Money Management

Don’t put off life insurance once you do this. 

Life insurance is one of those things many people don’t think about until they undergo a life change. In some cases, getting married could spur the decision to apply for life insurance. In other cases, a given couple might put off life insurance until they have children.

The whole purpose of life insurance is to protect your loved ones financially in the event of your passing. And so if you’re taking on a large financial obligation, like buying a home, with a spouse or partner, then that alone should motivate you to sign up for life insurance.

Why you need life insurance when buying a home jointly

Buying a home can be a huge undertaking. And it could also mean taking on a lot of debt in the process.

The average mortgage amount as of this writing is $433,000, according to Trading Economics. That’s not a small amount of debt. And it’s also the sort of debt that might require two separate salaries to keep up with.

Now, let’s say you decide to buy a home jointly with your spouse, and you take out a $433,000 mortgage with the assumption that both of your incomes will be used to pay off your home over time. If one of you were to pass away, the other might struggle to keep up with those mortgage payments. And falling behind on mortgage payments could mean losing your home.

So if you’re taking on a home purchase jointly, you should put life insurance in place. That way, if one of you passes away, your life insurance could be enough to cover their share of the mortgage or even, ideally, pay off your home outright.

What kind of life insurance should you get?

When it comes to buying life insurance, you have choices. You could opt for a term life insurance policy, which will cover you for a preset period of time, or you could buy whole life insurance, which covers you on a permanent basis.

Some people like the idea of perpetual coverage and opt for whole life insurance, which also offers the benefit of accumulating a cash value. But the problem with whole life insurance is that it can be very expensive — far more expensive than a term life insurance policy. So in many cases, you’ll be better off opting for term life coverage instead.

The good thing about term life insurance is that you can choose the timeframe that works for you. So, let’s say you’re signing a 30-year mortgage. You can buy a 30-year term life insurance policy so you’re protected throughout your home’s entire payoff period. And that way, you’ll also have lower life insurance premiums to cover, which may be important at a time when you’ve also taken on the expenses of homeownership.

Of course, there are plenty of good reasons to get life insurance other than buying a home. But once you take that leap, it really pays to shop around for life insurance and put some coverage in place.

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Reports ultimately end up in a large database that looks for suspicious patterns. 

Unless your bank has set a withdrawal limit of its own, you are free to take as much out of your bank account as you would like. It is, after all, your money. Here’s the catch: If you withdraw $10,000 or more, it will trigger federal reporting requirements.

Bank Secrecy Act

The Bank Secrecy Act (BSA) establishes how banks must conduct record keeping and when financial institutions must make a report to the federal government. Although BSA was amended following the attacks of 9/11, it’s been around since the Nixon administration.

The BSA is intended to make it tougher for people to use banks to launder money, finance terrorist activities, hide money from the IRS, or use funds to conduct other illegal activities.

How it works

Let’s say you have your eye on a classic car that needs work, and you withdraw $20,000 from your savings account to buy it. Your bank automatically files a report under the BSA, and that information is sent to the Financial Crimes Enforcement Unit (FinCen) within the U.S. Treasury Department.

Once the report makes its way to FinCen, it becomes part of a centralized database. No one believes you’re doing anything illegal. They know that the majority of reports received represent legitimate bank withdrawals. What they’re looking for are suspicious patterns of withdrawals.

Tough to get around

It’s the total withdrawal that banks look at. For example, a person might withdraw $7,000 from one bank branch, then drive to another branch to withdraw $3,000 the same day. Because the funds were taken the same day, a report is triggered.

Banks have dealt with the BSA long enough to know every trick in the books. The BSA requires banks to report any suspicious activity. Let’s say someone withdraws $9,999 to stay below the $10,000 threshold. Banks may report that. If someone were to come into the bank every day or two to withdraw $2,000, that could also be identified as suspicious.

How to withdraw a large sum

If you’re not doing anything wrong, there’s no reason to worry about a standard report winding its way to FinCen. However, if you prefer to avoid such a report, there are plenty of other ways to access your funds. Because the trigger applies to cash withdrawals, you can always:

Write an old-fashioned check for purchases over $10,000.Use a credit card to charge a purchase, then pay the card off before the end of the billing cycle.Arrange for a bank transfer. In the case of buying a classic car, you could have money transferred from your bank account to the seller.

Just in case

If you specifically need cash, be prepared to explain how it was used. The easiest way to cover yourself is to document how the money is spent and save receipts when possible.

The odds of being asked are negligible, but there’s no harm in being prepared.

As mentioned, a report sent to FinCent does not mean anyone thinks you did anything wrong. But until the government can devise a foolproof way to catch financial criminals and other bad guys, we’ll all have our names added to databases.

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It’s something you must pay attention to. 

Investing in real estate isn’t for the faint of heart. There’s a lot of risk that goes into owning an income property.

First, you have to cover your mortgage loan payments every month — even if your rental sits vacant for a period of time. You also have to keep up with expenses like property taxes, homeowners insurance, maintenance, and repairs.

Ideally, the income you earn by charging rent will be enough to not only cover your costs, but allow you to profit. But there’s a trap you might fall into as a landlord, and it’s one that real estate guru Graham Stephan wants to help you avoid.

Don’t focus on the wrong factors

As a landlord, your goal might be to eke out as much profit as possible on your rental. And to achieve that, you may be inclined to rent to any tenant who’s willing to pay up.

But in a recent tweet, Stephan said, “If you’re a landlord and plan to rent out your property, optimize for the quality of the tenant, not the rental amount.”

He then went on to tell a story about a mistake he made back in 2012. At that point, Stephan was desperate to fill an open rental and chose the tenant who offered him the most money for it. In doing so, he ignored certain red flags that should’ve made him think twice about moving forward. And lo and behold, after six months, that tenant stopped paying rent.

That’s why you really need to focus on finding quality tenants if you have an income property to rent out. If you rent to someone who’s willing to pay a premium but they fall behind on their rent or stop paying altogether, you’re going to stop making money — and you might end up with a major hassle on your hands.

How to find a great tenant

Any tenant you rent to should be someone you’re confident will follow your rules, all the while paying their rent every month. To that end, it’s a good idea to ask for recommendations from former or current landlords before offering up lease agreements.

Now, you may run into a situation where you have a tenant applicant who’s never rented before, and therefore doesn’t have a landlord recommendation to offer up. In that case, ask for a personal reference from an old roommate or even a neighbor or employer. Some sort of reference is better than none.

At the same time, make sure to run a credit check on any tenant you’re thinking of renting to. If that person has a solid history of paying bills on time, you’re probably safe to rent to them. But if an applicant has red flags on their credit report, like delinquent debts, consider it a warning sign.

Finally, make sure anyone who’s interested in renting from you earns enough money to cover their rent. Ask for recent pay stubs to verify their salary. And it may not be a bad idea to ask for a screenshot of their savings account balance so you can verify they have funds available for rent payments in the event of a lost job.

Renting to the wrong tenant could set you back as an income property owner. So rather than fixating on commanding the highest monthly rent payment, focus on finding tenants who are unlikely to leave you high and dry.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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You don’t want too much of your income withheld. 

If you haven’t finished filing your taxes this year, worry not. Tax returns aren’t due until April 18, so there’s still plenty of time to get the job done.

However, if you normally get a tax refund, then you may have been motivated to get your taxes done well ahead of that deadline. After all, the sooner your return is filed, the sooner your refund can hit your bank account.

In 2022, the average tax refund came to $3,121. But this year, refunds may be smaller for one big reason — a number of tax credits that got a boost in 2021 reverted to their former (lower) value in 2022.

In 2021, the Child Tax Credit saw its maximum value rise from $2,000 per child to $3,000 for children ages 6 to 17, and $3,600 for those under age 6. The Child and Dependent Care Credit, a separate credit available to parents who pay for childcare so they can work, saw its maximum value increase substantially, too.

But in 2022, these enhancements went away. As a result, a lot of people who file their 2022 taxes this year might see a lower refund amount once they’re done crunching the numbers. If the opposite happens to you, though, and you wind up with a larger refund in 2023 than in 2022, then there’s one key move you may want to make.

It may be time to adjust your withholding

Maybe you earn $60,000 a year, which would mean making $5,000 a month. You’ve probably noticed that your monthly paychecks don’t total $5,000, though. Rather, you get a lower sum of money because your employer has to withhold taxes from your pay. And the amount of tax your employer withholds is based on the information you provide on your W-4 form.

The good thing about W-4s, though, is that you can change your withholding information during the year if it needs an adjustment. And if you’re looking at a higher refund in 2023 than you got in 2022, then it means you may want to set yourself up to collect more of your money upfront for the rest of the year.

To do so, you may want to add more dependents to your W-4 if they’re not listed already. It’s common for workers to not list dependents even if they have children so as to have more tax taken out of their pay and avoid owing the IRS money. But if you have dependents you haven’t been listing on your W-4, it may be time to change that practice.

If you’re not sure how to update your W-4, a good bet is to consult an accountant or tax professional. Your payroll department probably can’t offer you advice on W-4 adjustments — they can simply process those adjustments once you make them.

Don’t let the IRS hang onto your money

Any tax refund you get represents money you were entitled to collect earlier but didn’t. So if you end up with a large refund this year, it may be time to arrange for your paychecks to get larger. Doing so could help you better manage your cash flow during the year, as opposed to letting the IRS hang onto more of your money during the year at no benefit to you.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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If you were harmed by Wells Fargo practices but have not received compensation, here’s the next step to take. 

Wells Fargo Bank has recently been on the hot seat. In December, the bank was ordered by the Consumer Financial Protection Bureau (CFPB) to pay a total of $3.7 billion for mismanagement of auto loans, mortgage loans, and deposit accounts.

Here’s what happened

According to the CFPB, the bank repeatedly misapplied loan payments. These improperly applied payments led to home foreclosures, repossessed vehicles, and incorrectly assessed fees and interest payments. There were also surprise overdraft fees that left customers confused and frustrated. CFPB estimates that these practices impacted more than 16 million Wells Fargo customers.

The bank was ordered to pay a total of $3.7 billion in penalties, more than $2 billion of which is to go to customers impacted by the bank errors. The CFPB laid out the specific ways Wells Fargo customers were harmed:

Auto loans: The bank incorrectly applied auto payments, improperly charged fees and interest on auto loans, and wrongfully repossessed vehicles. In addition, Wells Fargo failed to refund certain fees when a loan ended early.Mortgage loans: The CFPB contends that during at least a seven-year period, the bank denied thousands of mortgage loan modifications. These denials sometimes led to a customer losing their home in a wrongful foreclosure. Furthermore, the CFPB says that Wells Fargo was aware of the issue for years before it was finally addressed.Surprise bank fees: Let’s say someone went grocery shopping in the morning and used their debit card to pay. The bank authorized the transaction and it appeared all was well. Later that day, a check covering their electric bill hit the account but there was not enough money to cover that expense. Wells Fargo would not only charge an overdraft fee for the electric bill, but would go back and charge an overdraft for the debit transaction from earlier in the day — even though the bank had approved the purchase.Frozen accounts: Based on a faulty automated filter, the bank determined that there may have been a fraudulent deposit in more than 1 million consumer accounts. Wells Fargo automatically froze those bank accounts, harming consumers who could not access their money through no fault of their own. On average, accounts were frozen for at least two weeks.

Most consumers have received reparation

Once an agreement was reached with the CFPB, Wells Fargo did not waste any time contacting as many of the 16 million customers as it could locate. However, because the unfair practices took place over a span of years, some consumers have been difficult to pin down. For example, some have moved and left no forwarding address, while others have changed their contact information, or simply switched banks.

If you’re owed money

If you were a Wells Fargo customer who was harmed by its practices but have yet to receive payment, your next step is easy. First, contact Wells Fargo at 1 (800) 869-3557. Let them know more about your situation, including why you’ve been difficult to locate.

If you don’t get anywhere with the bank, you can call CFPB toll free at 1 (855) 411-2372. They will provide you with the information you need to receive compensation for your trouble.

As a government agency, CFPB is designed to ensure that you’re treated fairly by banks, lenders, and other financial institutions. If that’s not the case, CFPB has the authority to enforce federal protections on your behalf.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Dana George has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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