after the rate increase.
• How you feel matters. Paying off debt reduces stress and gives you a sense of financial freedom. For many people, this peace of mind can outweigh investment returns.
• Compound interest. This is when you earn interest on both the initial investment and any previous interest it has earned, meaning your money is likely to grow faster.

These are some of the considerations to think about if you find yourself with extra money and are trying to figure out whether to pay off debt and invest. You shouldn't take this article as a complete guide, though. It is best to seek the advice of an experienced financial adviser to make sure your money is working for you in the best way possible.

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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.

Your student loan was recently forgiven — hurray! But wait. Do you owe taxes?

As we hurry through yet another tax year, some borrowers may wonder whether their federal student loan forgiveness is tax-free. After all, under the Biden administration, over five million debtors with about $188.8 billion in debt were forgiven.

Biden accomplished this through the American Rescue Plan (ARPA), a law passed during the pandemic, which promised that federal student loans would be "free from taxes" for a while, right? Well, somewhat.

If your federal student loan was forgiven, depending on where you live, you may still be subject to state taxes, and the law that provides for tax-exempt federal student loan forgiveness expires after this year.

Plus, the Trump administration has targeted the PSLF program and, through the GOP's so-called "One Big Beautiful Bill," has enacted several changes that will impact student loans and borrowers.

Read on for more of what you need to know.

Is student loan forgiveness taxed in 2025?

Federally forgiven student debt is not taxable on your federal return through the end of this year. That's because ARPA made federal student loan forgiveness tax-free through 2025.

After that, a forgiven loan will again count toward taxable income on federal returns.

Affected loans may include:

• Pay As You Earn (PAYE) which limits federal student loan payments to generally 10% of a borrower’s discretionary income.
• Saving on a Valuable Education (SAVE) plan, which calculates your loan’s monthly payment amount based on income and family size (currently stalled in court — more on that below).
• Public Service Loan Forgiveness (PSLF), a program that forgives the balance on Direct Loans.

Student loan news under Trump

Parts of the SAVE plan are currently contested in a federal lawsuit. Repealing the plan could mean borrowers will face higher monthly student loan payments if forced to switch to another, more expensive alternative.

Additionally, after 2025, students will again pay taxes on their forgiven federal student loan debt unless Congress acts.

So, where does Trump stand on student loans?

• This month, the Trump administration has proposed a new rule for PSLF that would disqualify organizations involved in activities that have a "substantial illegal purpose." This may include what the administration identifies as illegal immigration, terrorism, or certain medical procedures on minors.
• New borrowers enrolling in July 2026 or later will have just two main federal repayment options: a Revised Standard Plan (fixed payments) and a Repayment Assistance Plan (RAP), which is tied to income and requires up to 30 years of payments before forgiveness.
• Existing income-driven plans are slated for a phase-out, and borrowers will need to transition to a new system by July 2028.
• Starting August 1, 2025, interest will also resume for those enrolled in the SAVE plan.

And that's not all. Earlier this year, Trump called for the end of the Department of Education, which manages federal student loans, among many other things.

Trump argues that the move would cut costs and return control to the states, potentially reshaping education in the U.S. Those on the other side say that eliminating the Department of Education could harm vulnerable students, disrupt funding, and weaken school civil rights enforcement.

While eliminating the department would require congressional approval, Trump could significantly alter its functions through executive actions.

For more information on which programs might be going away and how your taxes will be affected for 2026, check out Kiplinger's report Trump Targets Student Loan Forgiveness: Here’s How Taxes and Repayment Could Soon Change.

Are student loan payments tax deductible?

Yes, the interest portion of your student loan payment may be deductible if you qualify for the student loan interest deduction. Here are a few other ways you may save on student debt:

• Ask your employer about any qualified educational assistance programs or a 401(k) student loan match.
• If you have a 529 account, claim up to $10,000 (lifetime limit) to help pay off college debt.
• Talk to your employer about tax-free student loan repayment assistance.

Student loan debt and state taxes

As mentioned, most canceled student debt is currently exempt from federal tax, but only some states follow that federal law.

As a result, you could be stuck with an unexpected state tax bill for forgiven student loan debt, which could be as high as $1,100 in some states.

Check out your state’s Department of Revenue website to determine if you’ll be taxed on student loan forgiveness, or to see if you're missing out on any state tax breaks.

More on Student Loans

• States That Could Tax Forgiven Student Loans
• How to Get a 401(k) Match for Your Student Loan Payment
• A Tax-Free Way To Help Pay Your Student Loan
• 12 Education Tax Credits and Deductions

We’ve all been there: buyer's remorse after a season of frenzied spending and often overspending. That joy of gift giving quickly turns to panic when you receive your year-end credit card statement. If this sounds familiar you aren’t alone. Of shoppers polled by LendingTree, 36% said they racked up debt this holiday season, spending an average of $1,181 per person.

Starting the new year with extra credit card debt, especially if you are in retirement, isn’t ideal. After all, it can negatively impact your cash flow and if left unchecked, quickly gets out of hand, especially if you are only paying the minimum. But it doesn’t have to keep you down, says Bruce McClary, a spokesman for the National Foundation of Credit Counseling. There are strategies that McClary says should work to put a dent in those holiday excesses.

“The first step is to look closely at your budget to see where you stand. Look at all your expenses, how much debt, how much income and how you might manage it,” says McClary. “You may feel a little in over your head, but maybe it's just a matter of taking a look around.”

Eyes wide open couldn't be truer when it comes to working off your holiday debt. Armed with a true idea of your debt you can get busy reducing it. Here’s how.

How to get out of holiday debt

1. Seek greener pastures. If you racked up high-interest debt, one easy way to reduce it is to lower your interest rate via a balance transfer. Credit card companies want your business and will go to great lengths to get it. They entice you with sign-on bonuses and zero interest balance transfers. Many credit issuers offer no-interest periods for up to 21 months, says Andrea Woroch, a money coach. “During this period, your entire payment goes towards reducing the actual balance and nothing is wasted on interest fees,” she says. “Just make sure you compare balance transfer cards to find the best option with the longest no-interest term.”

2. Tap savings to pay it down. This is a last resort option when the matter has become urgent, says McClary. “If you feel like you're at risk of falling behind, you’ll get hit with penalties and interest rates, the balance is growing and you're at threat of debt collection, then it may make sense to use some of your savings” to pay down the debt, he says. “Keep in mind when you do that you are chipping away at your future income during retirement.”

3. Lower your expenses. If you are on a fixed income one way to shore up extra cash to pay off your debt is to curb your monthly expenses. To do that first make a list of every expense. After that, identify areas you can cut. You can also save money by shopping around for new insurance, cable and phone coverage. You may be able to get better rates. The more you cut, the sooner you can pay down your debt. “Start by cancelling unused subscriptions and switch to a lower-tiered data plan or move to an online-only wireless carrier that offers plans designed specifically for seniors,” says Woroch.

4. Boost your retirement cash flow. If you want to pay your holiday debt fast, consider getting a part-time job, side hustle or selling unwanted belongings to earn money. You can consult if you have a skill, pet sit, work in retail or even become an Uber driver. Any extra cash you earn can go toward your debt.

5. Don’t leave money on the table. If you are 55 or older, many retailers and service providers have a senior discount that can save you up to 10%. Don’t be afraid to ask for that discount. You can also save money by asking for better rates and taking advantage of coupons and discounts. Even unplugging unused devices can save you money on your energy bill. The idea is to find a place where you can save money that can go to your debt.

6. Contact your creditors. As soon as you realize you are in trouble, contact your credit card companies and alert them to your situation. Many are willing to work with you and can offer you repayment options. Before you contact your creditor, have a clear idea of how much you owe and what you can afford to pay. Ask the creditor if there is a forbearance program, if you can make fewer payments or if your interest can be reduced.

7. Seek help. If all else fails and you’re still struggling to pay off your debt, seek help from a nonprofit credit counselling agency, says Howard Dvorkin, CPA and Chairman of Debt.com. They will be able to give you a free, in-depth debt analysis over the phone and identify the debt-busting program best for your situation. That could range from debt management to debt settlement to even bankruptcy. “Best of all, there's no obligation. You can hang up and walk away with that debt analysis, which can help you figure out your next steps,” Dworkin said. "I've been a debt counselor for three decades now, and retirement debt is one of the saddest situations I see. There's simply no time for any other solution except hiring a professional to help.”

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As 2025 kicks off, many of us are making our resolutions for the new year. But as you ponder your fitness goals or a new skill you want to learn in 2025, you should also make a resolution to improve your finances.

Here are a few financial goals you could aim for in 2025.

1. Find easy ways to save

Many people are struggling to make ends meet due to the high cost of living, making it difficult to save for future emergencies or retirement. More than a quarter of adults in the United States say they have no emergency savings, the highest since 2020, according to Bankrate.

Everyone has different savings goals. Are you saving up to buy a house? Do you want to add more to a retirement account? Or do you simply want to build up your savings? Whichever you choose, you need to start with a plan.

The first thing you need to do is take a look at your budget. Are you spending more each month than you are making? Are there areas you can cut back on? Cancel any unused subscriptions or streaming services that you don’t use. Try making coffee at home and skip the $7 daily latte.

Consider putting money into a high-yield savings account, a certificate of deposit (CD) or a money market account. High-yield savings accounts allow you to grow your money faster than a regular savings account.

Unlike many other investment options, you can easily withdraw money from these accounts if you suddenly need access. The best savings rates for high-yield accounts are close to 5%. That means if you deposit $10,000, you’ll have an additional $500 in one year without doing anything else.

If you’re just starting your savings journey, start small. Put 5% of each paycheck into whatever you're saving towards, this could be retirement savings or an emergency fund. A little is better than nothing. When you feel more comfortable or if you get a raise, you can increase your amount to 10% or 15%.

2. Avoid adding to your debt

A great financial goal for 2025 is to avoid adding any debt. Currently, credit card debt in the United States is sitting at an astonishing $1.17 trillion. The more debt you have, the more interest you are paying, which is money you could be using to pay yourself. Even with recent rate cuts, interest rates remain high, making it harder for people to pay off their debt. This is not only keeping many Americans in debt for longer than they should, but also preventing them from progressing toward owning a home, building up their emergency savings or saving for retirement.

No matter what type of debt you have, you need to have a plan for paying it off. The two most popular strategies for attacking debt are the avalanche method and the snowball method. Using the avalanche method, you pay off the highest-interest debt first and then roll that payment into the next highest debt. The snowball method is where you tackle your debt by balance, from lowest to highest.

3. Improve your financial knowledge

When you were growing up, how much were you taught about money and finances? If you are like most people, it wasn’t much, if any. But don’t panic, it’s never too late to learn something new and improve your financial literacy.

Try reading articles, websites or books dedicated to personal finance. This is a quick and easy way to learn more about topics you might not know much about. Also, look into local organizations or financial firms in your area that may host workshops or webinars on various financial topics.

4. Choose an accountability partner

Just like with any goal or resolution, we’re much more likely to stick to it if you have a partner to tag along with. An accountability partner can check in with you as needed and offer encouragement and advice when you start to slip. Letting others know that you are trying to save money can help you cut back on spending as well.

Instead of friends reaching out to go to dinner, they might offer to host a dinner at their home saving you both money. If you are more of a competitor, try turning this into a game with your partner. Whoever pays off a loan first or saves the most during a certain period, owes the other person coffee.

A financial adviser can be one of the best accountability partners. They can help you with many aspects of your financial picture to outline your goals and ensure you stay on track in 2025.

Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.

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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.

Why would a bank take $15,000 out of a client’s account with no explanation or any chance for the client to stop the action?

That’s the question my friend asked herself after receiving a distressed call from her son, an accomplished entrepreneur. What happened next highlights the danger of relying too heavily on credit.

A cautionary tale

My friend’s son has started several successful businesses and worked in various fields, but as an entrepreneur, his income can be cyclical, sporadic and, at times, volatile. He’d called in a rare panic, blurting out information he usually wouldn’t share so freely and confessing that $15,000 had been stolen from one of his accounts.

My friend is nothing else if not a very protective mother bear; she doesn’t necessarily become involved in her son’s escapades, but because he seldom shared this type of information with her, she became concerned. She wanted to know what was going on, and eventually, he shared the story in painstaking detail.

As it turned out, even though he had maxed out all his credit cards while in between business ventures, he’d put together a plan to go to Europe and said he kept an account with $15,000 that was now gone.

When my friend asked how this money had been stolen, he told her it had been taken directly from his account without any warning or explanation.

She asked if the bank was applying it to his credit card debt.

He said that wasn’t possible because the credit card debt had been through a different bank.

She wondered if there was a paper trail proving the bank took the money without his authorization. If so, he could request it be returned to his account.

She kept asking questions until he specified which account and bank the money had disappeared from. The answer took her by surprise because she didn’t even know he had accounts with that bank.

She dug deeper and soon discovered that no, in fact, he did not have a checking or savings account with that bank.

But he did have a credit card. And that card had $15,000 of available credit — the money he’d been “saving” for his trip.

What had happened was not that the bank had stolen his money. When all his other cards were maxed out, his credit score had gone down, so the bank lowered his credit limit. That wasn’t his money, and it hadn’t been stolen; it had never been his to begin with.

No, he insisted. That was his money. He was saving that credit as his only source of income.

But what is income?

Credit doesn't provide an opportunity to save

Income is generally defined by its function: providing consumption and saving opportunities.

I’ve always maintained that credit cards are not an alternative source of income.

While having credit available on a credit card does offer a way to provide ourselves with consumption, it does not offer us a saving opportunity. Much the opposite, in fact, most of the time.

Under certain conditions, credit can offer us a way to leverage our money. If we use our credit cards to make purchases, we will have a clean and easy paper trail of what we’ve purchased and when. Credit cards also offer many perks as incentives compared to other payment methods.

How to use credit cards to your advantage

That said, there are only two ways to use credit cards to your advantage:

• If you pay your card off in full before the end of the billing cycle each month, you will receive your rewards and incentives. It can be easier to pay one monthly bill than to account for each expense.
• Often, credit cards provide promotional offers of no interest or fees on purchases within a specific time if you pay the monthly minimum payments.

Both options are available, but you must understand the specific terms and conditions precisely. Once you exceed these parameters, the interest, fees and penalties are costly because interest is calculated continuously and compounded. Paying the total amount doesn’t eliminate the average daily balance calculations, so it can take several months, with no additional charges, to clear your account.

Credit is not income

Thinking that having credit available means you have another source of income, as my friend’s son had done, is misguided. Income is earned a) in exchange for labor or services, b) from selling goods or property or c) as profit from investing.

Credit is not income.

Just because you have the credit available doesn’t mean you have the income to pay the debt, and the bank lowering your limit doesn’t mean they are stealing from you.

Credit cards are not an alternative source of income.

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

The transition from the carefree days of summer into the more structured rhythm of fall and the school year is a great opportunity to reassess and rebalance.

After a season full of vacations, outings and unplanned expenses, it’s normal to feel the effects of a financial hangover. Attaching your “why” to the excesses can help you realize the motivation behind them. You aren’t wrong for wanting to create lasting memories with your loved ones, bond with your friends on nights out or dive deep into hobbies that bring you joy. Don’t kick yourself for overspending. Instead, I think it’s more useful to find ways to fulfill your need for joy and connection in a way that squares with your financial reality.

In any event, you are certainly not alone. Between May 2023 and 2024, the average price of sports event tickets alone jumped from $204.91 to nearly $249.27, according to the U.S. Bureau of Labor Statistics. So, if you had the exact same kind of summer fun as you did last year, it’s safe to say that you had to pay more for it.

Start by telling the truth

All progress starts with truth, so before we can move forward, we need to see where we stand. It’s time to review the numbers. How much did you spend versus what you budgeted? Did you dip into savings or rely on credit cards more than anticipated?

First, review any outstanding debt from summer expenses. If credit card balances have crept up, now’s the time to create a repayment plan to avoid high interest charges. Effective strategies to pay off debt can include the “Avalanche Method,” paying off the debt with the highest interest rate first, or the “Snowball Method,” where you start by paying off the smallest balance first. If your emergency fund took a hit, consider rebuilding a three- to six-month cushion before tackling any discretionary spending. Your goal is to protect yourself from more financial strain down the road.

Again, we’re not trying to beat ourselves up over summer costs that got away from us. Acknowledge the parts of your financial plan that are still on track. Where did you stay on budget or even manage to save a little money? Most budgeting apps allow you to generate reports over time. The more you use them, the more you can identify positive trends. Identify your financial strengths so you can create a plan that aligns with your long-term goals.

Practical steps for rebalancing your budget

With your financial standing clear, it’s time to rebalance or revise your budget. This might involve reworking your budget to better reflect your lifestyle or setting aside money throughout the year for bigger expenses.

Consider setting up a specific “summer fund” within your budget. Allocate a small portion of your monthly income toward this fund so you can establish ahead of time what your spending limit will be. Ideally, you avoid both the financial stress of overspending and the temptation to splurge on impulse purchases. And you don’t have to limit this strategy to summer spending, either. You can do the same kind of early budgeting for the winter holidays too and reap the same benefits.

Whether you prefer a more informal approach or want to use technology to assist with tracking your expenses, the key is to find a system that works for you. There is no one-size-fits-all method. Budgeting apps and traditional methods, such as spreadsheets or a dedicated notebook, can help you get a clear picture of your financial situation and plan effectively for upcoming expenses.

Align your budget with your life's purpose

Your summer spending habits might indicate bigger patterns of spending and saving in your financial life. Cutting back and tightening your belt will only get you so far without zooming out to look at your values and long-term goals. Think about the choices you made over the summer — what brought you the most happiness? What activities or experiences were worth every penny?

Alternatively, consider where you might adjust. Were there expenses that didn’t bring much value or could have been done differently? By recognizing these patterns, you can make more intentional financial decisions going forward.

The shorter days, cooler weather and turning leaves that mark the beginning of fall are a good psychological signal to reset and reflect on your spending habits. Don’t punish yourself for overshooting your budget … and if you don’t have one, it’s never, ever too late to start. Life never turns out the way we expect, and that includes our financial lives too. You’ll know you’re on the right track when your financial plan has enough flexibility to account for the odd splurge or setback without throwing the rest of your life into turmoil.

Investment advisory services offered through SEIA, LLC. Securities offered through Signature Estate Securities, LLC member FINRA/SIPC. 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323.

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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.

While hot-button health care issues such as abortion and the Affordable Care Act roil the presidential race, Democrats and Republicans in statehouses around the country have been quietly working together to tackle the nation’s medical debt crisis.

New laws to curb aggressive hospital billing, to expand charity care for lower-income patients, and to rein in debt collectors have been enacted in more than 20 states since 2021.

Democrats championed most measures. But the legislative efforts often passed with Republican support. In a few states, GOP lawmakers led the push to expand patient protections.

“Regardless of their party, regardless of their background … any significant medical procedure can place people into bankruptcy,” Florida House Speaker Paul Renner, a conservative Republican, said in an interview. “This is a real issue.”

Renner, who has shepherded controversial measures to curb abortion rights and expand the death penalty in Florida, this year also led an effort to limit when hospitals could send patients to collections. It garnered unanimous support in the Florida Legislature.

Bipartisan measures in other states have gone further, barring unpaid medical bills from consumer credit reports and restricting medical providers from placing liens on patients’ homes.

About 100 million people in the U.S. are burdened by some form of health care debt, forcing millions to drain savings, take out second mortgages, or cut back on food and other essentials, KFF Health News has found. A quarter of those with debt owed more than $5,000 in 2022.

“Republicans in the legislature seem more open to protecting people from medical debt than from other kinds of debt,” said Marceline White, executive director of Economic Action Maryland, which helped lead efforts in that state to stop medical providers from garnishing the wages of low-income patients. That bill drew unanimous support from Democrats and Republicans.

“There seems to be broad agreement that you shouldn’t lose your home or your life savings because you got ill,” White said. “That’s just a basic level of fairness.”

Medical debt remains a more polarizing issue in Washington, where the Biden administration has pushed several efforts to tackle the issue, including a proposed rule by the Consumer Financial Protection Bureau, or CFPB, to bar all medical debt from consumer credit reports.

Vice President Kamala Harris, who is spearheading the administration’s medical debt campaign, has touted the work on the presidential campaign trail while calling for new efforts to retire health care debt for millions of Americans.

Former President Donald Trump doesn’t typically talk about medical debt while stumping. But congressional Republicans have blasted the CFPB proposal, which House Financial Services Committee Chairman Patrick McHenry (R-N.C.) called “regulatory overreach.”

Nevertheless, pollster Michael Perry, who has surveyed Americans extensively about health care, said that conservative voters typically wary of government seem to view medical debt through another lens. “I think they feel it’s so stacked against them that they, as patients, don’t really have a voice,” he said. “The partisan divides we normally see just aren’t there.”

When Arizona consumer advocates put a measure on the ballot in 2022 to cap interest rates on medical debt, 72% of voters backed the initiative.

Similarly, nationwide polls have found more than 80% of Republicans and Democrats back limits on medical debt collections and stronger requirements that hospitals provide financial aid to patients.

Perry surfaced something else that may be driving bipartisan interest in medical debt: growing mistrust as health systems get bigger and act more like major corporations. “Hospitals aren’t what they used to be,” he said. “That is making it clear that profit and greed are driving lots of the decision-making.”

Not every state effort to address medical debt has garnered broad bipartisan support.

When Colorado last year became the first state to bar medical debt from residents’ credit reports, just one Republican lawmaker backed the measure. A Minnesota bill that did the same thing this year passed without a single GOP vote.

But elsewhere, similarly tough measures have sailed through.

A 2024 Illinois bill to bar credit reporting for medical debt passed unanimously in the state Senate and cleared the House of Representatives 109-2. In Rhode Island, not a single GOP lawmaker opposed a credit reporting ban.

And when the California Legislature took up a 2021 bill to require hospitals in the state to provide more financial assistance to patients, it passed 72-0 in the state Assembly and 39-0 in the Senate.

Even some conservative states, such as Oklahoma, have taken steps, albeit more modest. A new law there bars medical providers from pursuing patients for debts if the provider has not publicly posted its prices. The measure, signed by the state’s Republican governor, passed unanimously.

New Mexico state Sen. Steve Neville, a Republican who backed legislation to restrict aggressive collections against low-income patients in that state, said he was simply being pragmatic.

“There was not much advantage to spending a lot of time trying to do collections on indigent patients,” Neville said. “If they don’t have the money, they don’t have the money.” Three of 12 GOP senators supported the measure.

North Carolina state Treasurer Dale Folwell, a Republican who as a state legislator spearheaded a 2012 effort to ban same-sex marriage, said all elected officials, no matter their party, should care about what medical debt is doing to patients.

“It doesn’t matter if, as a conservative, I’m saying these things, or if Bernie Sanders is saying these things,” Folwell said, referencing Vermont’s liberal U.S. senator. “At the end of the day, it should be all our jobs to advocate for the invisible.”

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — the independent source for health policy research, polling, and journalism.

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When it comes to financial planning there are so many ways to attack it. Additionally, I find one of the hardest things for people to do is to prioritize their needs. Oftentimes, individuals conflate importance with immediacy, as in the sooner something is approaching, the more important it must be. Although I certainly understand this mindset, I don’t believe it is the appropriate way to handle one’s finances.

I’d like to take a stab at listing in order of priority how, I believe, we should be looking at our finances. Naturally, it is not one-size-fits-all and, of course, I, nor anyone else, can tell you what is most important to you.

1. Protect yourself and your family

To me, the biggest and most important thing you should focus on first is protecting yourself and your family from a tragedy that could derail everything. This usually means making sure you have appropriate insurance coverage. Let’s face it — you can always work longer and make more money, but only if you are physically able.

All too often, I see individuals who are in a terrible bind because they didn’t have a contingency plan with proper insurance. Life, disability, long-term care, health, property and casualty — these are the basics of a good foundation to build off of. Without proper insurance, you are building a financial plan on a house of cards.

2. Get rid of destructive debt

Next on my list is bad debt, like credit cards. I want to make a clear distinction — I am not referring to mortgages or car loans. Rather, I’m referring to those credit card debts with high interest rates. These can simply crumble a family financially and need to be addressed.

You need to have a well-thought-out plan to eliminate high-interest debt, and it is equally important to ensure that you don’t end up back in this hard-to-recover-from place.

I rank this as a top priority because people can be stuck with high credit card debt for years, especially if they make only the minimum payments.

3. Save for emergencies

Simply put, you should have three to six months of expenses saved in an emergency fund that’s easily accessible. Many times, people end up with high-interest credit card debt simply because one unexpected expense broke their finances. Having a nest egg or slush fund to insulate you from that situation is highly important.

4. Save for retirement

Finally, something fun to talk about, right? There is an epidemic in our country, and that is that most people don’t have enough savings, or aren’t saving enough, to ensure they can afford a comfortable retirement.

You cannot borrow for retirement, and at some point, you might be forced to retire. The last thing you want is to be staring down a 30-year retirement but unable to afford the lifestyle you’re accustomed to.

Additionally, the sooner you start saving and the more effort you make in this area, the better your options will be to live the retirement of your dreams.

5. Focus on other savings goals

Now that emergency and retirement savings are on target, you can focus on other savings priorities, whether they be college for your children, a second home or a big project. These items aren’t critical to your financial plan, and there are generally other means to achieve these goals, such as borrowing for college.

I am not suggesting these shouldn’t be important to you now, as they may seem more important to you than how comfortable your far-off retirement will be. But everyone will need to retire, yet everyone won’t need a secondary home.

6. Consider paying off constructive debt

It is probably a tie for me on the next, and last, two categories. I’ll give a slight edge to paying off constructive debt, like a mortgage or car loan. If you have a low mortgage rate, though, I see very little benefit to aggressively paying off a home, except for the peace-of-mind factor. After all, if you are mortgage-free, you’ll have fewer fixed expenses heading into the next stage of your life, which can leave you feeling mentally clearer and more able to continue making good financial choices.

7. Give to charity

It might seem messed up to have charitable giving as the least important piece of your financial plan. Certainly, a great argument can be made that it is the most important, and I even have clients who prioritize this over almost anything else. I get it and actually highly admire those people.

That said, if I am looking out for my client’s finances first and foremost, like I’m supposed to, and the things above aren’t in a good spot, giving money away seems, well, conflicting at best.

Let the debates begin, but I’m sticking to my story that this is what I feel works best for most people. There are exceptions to every rule, and people can always shuffle this deck to their own circumstances. This is just my opinion on what I’ve seen work best in my 20-plus career.

Hope you enjoyed it, and stay wealthy, healthy, and happy.

Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified, LLC should not be a substitute for consulting a qualified tax advisor, accountant, or other professional concerning the application of tax law or an individual tax situation.

Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.

A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.

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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.

Life insurance can be a tricky topic to navigate for anyone. For some, it's an important financial tool that can help them protect themselves and their loved ones in the event of an untimely death, while for others, it’s simply throwing away money for something that most likely won’t happen anytime soon. There are different reasons why you may want to consider getting life insurance or increasing the coverage you already have.

This article will discuss why life insurance is essential and what benefits it brings to you and your family’s future.

Why is life insurance so important?

About 50% of Americans say they don’t have life insurance because it’s too expensive, according to research by Forbes Advisor. And, according to LIMRA, 42%, or more than 100 million Americans, say that their life insurance coverage is insufficient. Most reservations against life insurance usually stem from the stark difference between present cash outlay and future benefits. This could be because of:

• A lack of understanding about how life insurance works
• Not knowing the types of life insurance and what works best for your needs
• Hesitancy in paying cash today for a far future event
• Paying for something that you, yourself, will not receive in the future

True enough, most life insurance payouts will not benefit the policyholders because, as the name suggests, life insurance is based on the policyholder’s life and can be claimed only upon their death.

Albert Kim, vice president of Talent at Checkr, says, “A compensation package with life insurance policy in place is now one of the most non-negotiable terms jobseekers are looking for from their potential employers. This emphasizes how important the role life insurance plays, especially at an age where funeral costs are only getting more expensive.”

Kinds of life insurance

Depending on your need, policy length, premiums and benefits, many types of life insurance are available. Some of the most common:

• Term life insurance. This type of life insurance covers the policyholder for a fixed policy term, typically 10, 20 or 30 years. The premium and coverage usually do not change for the term, and the policy is renewable after the term has expired (usually with an increase in premium).
• Whole life insurance. This is usually more expensive than term life insurance. It has a cash value (saving) component and keeps the policyholder insured for as long as the policy is active and premiums are paid.
• Universal life insurance. Like whole life insurance, this also has a cash value component, which can earn interest. Compared to the first two, UL insurance features flexible premiums and benefits that can be adjusted over time.
• Final expense life insurance. If your goal is to help your loved ones cover your end-of-life medical bills and funeral and burial expenses, this life insurance offers more affordable premiums, even for older and less healthy individuals.
• Variable life insurance. This is a permanent policy whose cash value is invested in assets such as mutual funds. Because of this, the cash value may rise or fall, depending on the market.

The right type of life insurance, based on your needs and goals, gives you the peace of mind of leaving your loved ones financially free and secure. Here are some reasons why you need it, courtesy of small-business owners who know the score:

1. To protect your income

If you are the sole income earner in your family, life insurance is crucial for you, more than anyone else, to secure your loved ones' financial stability in case of your untimely demise.

According to Roman Zrazhevskiy, founder and CEO of MIRA Safety, “Adequate life insurance coverage helps ensure that breadwinners' children, parents or families receive monetary compensation upon their death that would last them just enough until they can earn income on their own to pay for household and other necessary expenses otherwise paid by the deceased policyholder and breadwinner.”

2. To protect your family and beneficiaries

Everyone works hard to give their families the life they dream of. However, accidents and unfortunate events are unavoidable, and nobody can predict when something might happen to you.

Nora Sudduth, founder and owner of Nora Sudduth Coaching, says, “Aside from business coaching, I find it important to emphasize to my clients the importance of leaving a legacy not only to their business, but to their families — and that is by making it a point that no amount of sales or marketing ROI (return on investment) can ever replace time spent with family and making sure they are comfortably living despite any unforeseen emergency.”

3. To cover final expenses

One of the benefits of life insurance is to help your loved ones cover the costs of your burial arrangements after your death. According to the National Funeral Directors Association, a funeral with viewing and burial costs an average of $8,300, and a funeral with cremation costs an average of $6,280.

Kyran Schmidt, co-founder of Outverse, says, “Most people don’t realize it, but AI has significantly lifted a huge burden among employees burdened by repetitive work that adds to the physical and mental stress causing sickness and death among many workers.” He adds, “A work life insurance policy only covers final expenses, but not the grief and loss your family lives with for the rest of their lives.”

Final expense life insurance covers not only burial, funeral or cremation expenses, but also final medical, nursing and legal expenses.

4. To help pay off debt

Your debt doesn’t go away when you die. When a lending institution has unpaid debt, it may go after your remaining assets or estate to settle that debt, potentially leaving your family less to rely on. Even if debt collectors are prohibited from transferring any liability for your debt to your surviving loved ones, hearing from debt collectors can still stress your family.

"With the help of life insurance, your family may use your insurance proceeds to help reduce the burden and stress of settling your unpaid debts or (keeping) debt collectors from touching your remaining estate,” says Chris Aubeeluck, head of sales and marketing at Osbornes Law.

5. To donate to charitable institutions

Aside from your loved ones, you can also use your life insurance payouts to provide more for a charitable institution or nonprofit organization. There are many ways you can do this, including:

• Charitable giving riders. A rider on your life insurance policy provides that a qualified institution will receive a percentage of your policy’s face value after your passing, subject to maximum limits.
• Gifting your policy. Gifting life insurance policies will allow your donee to receive the full policy amount. As a donor, you will also receive tax advantages by reducing your total taxable estate and your estate tax.
• Naming a charitable institution as beneficiary. One of the most common ways to provide life insurance proceeds to a charitable institution. This reduces a donor’s taxable estate and gives you all the cash value benefits while you are still alive for permanent life insurance policies with added cash value that functions similar to investments, while giving the lump sum amount of the payout to your charity or charities of choice.
• Gifting policy dividends. If you don’t want to give the full amount of your policy but still want to gift a portion of your benefits to a charity, you may donate the dividends from the cash value of a permanent life insurance policy. Doing this allows you to retain ownership of the policy but also benefit from tax advantages of the donation.

Erin Acheson, vice president of Business Intelligence at ZeroEyes, says, “It is important to remember that in assigning, gifting or naming charitable institutions as beneficiaries, they must meet the IRS’ qualifications on charitable contributions as outlined in 501(c)(3) as a qualified organization, especially when you mean to take advantage of the tax benefits of contributors to charitable institutions.”

6. To provide access to cash

Some types of life insurance, like whole life and universal life insurance, offer a cash value together with your normal life insurance death benefits. Simply put, your premiums for life insurance with cash value are generally more expensive than ones with no cash value, because your premiums are divided between your cash value and life insurance benefits.

Policyholders who purchase policies with cash value components can benefit from this arrangement by having immediate access to cash in case of an emergency, through partial surrenders or withdrawals of the cash value (which may decrease the death benefit).

The insurance company may also allow the policyholder to take out loans against the policy or use the cash value to pay policy premiums.

According to Tom Golubovich, head of Marketing and Media Relations at Ninja Transfers, “Cash value components aren’t new in life insurance policies, as many policyholders get them to get two-in-one benefits in one premium payment.” He adds, “Although, it is important to read the fine print before agreeing to any cash value-inclusive policies to better understand the tradeoffs it entails with your actual life insurance benefits.”

Life insurance policy premiums are highly dependent on your age, gender and overall health, so the younger and healthier you are when you buy life insurance, the lower the premiums you’ll have to pay to get the maximum death benefits.

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• Retirees, It's Not Too Late to Buy Life Insurance

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.

As the 2024 presidential election nears, the fate of student loan forgiveness is at the forefront of many borrowers' minds, particularly as Vice President Harris and former President Trump have such wildly differing viewpoints. In the first half of this year, federal student loan debt increased by $17.9 billion, bringing total student loan debt in the United States to over $1.75 trillion.

Approximately 43 million Americans have student loan debt as of 2023, with borrowers owing $37,853 on average in federal student loans, according to the Education Data Initiative. And college is only getting more expensive. Between 2000 and 2021, average tuition and fees jumped by 65%, to $14,307 per year from $8,661, according to BestColleges.com. Not to mention the impact of rising interest rates on student loans — 6.53% for the 2024–2025 academic year, the highest rate since 2007–2008.

Student loan forgiveness has become an increasingly hot topic over the last several years as legal battles over debt relief initiatives leave millions of borrowers in limbo. 

In 2023, Biden’s plan for widespread student loan forgiveness, which would forgive up to $10,000 of student loan debt for eligible borrowers, was struck down by the Supreme Court. In August 2024, the court temporarily blocked the administration’s Saving on a Valuable Education (SAVE) repayment plan.

In September, U.S. District Judge James Randal Hall issued an order blocking the Biden administration’s latest student loan forgiveness plan, which would have provided debt relief to over 30 million Americans. And just one day after Hall decided to let the restraining order expire, Biden's forgiveness plan was temporarily blocked again by a Missouri judge. 

One study from Bankrate found that nearly 1 in 5 Americans say student loan debt will have a major influence on their vote in the 2024 presidential election. Considering each candidate has very different ideas on how student loans should be handled, many borrowers are anxious to learn how the election will impact them.

Here’s a closer look at each candidate’s plans regarding student loan debt.

Harris on student loans

The Biden-Harris Administration has implemented several aid programs that have contributed to total debt relief, despite strong opposition. And if Kamala Harris becomes president, she will build on these policies, working to provide widespread student debt relief for millions of borrowers by expanding programs like income-driven repayment plans and Public Service Loan Forgiveness.

“We see a future where every student has the support and the resources they need to thrive,” Harris stated in a speech made in July. “And a future where no teacher has to struggle with the burden of student loan debt.” She noted that the Biden-Harris administration has forgiven student loan debt for nearly five million Americans. Nearly $160 billion in federal student loan debt has been forgiven since Biden took office, according to the U.S. Department of Education.

The administration's efforts have been focused on targeting areas for forgiveness for borrowers who are most in need, Stacey MacPhetres, senior director of education finance for EdAssist by Bright Horizons told Kiplinger. Borrowers most in need have included those facing financial hardship, holding balances greater than the initial amount borrowed due to accrued interest, those who are eligible for forgiveness but have not yet applied, those who have been in repayment for 20 years and borrowers who attended institutions that show low financial value. 

Here’s a closer look at various loan forgiveness programs Harris will likely continue expanding if she takes office.

• Borrower Defense loan discharge: If your college misrepresented details that led you to enroll there, you may have grounds to apply for borrower defense loan discharge. The administration says this has led to the discharge of over $28 billion in debt for 1.6 million borrowers.  
• Income-Driven Repayment plans: These plans base your monthly student loan payment amount on your income and family size. There are four plans:
  • Pay As You Earn (PAYE) 
  • Income-Based Repayment (IBR) 
  • Income-Contingent Repayment (ICR) 
  • Saving on a Valuable Education (SAVE) 
• Public Service Loan Forgiveness (PSLF): This program forgives federal student loans of borrowers employed by the government or certain non-profit organizations after ten years of on-time payments or 120 qualifying monthly payments. These efforts have reportedly led to the forgiveness of over $62 billion in student loan debt.
• Total and Permanent Disability (TPD) discharge: More than half a million borrowers with disabilities have received over $14 billion in relief through the Total and Permanent Disability Discharge program, according to the White House. 

"The Harris campaign would be trying to extend the same types of programs and maybe repackage those in a way that they can get those through either Congress or get them through the court system without being struck down," said Shane Cummings, wealth advisor & director of technology/cybersecurity at Halbert Hargrove.

Trump on student loans

Trump stands firmly in opposition to student loan forgiveness. If he becomes president, his efforts will likely be focused towards getting student loan forgiveness programs enacted by the Biden administration repealed or restricted.

During Trump's presidency, he proposed significant cuts to student aid programs and called for eliminating Public Service Loan Forgiveness (PSLF), Federal Supplemental Educational Opportunity Grant (FSEOG) programs and subsidized federal student loans.

And while Trump has made no statements regarding his specific plans to revoke student loan forgiveness initiatives if elected president, he is very vocal about how he views these initiatives. He has referred to Biden’s plans to cancel student loan debt as "not legal" and “vile.”

"He got rebuked, and then he did it again,” Trump stated at one of his rallies back in June, referring to the Biden administration's 2023 attempt at widespread student loan forgiveness that the Supreme Court shut down. “It’s going to get rebuked again even more so.”

In the September 10th presidential debate with Kamala Harris, Trump stated, as per Politico: "They didn't even come close to getting student loans. They taunted young people and a lot of other people that had loans, they can never get this approved.”

Kimberly Weihbrecht, CSLP®, Senior Associate at Fearless Finance tells Kiplinger that although the Trump administration would likely try to repeal programs like SAVE, PSLF and income-driven repayment, "big rollbacks like this would be difficult to do via regulations for the same reason SAVE is struggling now. Regulation-based programs are more likely to get contested in court and potentially struck down."

Ultimately, whether or not loan relief programs are actually repealed during a Trump presidency could heavily depend on whether or not there is a Republican majority in Congress. A set of conservative policy proposals developed by The Heritage Foundation, called Project 2025, calls for significant changes to how student loans are managed, including the phasing out of existing income-driven repayment (IDR) plans. And while Trump has tried to distance himself from the project, according to Reuters, many of his closest policy advisers and those likely to take high-ranking positions in his administration are heavily involved in the project.

Bottom line

Ultimately, it's still too early to determine exactly how the election will impact student loans. And because of the uncertainty of whether or not loans will be forgiven, it's difficult for many borrowers to make long-term plans concerning their debt, according to Cummings. This is why he advises borrowers to focus on repayment and plan conservatively.

For borrowers who are struggling to meet loan obligations, MacPhetres urges them to communicate with their loan services to review any repayment options or hardship opportunities available.

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Graduating from college is a remarkable achievement, but it often coincides with the pressures of finding a new place to live, securing a first job and managing your first paycheck. Entering the workforce now means you must focus on maximizing your entry-level salary, potentially paying off student loans and planning for a secure financial future.

While these obligations may seem daunting, implementing basic financial habits into your daily routine can help ease the transition into life after college. By tracking expenses, staying on top of any student loan debt and planning out the initial stages of your career path, you can lay the groundwork for a financially secure post-graduation period.

You recently graduated: Now what?

Performing initial research on salary estimates for your major or career choice is crucial. Understanding the differences in pay between different industries, sectors and companies — as well as the cost of living for different cities — can help you structure your career path and identify positions you want to apply for.

Once you land a job, it’s a good idea to create a monthly budget based on your income. Tracking your expenses will not only provide you with a clear idea of where your money is going, but also help you create new habits — enabling you to focus on your priorities and say no to unnecessary spending.

However, creating a budget doesn’t mean cutting out all the fun stuff! Budgets are meant to help you identify items that aren’t essential to your daily needs, like how much you spend on eating out, luxury accessories and subscription services. Removing or cutting back on some of these items will allow for greater flexibility to focus on essential spending.

One required bill for many graduates is their monthly student loan payments. If you have student loan debt, prioritizing these payments is essential to protecting your credit score.

As such, these payments should be factored into your budget. A general rule of thumb is to devote no more than 10% of your monthly gross income to paying your student loan under a standard 10-year repayment plan. If you find yourself paying more than 10%, it might be time to review your budget to see where you can put that extra money to better use.

Planning your career path

While a larger salary can make it easier to balance your budget, recent graduates often place a heavy emphasis on their starting pay, mistakenly equating it to career success.

While a job provides you with money to pay the bills, pursuing a career means gaining experience, building your innate skills and talents, which will allow you to progress toward higher-paying positions with more responsibility and impact.

Seek a career path that aligns with your passions, lifestyle and long-term goals. Take remote work as an example. If you prefer to interact with colleagues face-to-face, then taking a position in which you’re not going into an office — even if it offers a higher salary — will not bring you personal fulfillment.

Additionally, keep in mind that you may move between companies and industries at various times in your career. This is why it’s important to take a long-term approach to planning, taking positions early on that enable you to learn and grow your skills and make yourself more marketable. While this could mean taking a pay cut early on, improving your skill set will pay dividends in the future.

Working with a financial professional

Sometimes, no matter how much effort we put into managing our finances, it’s not enough to cover all the bases in our financial journey. This can be particularly true when you are balancing a new salary, student loans and the responsibilities of rent, utilities and insurance that come with living on your own.

This is where a financial advisor can help you “level up” basic habits to strengthen your financial security and stability. For example, if you are having trouble making loan repayments, an advisor can help you understand your loan obligations in greater detail and help you choose a repayment plan that makes sense for your situation.

A financial advisor’s greatest impact, however, lies in long-term planning. By working together to understand where you are today — and where you would like to be — an advisor can craft a comprehensive financial plan that considers your unique needs and circumstances, as well as your vision for the future.

With an entry-level starting salary, it usually takes time to achieve financial independence. But that doesn’t mean you can’t begin to save for longer-term goals, such as retirement, homeownership, a new car or continuing education. Collaborating with a financial advisor can help you budget for these items and take advantage of your employer’s retirement plan, which often includes matching contributions to your pretax salary deferrals.

Whether you work with an advisor or on your own, it’s important to set professional and financial goals and plan the steps you should take to realize them. The post-graduation period is filled with new responsibilities and important decisions, and financial missteps early in your career can lead to neglected debt payments, a damaged credit score and overall financial stress. However, if you stay committed to your financial plan, maintain responsible spending habits and seek a position that aligns with your passions and skills, you can lay the foundation for a rewarding career and a secure financial future.

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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.

Editor’s note: This is the first article in a six-part series focused on paying for education using smart financial and estate planning. Other articles focus on 529 plans, Coverdell Education Savings Accounts, Uniform Transfer to Minor Accounts (UTMAs), education trusts and family loans. See below for links to the other articles.

It’s never too early to start thinking about how to pay for the education of your child, grandchild or someone else you want to support. The cost of schooling continues to increase in the United States, and not just in higher education. Even independent day and boarding schools are raising tuition at higher rates to retain teachers and keep pace with inflation. The good news is that paying for education can be done through smart financial and estate planning.

As an outsourced chief investment officer firm, Hirtle Callaghan is often asked by families how to weigh the various options for paying for education. This series will examine different possibilities in depth, from direct payments, to government-sponsored plans and other estate planning techniques.

Efficient tuition funding: Direct payments explained

For estate planning purposes, it may be most efficient and effective to pay directly for someone else’s tuition. Unlike other options we will explore, paying tuition on behalf of another individual does not require years of advance planning. Yet, it can have an immediate tax benefit because the tuition payment does not count toward your annual gift tax exclusion or your lifetime exemption amount. For example, you can make a direct payment of $40,000 to a school to cover the cost of a grandchild’s tuition and then make a gift of $18,000 (in 2024) to the same grandchild in the same year free from gift taxes.

As noted above, it is critical that the tuition must be paid directly to the educational institution. If a grandparent were to give their son or daughter money to pay the tuition (and not do it directly), then the transfer would count as a gift under federal tax law. This option is not only available for college or graduate school but is also available for preschool, private grade school and private high school tuition. It is worth noting the direct payments apply only to tuition, not the cost of books, supplies or room and board. Those other expenses would count as gifts under federal gift tax law.

How this could affect financial aid

A direct contribution can negatively impact financial aid eligibility because it is treated as untaxed income on the Free Application for Federal Student Aid (FAFSA), which reduces eligibility by 50% of the amount paid. So, a tuition payment of $10,000 may reduce eligibility by $5,000. However, if financial aid is not a consideration, paying tuition directly may be the easiest and most tax-efficient way to fund a child, grandchild or loved one’s education.

Benefits:

• Tuition payments are removed from the grantor’s estate, which leaves fewer assets in the grantor's estate that could later be subject to estate tax.
• Direct tuition payments to an institution do not count toward the lifetime or annual gift tax exclusion
• Direct payments can be used for preschool, private grade school, private high school, college and graduate school

Considerations:

• Financial aid may be reduced
• The costs of books, supplies or room and board are not covered

Opting to pay tuition directly to an educational institution can be a savvy move for those looking to support someone’s education without coming up against gift tax limitations. However, it’s essential to consider the potential impact on financial aid eligibility and remember that this method covers only tuition, not ancillary expenses like books and room and board.

Also, paying directly for someone else’s education requires being willing and able to part with disposable income.

Each family's situation is unique, so it’s crucial to weigh this option against other strategies, such as government-sponsored plans or educational trusts, to find the best fit for your financial and estate planning goals. By carefully evaluating your choices, you can effectively support education while optimizing tax benefits and aligning with your broader financial planning strategy.

The next article in this series will be about unlocking the power of 529 plans.

Other Articles in This Series

• Part two: 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Part three: Coverdell Education Savings Accounts: A Deep Dive
• Part four: UTMA: A Flexible Alternative for Education Expenses and More
• Part five: How an Irrevocable Trust Could Pay for Education
• Part six: How Intrafamily Loans Can Bridge the Education Funding Gap

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 student loans, rising housing costs and the ease of credit card use, it’s become all too simple to get into debt. In fact, it’s estimated that about two-thirds of U.S. adults carry some form of debt. And while being debt-free can provide some much-needed emotional freedom and relief, getting out of that debt can sometimes feel like a gargantuan task, especially if you've accumulated a large amount. 

But according to the financial experts of Kiplinger Advisor Collective, paying off debt doesn’t have to be intimidating. If you’re ready to tackle your debt and take charge of your finances, consider these best practices for making debt repayment easier on you and your wallet. 

Gain a clear understanding of how debt works
“Learn how debt products work. Find the interest rates, repayment terms, fees and penalties in your agreements. Learn about alternate repayment options like consolidation or deferment. Research the consequences of nonpayment (e.g., interest, fees, credit impact). With a clear picture of how your debt works, you can make a plan to deal with it that works for you, and it won't feel so intimidating.” — Dana Miranda, YOU DON'T NEED A BUDGET

Take the 'snowball' approach
“Big debt usually doesn't happen all at once. The opposite is true as well. Start small. Begin with your smallest credit card balance, pay it off and then add that payment amount to the next-largest debt. The math says to pay the highest balance and interest first, but math doesn't always tell the whole story. Human emotion matters, too. If you don't see progress and then give up, the math doesn't matter.” — Rod Griffin, Experian

Use tech and expert advice to get organized
“I would recommend leveraging a debt management app and expert advice to make debt repayment easier and less intimidating. Debt management apps can help you track payments, set reminders and visualize progress. Additionally, consult with a financial adviser to receive personalized strategies for negotiating better terms with creditors. This way, you can manage a less stressful debt repayment plan.” — Jabin Geevarghese George, Tata Consultancy Services Ltd.

Change your mindset and habits around credit
“Getting out of debt does not have to be a gargantuan task; getting into overwhelming debt is a gargantuan task. To get out of debt, stop using credit. If you don't have the cash in the bank, you can't afford it. Pay at least the minimum on each obligation, but focus on debts charging the highest interest first. Finally, always remember that credit cards are not an alternate source of income.” — Deborah W. Ellis, Ellis Wealth Planning

Pay attention to your interest rates
“Generally speaking, you need to know the monthly (or whatever makes sense) debt service amount that you are comfortable with — and sure to make — and then commit to that. However, what complicates this strategy is the interest rate you signed up for. If it is high, you should retire that debt as soon as you can, or else you will end up in a situation where you are not really retiring the debt.” — Zain Jaffer, Zain Ventures

Leverage any savings with the 'snowflake' method
“Try the ‘snowflake’ technique to tackle debt: Sell unused items, cut back on habits and apply any savings to your debt. Quick wins build momentum and confidence, making the larger debt feel less daunting.” — Amrita Choudhary, Wasabi Technologies

Break repayment into manageable steps
“Break debt repayment down into manageable steps by creating a detailed budget and prioritizing high-interest debts first. Use the ‘snowball’ or ‘avalanche’ method to stay motivated with quick wins or interest savings. This approach makes the process less overwhelming, provides a clear road map and helps maintain momentum, making debt repayment more achievable and less intimidating.” — Stephen Nalley, Black Briar Advisors

Look into debt forgiveness or relief programs
“Research lesser-known debt forgiveness or relief programs that might apply to your specific circumstances. These might include certain government grants or nonprofit initiatives.” — Manoj Kumar Vandanapu

Share your experience with others
“Budgets and financial prioritization are important to set yourself on the right path, but staying on the path is the hardest part. I recommend sharing your experience and journey with others by seeking out a mental and emotional support network. Debt reduction is a long process, and it can feel like running through molasses. Don't go it alone and you are more likely to succeed.” — Stephen Kates, Annuity.org

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

If you needed a small loan to fund car repairs, buy a new car or make crucial kitchen renovations, where would you go?

You could certainly go to a bank, but the application process may take longer than expected, and the requirements might be more stringent for those with fair credit. If you’re just starting out, or if you are on the journey to enhance your credit, an online marketplace lending platform could provide a smoother, more successful experience for obtaining the funding you need to achieve your dreams while improving your overall financial well-being.

We at Prosper introduced peer-to-peer (P2P) lending to the U.S. in 2005, and nearly 20 years later, our personal loan platform has facilitated more than $26 billion in loans for more than 1.5 million Americans.

A wider range of access to loans

The introduction of P2P lending in 2005 was a breakthrough in giving a wider range of Americans access to loans that help them meet financial needs, consolidate their debt and more. It also provided an opportunity for individuals to expand and diversify their investment portfolio beyond conventional options and achieve solid returns by investing in “notes,” or shares, of borrowers’ unsecured personal loans.

To meet the growing demand in this space, P2P lending, which originally focused on retail investors, expanded to include institutional investors under a broader umbrella called marketplace lending.

Below is a list of the top five advantages over traditional lending that some marketplace lending providers, and specifically P2P lending, can offer:

• Easier qualification for those with fair or poor credit. P2P loans are typically unsecured loans provided by investors to individual borrowers or small businesses. Consumers with fair or less-than-ideal credit scores may qualify for these loans much easier than they can with bank loans — and may be able to obtain lower interest rates.
• Fast, seamless online application process. P2P and other online marketplace platforms allow consumers to apply online for loans and identify the loans that would be the best fit for them, in a matter of minutes. Depending on the platform, potential borrowers can, after creating an online account and obtaining an interest rate estimate, authorize a “soft pull” credit check that won’t impact their credit scores — and all before formally applying for a loan. Some online lending platforms can also undertake “soft pull” credit checks after applications have been submitted, further protecting borrowers’ credit scores.
• Flexible terms. Depending on which marketplace lending platform a borrower uses, they can customize their monthly payments and rates — and can even make changes to their payment dates after loan agreements are signed, without having to provide a reason. Certain platforms may also offer multiple ways for borrowers to make payments, ranging from phone or mail to mobile apps and electronic fund transfer.
• Getting money fast. Certain lending platforms enable borrowers to receive their money as quickly as the next business day.
• Solid returns for investors. P2P lending enables borrowers and individual investors to succeed and grow together. Usually, when the borrowers begin making monthly payments and interest, the money is distributed to the contributing investors, minus any platform and servicing fees. The loan payments from borrowers can provide a source of passive monthly income for investors. Furthermore, investors may have the opportunity to invest in loan listings for as little as $25.

Consumers need to proactively protect themselves from bad actors in this space, and the personal finance marketplace in general. A good rule of thumb is to always vet the lender/company, read customer reviews, take the time to read and understand the loan terms in-depth and check the lender/company’s cybersecurity measures. The latter is especially important for keeping personal information well-protected.

Household debt has been climbing

The benefits that peer-to-peer lending holds over traditional lending are impressive — and they couldn’t come at a better time, given that U.S. household debt has been increasing. During the first quarter of 2024, total U.S. household debt increased by $184 billion to $17.69 trillion, according to the Federal Reserve Bank of New York. Americans’ mortgage balances rose by $190 billion to $12.44 trillion, and their auto loan debt increased by $9 billion to $1.62 trillion. Meanwhile, Americans’ home equity lines of credit rose for the eighth consecutive quarter since the first quarter of 2022, increasing by $16 billion to $376 billion.

In addition, the New York Fed reported that almost 9% of annualized credit card balances and 8% of annualized auto loans entered into delinquency during the first quarter of this year.

With Americans’ debt balances only continuing their upward trajectory, P2P lending can provide a viable, advantageous alternative for obtaining the money they need to achieve success and improve their financial well-being.

Prosper's borrower payment dependent notes (“Notes”) are offered pursuant to a Prospectus available at: prosper.com/prospectus. Notes are not guaranteed or FDIC-insured, and investors may lose some or all of the principal invested. Investors should carefully consider these and other risks and uncertainties before investing.

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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.

It’s no secret that getting a college degree comes with a hefty price tag.

According to a report from Education Data Initiative, the average annual cost of tuition in the United States in 2024 is $38,270. This price includes books, supplies and living expenses. That number goes down a bit for students attending college in-state, with the average annual cost being $27,146, or $108,584 for four years.

Entering the workforce with a six-figure debt can be debilitating, especially when entry-level job salaries aren’t keeping up. According to a report from ZipRecruiter, the national starting salary for a recent college graduate is $62,609, which is just over half the cost of getting a degree at an in-state school.

When it comes to employment, a report from Strada Institute for the Future of Work and the Burning Glass Institute found that 52% of recent four-year college graduates are underemployed a year after graduation. That number drops slightly for those who graduated a decade ago, with 45% still holding a job that doesn’t require a four-year degree. When you couple that with current inflation rates, it can be extremely difficult to pay that debt off, bogging down some Americans for decades. Of course, there are scholarships and grants available to help offset these costs, but there’s another option families can take advantage of known as a 529 plan.

What is a 529 plan?

Section 529 plans, named after Section 529 of the Internal Revenue Code, are tax-advantaged accounts that can be used to pay for educational expenses from kindergarten through graduate school. There are two types of 529 plans: education savings plans and prepaid tuition plans.

Education savings plans grow tax-deferred, and account holders can make tax-free withdrawals when the money is used for qualified education expenses. Prepaid tuition plans allow account holders to secure current tuition rates for future attendance. These funds can be used only for tuition and related fees. All other expenses, such as meal plans or room and board, will be charged at the institution’s current rate.

Despite these plans being offered by all 50 states, only 30% of Americans utilized them in 2023, according to data from Education Data Initiative. The same report showed that 54% of parents were unaware that 529 plans existed. These plans are available to anyone and are typically opened by parents or grandparents for their children or grandchildren, who are listed as beneficiaries on the account. Each state has its own rules, fees and tax benefits associated with these accounts. Another nice perk is that qualified withdrawals aren’t subject to federal or state taxes. However, for K-12 students, tax-free withdrawals are limited to $10,000.

In addition to their various structures, there are some stark differences between the two types of 529 plans. With education savings plans, funds contributed to the plan are invested in a preset selection of investments. Account holders can choose what kinds of investments to make, and the account grows based on how those investments perform over time. Many plans offer target-date funds, which typically become more conservative as the beneficiary nears college age.

What 529 plans cover has been expanded

The money can be used to cover tuition, fees, room and board and other related costs for both college and K-12 students. However, the federal government has made some expansions to the plans in recent years. Under the SECURE Act of 2019, the federal government allowed beneficiaries to use account funds to cover registered apprenticeship program expenses. These tax-free withdrawals can also be used to cover student loan repayments of up to $10,000 for beneficiaries and their siblings. In 2022, the government expanded the plan further to help boost retirement savings. Under the SECURE 2.0 Act, $35,000 of unused funds in education savings plans can be rolled into a Roth IRA account.

Prepaid tuition plans are a little different. These plans are offered only in a few states, along with select colleges and universities. As mentioned, these plans allow account holders to lock in current rates, even if the beneficiary isn’t college-age. These plans are not eligible for any K-12 education expenses — and they don’t cover the cost of room and board for college students. Similar to 529 education savings plans, withdrawals from prepaid tuition plans are not taxed, and the funds grow over time. It’s important to note these plans are not guaranteed by the federal government and may not be guaranteed by some states, depending on where you live, so make sure you understand those risks before opening an account.

529 plans are a great way for families to save money on education costs — especially when it comes to paying for college. Opening one of these accounts could lessen or even eliminate the amount of debt your child accrues until they graduate, saving them years of student loan payments. Furthermore, the funds in these accounts grow over time, allowing you to maximize your contributions.

You may also be eligible for various tax benefits depending on where you live. Despite continuous talk of student loan forgiveness and free tuition, a 529 plan can be a great way to help ensure your child has access to higher education, which will open a world of opportunities for them as they enter adulthood.

Justin Stivers is an investment advisory representative and provides advisory services through CoreCap Advisors, LLC. Stivers Wealth Management is a separate entity and not affiliated with CoreCap Advisors. The information provided here is not tax, investment or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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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 a mortgage may be a good move for you if you can lower your current interest rate or shorten your term to save on your monthly payments. But those aren’t the only reasons.

Maybe you need to tap your home’s equity for cash, get out of paying private mortgage insurance (PMI), or change from an adjustable to a fixed-rate mortgage. There are many good reasons to refinance, not to mention several reasons not to.

Some experts predict that mortgage rates may decline in 2025, which could make refinancing more appealing. At its May meeting, the Federal Reserve decided to keep interest rates steady at 4.25% to 4.5% — a level maintained since December 2024. This cautious approach reflects the Fed’s strategy to stabilize the economy amid ongoing economic uncertainty and trade tensions, suggesting that mortgage rates may remain steady for the time being.

However, the best time to refinance isn’t just when interest rates drop—it’s when it aligns with your financial goals. Here's a look at how refinancing works and if it's right for you.

How refinancing a mortgage works

Refinancing a mortgage works by replacing your current mortgage loan with a new one, preferably with better terms, a lower interest rate and new (hopefully lower) monthly payments. When you refinance, you usually pay closing costs and fees.

You won’t receive money from the loan unless you’re doing a cash-out refinance. Instead, your lender will use the loan amount to pay off your existing mortgage. After closing, you’ll start making monthly payments on the new loan.

For example, if you refinance your current 30-year mortgage to a 15-year mortgage, the number of years you paid on your original loan doesn't matter because your payments will start over and continue for the next 15 years.

How much does it cost to refinance a mortgage?

The type of refinance loan you choose depends entirely on your current situation, needs and wants. You may want to tap the equity in your property and use it to finance a large expense, or change the interest rate and terms of your existing mortgage to lower your monthly payments.

Whichever type of refinancing you opt for, just make sure the benefits outweigh the costs. Yes, you will likely pay closing costs and lenders' fees on a refinance just as you did with your first home loan.

In fact, refinancing your mortgage can cost between 3% to 6% of the new loan amount, according to the Federal Reserve.

For example, if you still owe $350,000 on your home, expect to pay between $10,500 to $21,000 in refinance fees. But shop around, because these costs can vary by lender.

You’ll want to do some math to determine whether or not it's worth refinancing. It can take a few years for the accumulated monthly savings to exceed the closing costs on your refinance or the break-even mark.

Which type of mortgage refinance is right for you?

Rate and term refinance

Rate and term refinancing, which lets you change the interest rate and terms of your existing mortgage, is considered the most common type of refinancing. Your mortgage balance won’t change, but your monthly payment may drop because of a lower interest rate or longer repayment term.

This type of refinancing can also be used to shorten your repayment term. Your monthly payment may increase, but you’ll pay off your loan faster and spend less in interest over the life of your new loan.

Cash-out refinance

A cash-out refinance lets you tap into the equity in your property. It replaces your existing mortgage with a new, larger loan, giving you access to the difference between the two in real money. The terms of your refinance might differ significantly from your original mortgage loan, including new rates and terms.

Although a cash-out refinance can be a convenient way to access large sums of money to pay for a large expense, home improvements or a remodeling job, it comes with risks. You may pay a higher interest rate than on your existing loan, and if you don’t make payments, you risk losing your home to foreclosure.

Also, not all borrowers qualify. You need a certain amount of home equity — usually 20% or more, which can vary by lender, and you must meet your lender’s credit score and debt-to-income (DTI) ratio requirements.

No closing cost refinance

If refinance rates are low, but scraping together the upfront costs is out of the question, a no-closing cost refinance may be the answer. This is especially true if you plan to stay in your home for only a few years.

However, lenders may recoup their closing costs by raising the mortgage rate, wrapping the fees into the financing or rolling the fees into the total principal balance you’ll owe. Still, you’ll pay no upfront origination fees at closing, which means a shorter break-even point.

FHA refinance

If the Federal Housing Administration (FHA) insured your existing mortgage, you could lower your monthly payments with an FHA streamline refinance. You may even be able to roll your closing costs into the new loan, saving you money upfront, although your lender may charge a higher interest rate to make this happen.

Borrowers often use this type of loan to refinance into a conventional mortgage to suspend mortgage insurance premiums (PMI).

VA refinance

A VA refinance, or interest rate reduction refinance loan (IRRRL), is for homeowners with an existing mortgage backed by the U.S. Department of Veterans Affairs (VA).

This type of refinance can help borrowers lower their monthly mortgage payments by switching from an adjustable-rate to a fixed-rate loan. With this refinance, borrowers are typically required to pay a one-time VA funding fee in addition to closing costs. The VA funding fee for a VA refinance generally ranges from 0.5% to 3.3% of the loan amount.

USDA Assist Refinance

Current USDA borrowers can access low- or no-equity refinancing with streamlined assist refinance loans from the U.S. Department of Agriculture (USDA). However, you will need to go through a USDA-approved lender for your refinance.

This type of program does not typically require credit approval, an appraisal, home inspection or a low debt-to-income ratio to qualify.

Cash-In Refinance

A cash-in refinance is an option for borrowers who want to reduce their monthly mortgage payments, lower interest costs, remove PMI, or inject cash into their homes.

With a cash-in refinance, borrowers put a lump sum payment toward their existing mortgage balance at closing, which reduces the loan-to-value (LTV) ratio and increases the equity in their homes.

This type of refinance can be a good option if you lack equity in your home or are underwater on your mortgage (which means you owe more than the property is worth in the current market).

Short refinance

Missed mortgage payments and foreclosures often come with a higher cost of living. If you find yourself in a tight spot, you may be eligible for a short refinance.

This type of refinance involves replacing your existing mortgage with a lower-balance loan, which can reduce your monthly payments and help you keep your home. Lenders benefit by escaping any short sale or foreclosure costs.

Reverse mortgages

A reverse mortgage isn't the same as refinancing, but they are similar. A reverse mortgage lets older borrowers tap into the equity in their home. However, unlike a standard mortgage where a borrower makes payments to the lender, the lender makes regular payments to the borrower.

It's also possible to refinance a reverse mortgage, ideally with a better interest rate or different monthly payout, and the steps are similar to refinancing a conventional mortgage with a few caveats. You can't refinance a reverse mortgage any earlier than 18 months from when you closed on your original reverse mortgage.

Also, the money that's available to you must be equal to or more than five times the loan closing costs, and the additional cash you get from the refinance must be equal to or more than 5% of the amount being refinanced.

Steps to take to refinance a home

Once you've decided that you want to refinance a home loan, here are the steps you need to take:

1. Find the type of refinance that works best for you. 
2. Next, you’ll want to shop around for a mortgage lender who is willing to accommodate your needs. 
3. Then, gather all of the necessary documents. Much of this information will be the same as when you applied for your existing mortgage loan, including income, tax returns, assets, debt, credit score, etc. If you're married, your lender may also ask for your spouse’s information.  
4. After your lender approves your refinance, you may be given the option to lock in your interest rate, which usually lasts between 15 to 60 days — this way, you know the rate you’ll pay before the loan closes. You might also choose to float your rate, which means not locking in the rate before proceeding with the loan and hedging your bets that interest rates will go down.
5. Once you submit your refinance application, your lender will begin the process of underwriting where the lender verifies your financial information and looks over all of the details of the property to ensure what has been submitted is accurate. 
6. The lender typically also orders a home appraisal before you refinance, which will be scheduled. You'll want to put together a list of all of the renovations and updates you've made to your home and tidy up a bit so it looks its best. 
7. Once the home appraisal and underwriting are complete and everything is in order, it's time to close on your new loan. Before closing, you'll receive a document called a Closing Disclosure, which contains all of the final numbers for your refinance. You have a few days to exercise your right of rescission and cancel your loan if something happens and you need to get out of your refinance before the standard three-day grace period ends.

Does refinancing impact your credit?

Generally, refinancing your mortgage will temporarily lower your credit score and can remain a factor for up to two years. When you shop around for a lender and apply for refinancing, each lender will do a hard credit inquiry, which will reflect on your credit report and your score may drop.

However, you can limit this by applying within a short period of time, usually within a 14- to 45-day window, depending on the scoring model.

Refinancing a home loan can also result in the closing of the account of your existing home loan, which is also reflected on your credit report. But, the impact on your credit score can vary and is based on the size and age of the account. Over time, the impact of a refinance on your credit score will generally lessen as your other credit accounts age.

Should you refinance a home loan?

There are several things to consider before refinancing. Doing so can change the conditions of your mortgage and help you secure a lower interest rate and new repayment term.

Refinancing can also lower your monthly payment, allow you to consolidate debt or provide the option to take some cash out of your home’s equity to pay for renovations.

But, there are times when refinancing is not recommended.

One drawback of refinancing is that it comes with closing costs. Also, if you’re at least halfway through paying off your existing loan, it's unlikely you'll save money refinancing. That's because refinancing with a new loan restarts the clock all over again, meaning you may pay more in interest over time.

Pros and cons of refinancing

Patrick Boyaggi, Co-Founder & CEO of Own Up says, “Refinancing in today's market may not make sense for most homeowners because current market rates are significantly higher than the rates most homeowners secured during the pandemic's low-rate environment.”

While the Federal Reserve recently decided to keep interest rates steady, mortgage rates are still higher than those secured during the pandemic's low-rate environment.

However, some homeowners are still choosing to refinance to tap into the equity they've built, using the funds for home renovations or to consolidate higher-interest debt. Whether refinancing is the right move depends on your financial situation and goals.

There are many positive reasons to refinance, but there are also a few drawbacks to consider.

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Bankruptcy is a significant risk for businesses across all industries. While the specific circumstances leading to bankruptcy can vary, there are common underlying causes that many companies face. With extensive experience in corporate restructuring and turnaround management, my company has consulted on numerous projects. 

Drawing from these experiences, this article explores the five biggest reasons companies go bankrupt and provides insights into the lessons learned from these case studies.

1. Poor financial management

Poor financial management is one of the most prevalent reasons companies go bankrupt. This includes inadequate cash flow management, excessive debt and lack of financial planning.

Inadequate cash flow management. Cash flow is essential for day-to-day operations. Companies that fail to manage their cash flow effectively can quickly find themselves in financial trouble. For instance, one of our clients faced significant cash flow issues due to seasonal fluctuations in revenue. Without a robust cash flow management strategy, they struggled to cover their operational expenses during off-peak seasons.

Excessive debt. High levels of debt can be a burden, particularly if the company’s revenue projections fall short. This was a critical issue for another client of ours, which had accumulated substantial debt from its ambitious expansion plans. The debt burden became unsustainable when the expected increase in occupancy and revenue did not materialize.

Lack of financial planning. Without a comprehensive financial plan, businesses may fail to allocate resources efficiently, invest in growth opportunities and respond to market changes. Both the clients I mentioned above lacked detailed financial planning, which contributed to their financial instability.

2. Market changes and competition

Market dynamics are constantly evolving, and companies that fail to adapt can find themselves at a disadvantage. Increased competition, changing consumer preferences and disruptive technologies can all contribute to a company’s downfall.

Increased competition. New entrants or aggressive strategies from existing competitors can erode market share and profitability. One resort client faced intense competition from newer, more modern resorts in the area. Their inability to differentiate themselves and offer competitive amenities led to a decline in occupancy rates.

Changing consumer preferences. Consumer tastes and preferences can shift rapidly, impacting demand for products or services. For example, a hotel client struggled to attract younger travelers who preferred boutique hotels and vacation rental accommodations over traditional hotel stays. The client's failure to adapt to these changing preferences resulted in declining revenues.

3. Ineffective leadership and management

Leadership is crucial in steering a company through challenges and toward growth. Ineffective leadership can lead to poor decision-making, low employee morale and strategic missteps.

Poor decision-making. Leaders who lack the necessary experience or skills may make decisions that adversely impact the company. One client made several poor strategic decisions, including overexpansion without adequate market research and financial backing. These decisions stretched their resources thin and contributed to their financial troubles.

Low employee morale. A demotivated workforce can lead to decreased productivity, higher turnover and a negative company culture. For one client, low employee morale was a significant issue due to a lack of clear direction and support from management. This impacted the quality of service and guest satisfaction, further exacerbating their financial problems.

Strategic missteps, Strategic planning is essential for long-term success. Companies that lack a clear strategy or fail to execute their strategy effectively may struggle to achieve their goals. Several clients have lacked coherent strategies for growth and customer retention, leading to operational inefficiencies and financial strain.

4. Economic downturns

External economic factors can have a profound impact on businesses. Economic recessions, fluctuations in currency exchange rates and changes in interest rates can all contribute to financial distress.

Economic recessions. During economic downturns, consumer spending typically decreases, affecting revenue streams. Our resort client was particularly vulnerable to economic recessions, as discretionary spending on travel and leisure declined. This resulted in lower occupancy rates and revenue.

Fluctuations in currency exchange rates. For companies involved in international trade, currency exchange rate volatility can impact profitability. It can be a significant risk for many businesses with international operations.

Changes in interest rates. Rising interest rates can increase the cost of borrowing, affecting companies with high debt levels. One client faced increased interest payments on their substantial debt, which further strained their financial resources.

5. Legal issues and compliance failures

Legal challenges and compliance failures can drain resources and damage a company’s reputation. This includes lawsuits, regulatory fines and failure to adhere to industry standards.

Lawsuits. Litigation can be costly and time-consuming. Two clients faced legal challenges related to labor disputes and contract issues. These lawsuits diverted management’s attention and financial resources away from core operations.

Regulatory fines. Noncompliance with regulatory requirements can result in substantial fines and operational disruptions. While not a significant issue for the case studies discussed, regulatory compliance remains a critical concern for many businesses.

Failure to adhere to industry standards. Adhering to industry standards is crucial for maintaining customer trust and operational efficiency. Companies that cut corners or ignore these standards risk damaging their reputation and facing operational setbacks. Two of our clients struggled with maintaining industry standards, impacting their customer satisfaction and loyalty.

Conclusion

Understanding common reasons why companies go bankrupt can help businesses avoid these pitfalls and build a foundation for long-term success. Poor financial management, market changes and competition, ineffective leadership, economic downturns and legal issues are significant factors that can lead to bankruptcy. It is clear that proactive planning, effective leadership and strategic adaptability are essential for navigating these challenges. By addressing these critical areas, businesses can improve their resilience and increase their chances of success in a competitive market.

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.