personal finance

TikTok is not a fiduciary! A cautionary tale.

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Guys! Did you know that if you have an S corporation you don’t have to pay taxes??? You can give yourself and your children jobs without owing the government one thin dime!

Bonus awesomeness: You can call everything you buy “a company expense,” and even take a “corporate vacation” every year.

Pretty sweet, huh? Except it’s also completely wrong.

You can start an S corporation, no problem. But your business still has to pay FICA taxes on the salary you pay yourself (and your kids, if you wind up employing them), and those paychecks will be subject to income tax.

This and other sketchy financial advice is available free for the taking from TikTok. And it’s worth every penny you paid.

“Surely no one would take such ridiculous info at face value,” you’re thinking. “And just who gets all their advice from the Internet, anyway?”

Quite a few get at least some of it that way. According to a poll from CreditCards.com, 28% of Gen Zers look for advice from “social media platforms and influencers.” Of the other demographics, 24% of millennials, 10% of Gen Xers and 4% of Baby Boomers get advice there.

When we go online to search for money help, there’s a chance we’ll find good stuff right away, such as the Consumer Financial Protection Bureau, the Federal Trade Commission or Consumer Reports.

But there’s just as good a chance that we’ll run across:

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COVID-19 and retirement.

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In a piece over at Money Talks News today, I address a Pew Research Center study about COVID-19 and retirement. But I didn’t write the headline.

That’s because “7 unusual tactics to keep COVID-19 from derailing your retirement” was made up of tactics that I personally don’t see as all that unusual.

Then again, a lot of money tactics/frugal hacks that others think are offbeat don’t strike me that way.

Learning to cook. Delaying a purchase if it means saving either money or your budget. Stocking up on items at today’s prices ahead of the inflation that’s already taking place.

But as I learned from my early days at MSN Money: It’s always new to somebody. Maybe to a whole lot of somebodies.

During the 2008 recession, personal finance blogs were offering posts on topics like “how to pack a lunch” and “how to save money by going to yard sales and thrift stores.” These are things that strike me (and maybe you) as just basic adulting skills.

This morning DF and I were talking about these and other basic skills. I reminded him that a lot of success as an adult depends on what you grow up hearing. For example, no one ever said to me “it’s best to start saving for retirement early because of compound interest.”

I was well into adulthood before I learned this – and other people would probably have responded, “How could you not know this?” Because we don’t know what we don’t know, that’s why. What I heard growing up was, “Work hard, pay your bills and if there’s anything left over, put it in the bank.”

Had I known better, I’d be so much farther ahead when it comes to money. For that reason, I’m going to add a few more tactics that could help people with regard to COVID-19 and retirement. If they sound familiar or even oversimplified, remember: We don’t all start at the same place.

 

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Monday miscellany: WFH and PF edition.

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(Edited to add: The Freelance Writer Academy now offers scholarships! See below.)

Almost one in four U.S. residents joined the WFH (work from home) club at least part of the time since the pandemic was officially called in March 2020. According to a recent Bankrate.com poll, more than half of those (57 percent) said that working from had a positive effect on their personal finances.

Among those effects: fewer lunches out, no commuting costs, less need to dress up and fewer impulse purchases. Some also didn’t have to pay for child care, although how they got much done with kids at home is a complete mystery to me.

In fact, one of the least-favorite parts about working from home was simply the distractions while they were trying to work. Those surveyed also said they missed interaction with coworkers, and cited fewer chances for salary increases and promotions while at home.

Their favorite parts: more freedom, family time and sleep.

It’s worth noting that a lot of those who did well with at-home work were already doing well. More than a quarter of those surveyed (28 percent) earned $40,000 to $80,000 a year and more than half (54 percent) earned $80,000 or more. 

 

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5 money lessons from “Wrath of Man.”

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Sometimes I want to watch art films, international cinema or documentaries. And sometimes I just want to see a whole lotta stuff get blowed up real good. “Wrath of Man,” a heist film starring Jason Statham, did not disappoint even though at times it was hard to follow.

Mostly that was due to the flashbacks. Lots of flashbacks. A couple of other scenes were absolutely mystifying until later, when they finally begin to make sense. Patience is needed, along with a tolerance for gunfire and roaring engines.

Now and then the story is a bit mystifying, as when H (Statham) gives a sub-par performance at a shooting range and isn’t the best at parking a truck. Another character basically confesses to being a bad guy, at which point I whispered to my great-nephew, “Why in the world would he tell him that?”

“Because he doesn’t want him to die,” great-nephew whispered back.

Again, it all made sense eventually. And the whispering was okay: We were two of only five people in the theater, and the only ones in our section. Besides, there was all that gunfire and roaring engines to provide cover.

How did I find personal finance lessons in all this? The way I always do: by looking for them. Here’s what I found. 

 

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Why you need an “abundance tracker.”

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Recent talk of inflation (and the possibility of hyperinflation) has left me very jumpy. That’s why a squib in Melanie Lockert’s newsletter really resonated with me. 

“Do you ever feel like you’ll never have enough? This is a common issue when it comes to money mindset, and can impact our financial and mental health,” Lockert wrote.

“So one thing I’ve been doing lately is something I call ‘abundance tracker.’ I track all moments of abundance.”

A few recent examples:

Lockert’s health insurance premium decreased.

She received a gift card for food from someone who couldn’t use it.

She cashed in Starbucks rewards points for a free coffee.

According to Lockert, tracking “moments of abundance” can help reset your mindset: “From the discounts you get, to the gifts, time and support. It all counts.”

Turns out I’ve been doing that for the past week or so. I just didn’t know what to call it.

 

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Does refinancing a car hurt your credit?

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Sometimes stuff happens: illness, job loss, divorce. When things get super-tight and you’re casting around for a cash influx your eye might fall upon that fairly new vehicle. Maybe you should sell it. Or you might wonder, “Does refinancing a car hurt your credit?”

Yes, it can. But in some cases it might be the best – or only – option for when things go sideways. (Looking at you, COVID-19.)

I tackled this topic recently for Self.inc. “Does refinancing a car hurt your credit?” covers the good, the bad and the WTF of this complicated topic.

On the face of it, refinancing a car isn’t a great idea. But sometimes it could be the right thing to do.

The most obvious reason to refinance is because interest rates dropped. This is especially true if you financed with the dealer rather than looking around for loan options. Given that the average new-car loan is $34,635 and the used-vehicle loan is $21,438, even a loan rate that’s just 1 percent lower will make a big difference over time. (Not-so-fun fact: The average used-car loan is 65.15 months long and the average new-vehicle loan is 69.68 months.)

You could even get some cash in-hand if you do something called a cash-out auto refinance, which is similar to a cash-out mortgage refi. If having cash is vital, this might be the right choice for you at this moment in your life.

For example, if you couldn’t make the rent during a COVID layoff, a couple of months’ worth of payments might stave off eviction. Or if you have credit-card debt at 18 percent and were eligible for a cash-out refi at a much lower interest rate, you would be able to pay off the card and improve monthly cash flow. (Ideally you’d use some of that money to start an emergency fund, because the only thing certain is uncertainty and we need to positions ourselves to punch back at it.)

As always, you need to look at the big picture – and to look at it from all angles. Just because you can do something doesn’t mean you should. 

 

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How are credit scores calculated?

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You try hard, but still have a mediocre credit score. You pay no attention and have a great one. Just how are credit scores calculated, anyway?

Good question – and it has a complicated answer.

This is a topic I tackled for the “How Credit Works” section at Self.inc. “How are credit scores calculated?” takes a deep and nerdy dive into the issue of credit scores.

<<Surviving and Thriving has partnered with CardRatings for our coverage of credit card products. Surviving and Thriving and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses and recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.>>

Every so often I do a “read me elsewhere” roundup of articles I’ve written. Lately a lot of the work I’ve done is either editing someone else’s site, doing non-bylined stuff or writing stuff that’s so ridiculously specialized that I wouldn’t bore my readers by sharing it.

The topic of how credit scores are calculated is one that I think can help a lot of people, though. No matter how unfair you think the credit scoring system is, the fact is that we are currently stuck with it. A smart consumer will learn to operate within its confines. That is, unless you like paying many tens of thousands of dollars in extra interest during your lifetime.

From “very poor” to “exceptional,” credit scores matter. They determine the kind of interest rate you’ll get on housing, vehicle and other loans. They might determine whether you get that loan at all, at least from a conventional lender – and the others can somehow get away with charging loan rates of up to 35.99 percent. 

 

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Monday miscellany: Love and money edition.

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If the Policy Genius “Couples & Money” survey is any indication, one of the things COVID didn’t change was love and money. Specifically, it didn’t change how paired-up households manage their dough.

About 40 percent manage their finances together and 22 percent “keep and manage” money separately, which is consistent with PG’s previous two surveys.

A few other interesting tidbits:

About two-thirds (66 percent) say money doesn’t have any influence on their relationship.

Almost one in three (30 percent) have paid off a partner’s debts. In that group, 44 percent have plunked down more than $10,000 to settle their loved ones’ obligations.

Lots of partners aren’t sharing money specifics. That includes topics like salary (41 percent), retirement savings (49 percent), credit scores (54 percent), debt (42 percent), investments (48 percent) and monthly spending totals (53 percent). And one out of five respondents say they don’t know any of those things about their partners.

Speaking of not-knowing: Almost two-thirds (64 percent) of those surveyed said that lying or hiding money could mean the end of a relationship. Yet one in five of them have an undisclosed will or some kind of secret account (credit card, banking, retirement, life insurance).

One way to get around all the secrecy is simple: Talk about money.

 

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Found money in 2020.

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This was not a good year for found money. In the last 12 months or so I picked up just $5.88.

Frankly I’m surprised I found more than a buck all year, given that I (and everyone else) stayed home a lot during the pandemic.

In addition, my gut feeling is that COVID-caused unemployment/fear of unemployment might also have made people clutch their coins a little tighter. It might even have made some folks  stoop to pick up that dime they dropped at the cash register.

Or the dime that someone else dropped. Maybe more money was out there all year, but other people found it before I could.

That’s fine with me. I don’t technically need this found money, being one of the lucky ones whose job did not fade away in part or in full in 2020. The reason I pick up cast-off coins all year long is that I donate them.

As always, I’ll round up the donation. This year it’s going up to $30, which is what I sent to the Food Bank of Alaska yesterday after a Facebook friend asked everyone to donate to FBA if they could. Doing this reminded me that I hadn’t counted my found money yet this year.

Now I have. Here’s the total:

 

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