Money Management

An inheritance may be expected or come as a windfall. In either case, read on for six smart ways you can make an inheritance work for you. 

Whether you’ve inherited $2,500 or $2.5 million, a sudden influx of cash calls for decisions. The goal is to use the funds in a way that ultimately makes your life easier and leaves you with no regrets. If you’ve received an inheritance or expect one in the future, wait to spend a penny until you put a plan in place. Here are six smart moves you can make, each designed with your well-being in mind.

1. Don’t get dragged into an argument

If your inheritance stirs up conflict, how you handle that conflict can directly impact your future.

There are many reasons someone may feel you received an unfair portion of the inheritance pie. Trevor Todd is a Canadian estate litigation lawyer who has spent decades helping those who have been disinherited contest wills, and offers these reasons people might come after you for your inheritance:

For some people, money equates love, and the lack of an inheritance equates a lack of love.Humans are greedy.The death of a loved one activates the death anxieties of those left behind, causing some people to strike out in response.

You’re less likely to make the best decisions regarding the inheritance if someone is yapping in your ear like an excited chihuahua. Refrain from getting dragged into conflict regarding any money or property left to you, and if need be, hire an attorney to argue on your behalf.

2. Wipe out debt

If you have high-interest debt hanging over your head, there’s little doubt that it should be the first thing you tackle. Let’s say you owe $7,500 on a credit card carrying an interest rate of 17%. The fact that you’re making a $150 monthly payment doesn’t feel like that big of a deal. However, if you keep making $150 payments, it will take 59 months to pay off, and you’ll pay a total of $3,583 in interest.

Failing to pay that debt off means spending just shy of five years paying interest when you could be earning interest in a money market account or high-yield savings account.

3. Set a splurge limit

Now is the time to set a spending limit. If someone cared enough about you to leave an inheritance, you’re probably going through your own grief. Decide how much money you will spend, then stick with that budget. It’s okay to splurge if it does not negatively impact your ability to cover expenses later.

4. Build an emergency fund

More than half of Americans (53%) say they don’t have an emergency fund. That means scrambling to come up with the money to pay for things like a cracked radiator or an emergency visit to the dentist. If you’re like most Americans and don’t have money put away for a rainy day, there’s no better time to do it than after receiving an inheritance.

Experts recommend that you tuck away enough to cover three to six months’ worth of expenses. You can figure out how much you need by listing your fixed monthly expenses and multiplying by three or six. Or, you can use a calculator like this to walk you through the process.

You may want to save even more if you have serious health problems or an unpredictable job. Imagine knowing your bills will be paid, and you’ll be okay if everything goes south.

5. Don’t go it alone

The most tempting thing to do with “found” money is to spend. This is especially true if you’ve been living paycheck to paycheck. What’s the hurry? The more time you take to consider what to do with the money, the less likely you are to have regrets.

If you need help figuring out where to start, work with a financial advisor who will offer you unbiased advice regarding optimizing your windfall. A Northwestern Mutual study found that people who work with financial advisors are twice as likely to feel financially secure and more likely to have a clear picture of how much they should spend and how much they should save.

And here’s the great part if you’re the independent type: You don’t have to marry yourself to a particular advisor. Sure, some ask for a monthly retainer, but there are also those who charge an hourly rate or a flat fee to complete a specific project. You can meet with this person as often or as infrequently as you want.

6. Plan for the future

We all have dreams. Yours may include buying your first home or upgrading to a larger home. You may want nothing more than to return to college or to travel the globe. Whatever your heart’s desire might be, planning for it allows you to systematically put away enough to cover that goal while still considering things like healthcare and retirement.

If you’ve received an inheritance, it’s a token of someone’s affection for you. Why not take your time to use the money in a way that would make that person proud?

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Financial expert Tori Dunlap believes people who start investing today will become millionaires. Read on to find out why. 

Many people are feeling the financial effects of high inflation and interest rates. You might be wondering, with all of this uncertainty, is it really a good time to start investing? According to Tori Dunlap, a financial expert and founder of Her First $100K, the answer is yes. In fact, she believes that now is one of the best times to start investing, according to a recent podcast episode. Here’s why.

Stocks are on sale

One reason why now is a great time to start investing is that stocks are on sale. Due to high interest rates and the slowdown in the economy, the stock market has experienced several lows and dips, causing the prices of many stocks to plummet.

According to Dunlap, this presents an excellent opportunity for new investors, as they can purchase stocks at lower prices. Tori Dunlap uses the analogy of a coat to illustrate why now is a good time to invest. If a coat is originally priced at $100, but then goes on sale for $50, it’s a good time to buy.

The same principle applies to investing — if a stock is valued at $100, but is now trading for $50, it presents an opportunity to invest at a lower price. This is a great way to get started with investing, as you don’t need a significant amount of capital to begin.

Millionaires will be made right now

Many successful investors, such as Warren Buffett, have made their fortunes by investing during economic downturns. These investors recognized that stock prices were low and were not indicative of the underlying value of these companies, and they invested accordingly.

Tori Dunlap encourages new investors to adopt this same perspective, as those who invest during these times have the potential to make significant gains in the long term. Investing is a long-term game, and it requires patience.

While it’s true that the stock market can be volatile in the short term, over the long term, it tends to go up. Investors who have held onto their assets for a long time have often ended up millionaires, and now is a great time to start playing the long game.

Dollar-cost averaging

For those looking to dip their toes into the world of investing, Dunlap suggests using the dollar-cost averaging method. If you’re unfamiliar with the term, it simply means investing a fixed amount of money on a regular basis (such as weekly or monthly).

While it may be tempting to wait for the “perfect” time to invest, Dunlap recommends focusing on the long-term outlook and not getting bogged down by short-term fluctuations. By investing consistently over time, regardless of market performance, you can potentially lower the overall cost of your investments.

In other words, don’t try to time the market — simply get in and ride whatever wave is coming. With this optimistic and practical approach, it’s never too early (or too late) to start investing and build a stronger financial future.

Dunlap states that now is an excellent time to start investing. Despite the uncertainty and volatility of the current economic climate, investing during these times presents a great opportunity for long-term growth and potential for significant gains. By investing with a long-term perspective, being patient, and taking advantage of lower prices, new investors can start building their wealth and securing their financial future.

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In recent years, many banks have deployed chatbots. But despite their convenience, these chatbots may not be the best option for customers. Read on to see why. 

Technology is transforming the way we interact and conduct our day-to-day activities, including our financial transactions. One such technological breakthrough that has taken the banking sector by storm is the rise of chatbots. More and more financial institutions are adopting this innovation every day. However, as much as chatbots present several advantages, such as improving customer experience, efficiency, and cost reduction, there are several risks that you should be aware of.

What are chatbots?

Chatbots are artificial intelligence systems that simulate conversation with human users. In recent years, many banks have deployed chatbots to help their customers with basic queries, savings and checking account transactions, and customer service issues.

The financial industry has widely adopted chatbots in various platforms like bank websites, mobile applications, and social media accounts. As of last year, around 98 million users in the United States (accounting for about 37% of the population) interacted with chatbots from their bank. This figure is expected to rise to 110.9 million users by 2026.

What risks should you be aware of?

According to the Consumer Financial Protection Bureau (CFPB), while chatbots are useful, consumers need to understand the limitations of chatbots. The CFPB is responsible for gathering feedback from consumers regarding their experiences with financial products and services.

As the use of chatbots has become more common in the financial industry, users have increasingly raised some concerns and submitted complaints with the CFPB. Here are some of them.

Noncompliance

Like the processes they replace, chatbots must comply with all applicable federal consumer financial laws. Financial institutions are at risk when using chatbots to respond to customer queries, as they may provide inaccurate information or fail to recognize when a customer is invoking their federal rights.

Additionally, there is the potential for these chatbots to compromise customer privacy and data. As such, it is essential that financial institutions exercise caution when utilizing this technology.

Privacy and security

While chatbots may seem convenient and time-efficient, they can also pose security and privacy risks for customers. For example, your personal and financial data could be compromised if the chatbot is hacked or accessed by cybercriminals.

Additionally, the chatbot may share your information with third parties or use it for targeted advertising or marketing without your consent. Therefore, it’s crucial to be aware of the risks and limitations of chatbots and take appropriate measures to protect your identity and privacy.

Poor customer service

Chatbots are only as accurate as the data and algorithms that power them. If your bank’s chatbot doesn’t have the latest information or updates on your account, you may receive wrong or outdated answers.

Additionally, chatbots can’t always give personalized recommendations based on your profile or history, as human agents can. Therefore, you may miss out on valuable services or features that could benefit you in the long run.

What should you do?

As technology continues to advance, it is evident that chatbots are here to stay. These artificially intelligent systems have revolutionized the way we interact with businesses and streamline their processes. With their ability to handle basic tasks and queries, many companies are adopting the technology to reduce workload and improve productivity.

However, for more complicated problems and security concerns, it may be best to work with a human. A chatbot-human hybrid approach is most ideal, as it allows for the best of both worlds. Humans are complex beings and require a level of reasoning and empathy that bots are not yet able to provide.

With continued advancements in AI and machine learning, the future of chatbots looks bright, and we can expect more innovation and improvement in the years to come.

Chatbots should not be viewed as a stand-alone technology, but rather as a complementary tool that should work in conjunction with human employees. Financial institutions should prioritize a customer-centric approach that leverages both technological and human resources to ensure that customers are adequately served. Additionally, banks must also make sure that their chatbots have adequate security features, are backed by robust regulations, and are user-friendly. If used correctly, chatbots can help boost engagement and efficiency while improving the overall customer experience.

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A home appraisal is supposed to be an unbiased opinion on the value of your home. Learn why that’s not true for Americans in communities of color. 

A home appraisal is an unbiased, expert opinion on the value of your home. That is, unless you live in a neighborhood where there’s no white families.

According to new research by sociologist Dr. Junia Howell, done exclusively for Bloomberg CityLab, homes in white neighborhoods are often appraised for far higher values than those in identical neighborhoods, but with families of color.

The racial penalty

In her 2022 study, Dr. Howell found that the “racial penalty” — that is, the difference between white and non-white home appraisals that cannot be attributed to anything intrinsic to the home or neighborhood — averaged $408,000 in 2022. Again, this is a difference of hundreds of thousands of dollars simply because the home has an address in a non-white neighborhood.

Even more alarming is just how much this appraisal gap has widened since 2013. In a previous study, Dr. Howell and Dr. Elizabeth Korver-Glenn, author of Race Brokers: Housing Markets and Segregation in 21st Century Urban America, found that the racial appraisal gap in 2013 was roughly $211,000, with white neighborhoods enjoying mean appraisals of about $432,300 and communities of color getting $221,000.

In 2022, communities of color were seeing mean appraisals of $409,500, with white neighborhoods enjoying nearly double that at $817,500 — again a difference of roughly $408,000. That means, homes in white neighborhoods have appreciated by almost $200,000 more since 2013. Not only that, but the $409,500 mean appraisal that communities of color were receiving in 2022 was about $22,800 less than what white neighborhoods were getting in 2013 ($432,300).

Here’s how the difference in mean value appraisals have changed for the two communities since 2013.

What this means is that white homeowners in white neighborhoods are earning equity and building wealth faster than those in communities of color, widening wealth divisions that have never historically been in parity.

Can you dispute a home appraisal?

Yes, you can.

Appraisers are not immune to errors of judgment, but they do have a legal responsibility to assign value based on data, market trends, recent sales of similar properties, and their own expertise. Since it’s illegal under federal law to assign less value to a home because of racial prejudice, you can take legal action if you’re a victim of discriminatory appraisals.

Sometimes, however, the problem isn’t the appraiser’s judgment; rather, it’s the limited appraisal methods they’re using. One of the most common ways of appraising homes is to perform what’s called a comparative market analysis (CMA). This involves comparing the home in question with recently sold homes of the same size and features. If similar homes in your neighborhood sell for $409,000, then the appraiser would likely give your home the same value, even if the same house sells for double in a white neighborhood.

In this case, you could request a second appraisal, especially if the appraiser values the home lower than the buyer’s asking price. Since lenders don’t usually lend above the home appraisal, it could be vital to a buyer’s mortgage approval process to have another expert appraise the home.

If a lender has discriminated against you, you can file a complaint against them with the Consumer Financial Protection Bureau. You can also contact the Property Appraisal and Valuation Equity (PAVE) taskforce for discriminatory appraisals and the agency will connect you with a fair housing specialist.

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If you’re penciling out the cost of having kids, you might want to prepare yourself for a few unexpected big expenses. Check them out here. 

Having kids means buying stuff. Right away, you’ll be buying diapers (but you might still be shocked at how much you’ll spend before your mini-me is potty trained). Down the road, your grand financial finale could be paying for your child’s college education or their wedding. You might even make the down payment on their first home. You’ll face a zillion more buying decisions in between, including big, surprising parenting expenses you hadn’t thought of and probably couldn’t have predicted.

If you’re thinking of increasing the number of humans on Earth and you’re pragmatic enough to wonder how that decision might affect your bottom line, consider planning for these possibilities.

Parenting expenses you might not be ready for

Consider the financial impact of these costs.

1. Education (not college)

We’re not talking about daycare. Fewer than 17% of children are enrolled in paid daycare, possibly because whether you can find affordable childcare largely depends on where you live. And besides, even if you don’t pay for daycare, expenses can soar.

Here, we’re talking about education costs. They loom until your child is grown and gone. Some parents will choose private schools, which can cost even more than college. But even families who don’t go the private school route will face ongoing costs related to educating their child. For example:

Some preschools charge tuition or fees.You might need to hire a tutor to help your child keep up with a tough school subject.Your child might want or need to take a class outside of school.You might opt to pay for private music lessons, especially if your child’s school has cut their arts program.Summer, spring, and winter day camps can be a fun way for your child to experience immersive learning, and they are virtually never free.Public schools charge various fees, and your child could be left out if you don’t pony up. Examples include meal or snack fees, supply fees, sports equipment fees, field trip fees, and lab equipment fees.

2. Orthodontics (even for straight teeth)

Modern dentistry allows us to correct problems, prevent future issues, and generally improve dental health from a very young age. By many estimates, more than half of today’s kids will have worn braces by the time they are adults. Dentists can also take steps to help your child’s teeth come in correctly and avoid braces, but there’s still a cost. Whether it’s a palate expander, braces, or mouth guards, expect to have to pay for some orthodontic work for your child. Then just feel lucky if you end up in the half that doesn’t need orthodontia.

3. Transportation (above and beyond)

All transportation costs go up as your family grows. After the age of 2, your little person will need their own plane seat every time you fly.

Transportation costs at home are more insidious. If you’re letting your child enjoy extracurricular activities, you could very well double (or more) the annual miles you normally drive. Translation: You’ll spend a lot more on fuel, and maintenance issues will come up twice as fast. You’ll also need to replace your car in half the time, and that’s something many parents don’t think about until it happens. Kids wear stuff out.

4. Babysitting

Unless you’re lucky enough to have friends or family who are willing to occasionally watch your child for free or in trade, the cost of babysitting might drop your jaw. Even for teen babysitters, you might pay at least your state’s minimum wage for your sitter’s time. In California, that’s $15.50 per hour. If you want to head out at 5 p.m. for date night and promise to come home at 10 p.m., you’re looking at more than $75. Multiple children? You’ll pay even more.

5. Activities (if you’re cultivating grit)

This is the biggie. Most parents want to let their children participate in extracurricular activities. Activities build self confidence and grit. It’s where your child can learn sportsmanship, leadership, and advanced skills. Children who participate in extracurriculars are happier than those who don’t. Colleges want to see activities on your child’s resume. Activities are a place where your child can be safe, supervised, and mentored.

With all of those reasons, who wouldn’t want to sign their children up?

For activities that aren’t free, the cost can easily hit $400 per month or more by the time Junior is 11 years old, and it keeps going up. If your child is passionate about the activity and they want to be as good as they can be, you’ll want to consider enrolling them full time in the program, not just a class or two a week. Also, most kids at higher levels need private instruction in addition to regular training. And there are always summer intensives and camps that add to the annual cost.

Activities at this level include ice skating, dance, theater, gymnastics, horseback riding, and many others. Figure skating can cost $35,000 to $50,000 per year. Costs are usually broken out into categories like these:

ClassesPerformance feeCostume feeClothing and equipmentPrivate lessons (not optional for top performers)Contributions to many fundraisersTravel expensesProfessional photos and videosSummer training or intensives

How you can lower the cost of having kids

Thankfully, there are a few moves you can make to ensure parenthood is more affordable.

1. Start saving early

As you grow your family, it makes more sense than ever to be smart with your money. Get creative and look for ways to save that are a good fit for your lifestyle and personality.

Unless you are at least several years away from spending your kid money, put your savings in a high-yield savings account where it’s accessible and earning interest. Having accessible savings gives you the freedom to make the choices that matter the most.

2. Shop for dental insurance if you don’t have it

If all you need is routine care, dental insurance often doesn’t make financial sense. That’s because the cost can exceed the benefits you get. But if your child needs orthodontics, it’s another story. Some policies do cover orthodontics, and the benefit is more than what you’ll pay in premiums for the year.

What you don’t want is to show up at the dentist’s office and be surprised. That could force you to rely on credit cards to cover the cost. So set those appointments for regular exams and cleanings. If you plan your insurance purchase strategically, you could save a chunk of change.

3. Make the effort to find free activities

It’s possible to find activities that are free. Take advantage of those as much as you can. There will still be registration and event fees, and you’ll have to cover the cost of equipment and uniforms. It can take a lot of work to get freebies, but it’s worth it. If you can find a community circus group that costs $500 a year instead of the local gymnastics program that costs $4,000 a year, you just got “paid” $3,500 for making the effort.

4. Ask about fee waivers

Speaking of freebies, don’t be shy. No matter what the expense is, it doesn’t hurt to ask if there is any way to get it for free or at a discount. You might get better results if you can show that your income is low, but sometimes discounts are available to anyone who asks. For instance, maybe you can get free tickets to your child’s event if you agree to volunteer to help backstage. Or maybe you can barter with a private instructor to provide your service in exchange for theirs.

Parenting is a joyful experience. Don’t let the cost scare you away. People at all income levels love being moms and dads. Anticipating some of the bigger parenting expenses can help you plan for the ones that are important to you.

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You’ll regret not being timely with credit card bills. Read on to see why. 

Sometimes, life gets in the way of paying bills on time. You might forget to pay a credit card bill because you’re busy at work, you’re spending the week nursing sick kids, or you’re running around trying to plan a big event. You may also end up paying a bill late due to not having the funds.

Paying a credit card bill a few days late isn’t ideal, but from a credit score perspective, it generally isn’t so damaging. It’s when you’re 30 days late or more with a credit card bill that major problems can ensue.

A mistake that could cost you

Your payment history carries more weight than any other factor when calculating your credit score, and it speaks to how timely you are with bills. Once you have a credit card bill that’s 30 days or more past its due date, you’ll generally be reported as late to the credit bureaus. From there, your credit score has the potential to take a big hit.

Now you may be thinking, “What’s the big deal — it’s just one late payment!” But actually, it is a big deal.

Experian says that a single late payment of 30 days or more will remain on your credit report for seven years. During that window, it has the potential to impact your credit score in a big way.

It’s also worth noting that the higher your credit score is before you’re reported as being late with a payment, the more of a hit a single late payment might cause. On the flipside, an individual late payment may not have the same extreme impact on your credit score if it’s lower already, or if you have a history of late payments.

In the first situation, that late payment is an out-of-the-ordinary event. And the shock value of that, so to speak, might drag down your score a lot.

How to avoid being late with a credit card payment

There are two reasons why people tend to be late paying their credit cards — they forget to submit the payment, or they don’t have the money to make their minimum payments. The first item is a pretty easy one to address — just mark your credit card due dates on your calendar and set reminders so you don’t end up being late due to forgetfulness.

The second issue is harder to manage, but one option is to check your credit card balances on a weekly basis. That way, if you see them climbing to an uncomfortable degree, you’ll know to stop spending and wait for your next billing cycle at the very least.

You can also avoid late credit card payments due to a lack of funds by giving your savings account a boost. That way, if you end up with a minimum payment your paycheck can’t handle, you can tap your personal cash reserves and get that payment in by its due date.

Paying your credit card bill more than 30 days late has the potential to damage your credit score, making it harder and more expensive to borrow money when you need to. So it pays to do whatever you can to avoid that situation altogether.

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