Farnoosh Torabi's Blog, page 57

#AskFarnoosh: Couples & Real Estate

This week, Dan, a Facebook fan, asks me:

How do two, mid/late 30s adults combine a household? We both are very established and have worked hard for what we have obtained. My house is bigger with a bigger yard and in a slightly nicer area. I can’t imagine asking her to move after all the work she put into her home. I can’t sell my home because it is so far underwater. Besides, we would put one of them into the rental market and earn additional income. Our rental market is pretty flat, so I do not believe either home will bring in a significant amount of rent other the other. The “plan” is to remodel my home and move in there once complete, subsequently renting out hers.  I’m not only asking for your professional advice, but also your advice as a woman.

Thanks!

Hi Dan,

As you know money can be a contentious issue in many relationships. Doing ‘what’s right’ is a calculation that includes both numbers and emotions. You want to do what’s financially sound and offers you both the least amount of stress. What’s the most peace-of-mind thing to do and the most economical? Somewhere in the middle lies your answer.

My advice is to follow through on the plan you’ve chosen. Seems like and your significant other have given this quite a bit of thought.  You’ve probably analyzed things like neighborhood, space, functionality, schools (if you choose to raise a family there), all in addition to the costs. If it makes the both of you happiest to live in your home and rent out hers, then trust your instincts. Just don’t go crazy with the remodeling, unless the upgrades will add significant value to the home.

Why rent instead of sell your partner’s home? Well, it could be a great long-term investment, especially since she’s put major sweat equity into it.  If could offer you both a nice little bit of cash flow every month and down the road a nest egg to fall back on.  But if you plan to reap the benefits of this home, I’d suggest she add you to the mortgage or that you split the costs somehow. (That’s my womanly advice). After all, the proceeds of renting out the home – or selling it – may end up in both your pockets. You should be equally invested. Otherwise, I’d suggest that she keep paying the mortgage on her own, pocket the rental income and keep it as her own personal savings.

Just make sure that whatever you’re both contributing to keep these two houses afloat – after any rental income – is no more than 25% of your take-home pay.  And as for rental income, money and couples expert Matt Bell says it should cover mortgage, taxes, insurance and monthly maintenance costs. “Also factor in the assumption that the property could go unrented for two months out of the year,” he says. Finally, try renting the place for a year and see if you even enjoy it. The stress of being landlords may outweigh any financial benefits. In that case, you should revisit selling it and use the savings for your future.

Choosing the Right Rewards Card

[image error][Full disclosure: I've teamed up with BofA for the day to bring consumers advice on how to choose a rewards card wisely.]  

For the responsible consumer who pays off that monthly credit card balance on time and in full – why not carry a credit card that rewards you for spending?  I’m personally looking forward to buying a new Macbook Air soon with my accumulated credit card reward points. Over the past two years, I’ve managed to rack up enough points (200,000 and counting) to earn this massive freebie. How’s that for delaying gratification?

But with so many rewards cards on the market – how to identify which one is right for you? Consider these tips:

Consider Your Spending Habits and Goals

Rewards cards run the gamut, offering various benefits from cash back to retirement savings, charity dollars, gas rewards and travel perks. The key (and sometimes, challenge) is figuring out which speaks best to both your current spending habits and goals. If you’re a stay-at-home parent who routinely uses a card to pay for groceries, gas and clothes – and could use some good old cash to help pay the bills each month – you may want to shop around for a cash-back rewards card that gives you a percentage back for every dollar spent in those particular categories.

On the other hand, if you want a card that can help you save on travel, consider a travel rewards card that rewards you for every dollar spent and offers flexible redemption, meaning you can use the points towards any airline with no black out dates, expirations or restrictions. The BankAmericard Travel Rewards Credit Card, for example, provides that and more, allowing cardholders to apply their points to more than just the purchase of airline tickets. You can use them to pay for rental cars, vacation packages, hotels and even baggage fees.

Also See: Debit Versus Credit

For more rewards card profiles, check out Consumer Reports’ updated Rewards Card Buying Guide. There’s also Bankrate’s 2012 Rewards Card Survey.

Weigh the Pros With the Cons

Now that you’ve narrowed down a few possible options the next step to picking the best rewards card involves reading all the fine print. As arduous as that sounds, it will be very important to know what, for example, are the annual fees to opening the card and the possible limitations when trying to accumulate and redeem those points or earn cash back. Does the sum of the pros outweigh the cons? If not, keep looking.

Also See: 6 Things to Keep in Your Wallet

Consider Offers From Your Bank

Finally, don’t forget to review rewards cards offered by your existing bank. The reason is some banks extend even bigger perks to existing customers. For example, you may be able to earn additional bonus points for paying the credit card off using your checking account at the same bank.

Photo credit: Wal-mart stores

America’s Biggest Shopping Regrets

Be honest. Ever bought anything on impulse? Chances are you have, and as a new survey finds — often regrettably. Our Financially Fit team recently teamed up with the National Endowment for Financial Education to ask over 2,000 Americans what’s your biggest shopping regret. Read more here.

As always, we want to hear from you. What have been some of your biggest shopping regrets? Connect with me on Twitter@Farnoosh, using the hashtag #finfit.

Gender Pricing: The Higher Costs of Being a Woman

[image error]It’s expensive to be a woman in this country. For one, there’s a lot of cultural and career pressure linked to looking our polished and professional best; collectively, we fork over $426 billion a year on our hair, nails, and beauty products.

But glamour aside, for services that we all need — such as grooming, toiletries, and healthcare — women pay more than men.  It’s a harsh sometimes discriminatory reality. And let’s not forget that, on average, women still earn less than men in this country.

At a dry cleaner near my house, they charge $2.75 to dry clean a man’s dress shirt, and $3.50 to clean a women’s dress shirt.  To me, there’s no perceptible reason why this should be so, considering we’re talking about the simple act of washing dirt out of fabric (and shouldn’t gals argue that men sweat more?).  I joke, but this is some pretty serious gender-based price favoritism.  And dry cleaners are far from the only perpetrators.

According to Forbes Magazine, a study by researchers at the University of Central Florida examined 200 deodorants sold at major drugstore chains and found that deodorant for women costs, on average, 30 cents more per ounce than men’s.  This is also true of disposable razors, shaving creams, shampoos and soaps dressed in pretty packaging and marketed to women, but are practically identical products to those sold to men, give or take a flowery scent.

In New York, 138 businesses have been hit this year for gender-pricing discrimination, and the majority of those violations were issued to salons and barbershops. Women have long-since been aware of this unfair practice in the haircare industry (but also actively buy into it – we willingly spend more on our hair than men, by a factor of two!). But despite what salons say about the time and the artistry involved in a women’s ‘do, there’s no explaining why there’s a 50% up-charge for a girl with a “boys” haircut.

If you talk to the companies hit by these fines, they’ll probably say that what appears to be discriminatory pricing is really just smart business: dry-cleaners assure us that laundering women’s shirts is more labor intensive and requires different machinery than men’s, and in fact it’s men who get price-discriminated against at nail salons: some establishments charge more for a MAN-icure or a man’s wax because, they claim, men come in so infrequently it takes more time and effort to complete the service – similar to why a hair salon might charge more for a women.  So what’s the big deal?

Well, these price differentials spread much further than just errands and grooming. In Marie Claire’s article detailing gender-biased pricing it explores how women also pay more for home mortgages, health insurance, cars, and car repairs.  Jezebel reported that women pay $200 more on average for a car than a white male would, while black women pay a whopping $400 more.  They also wrote that in 2006 the Consumer Federation of America found that women were 32% more likely to end up with high-interest subprime loans, even when they had better credit ratings than the men.

In health care, too, women win by a landslide: new research by the National Women’s Law Center shows that, in states that have not banned the practice, 92% of the top plans charge women more, despite the fact that the majority of them do not cover maternity services. In Florida, women pay as much as $1,141 extra per year in health care premiums; often paying extra to cover inadequate maternity coverage, or taking on the brunt of maternity care on their own, an average of $9,600.

These are huge financial burdens with lasting consequences, and all this despite the fact that a woman still makes 82 cents for every dollar a man earns.  While men do pay more for certain kinds of auto and life insurance, it can’t be denied that women shoulder more expenses overall: the State of California, when they became the first to ban gender pricing in 1996, found that women paid an average $1,351 per year more in higher prices and added fees over men.  If you multiply that for an entire nation of women, that’s roughly $151 billion in markups.

So how can discrimination like this be legal?  Marie Claire explains that though civil rights laws protect against job and housing discrimination on the basis of race, gender, or sexual orientation, there’s no federal law outlawing discrimination in the sale of goods and services. Some cities and states have adopted their own anti-discrimination statutes, but they aren’t always effective. At least under the Affordable Care Act, ten states have already banned gender rating in health insurance which means that by 2014, all insurance companies will be forced to stop pricing differently.

As a consumer, here’s how you can fight against price discrimination:

Be Your Own Advocate

Refuse to patronize businesses that blatantly discriminate in their pricing: just by letting the company know you’ll be going elsewhere because of the unfair differential is usually enough to get someone’s attention — and maybe they’ll even change their ways (or, at least try to win your business back).

Don’t Buy In

No one says you have to pay more for women’s products: if it costs less and does the same thing, who cares if you use a man’s deodorant or shaving cream? If the smell bothers you, get the kind for sensitive skin, which is usually scentless.

Do Your Homework

“Shop Around” is a tired trope when it comes to financial advice, but the rule of threes works nicely when comparison shopping — you don’t have to (nor should you) take the first price quote thrown at you.  And if you suspect you’re being charged differently because of your gender, report it. Marie Claire has a place where you can drop a note to your local representative at: marieclaire.com/womenpaymore.

I suppose a woman’s work fighting against gender discrimination is never done. But while I’m at it, I may as well continue enjoying “ladies” night at my local watering hole – at least there I can still get a price break!

Photo courtesy of Images_of_Money

How to Manage a Bullying Boss

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If you’ve ever been yelled at, demeaned or otherwise intimidated by your boss, you’re not alone. An estimated 54 million Americans have recently reported being bullied at work.

Bullying bosses come in many forms but the result is usually  the same: frustration and demoralization, especially if it’s a job you can’t afford to lose. I recently spoke with human resources expert Steven Kane to discuss tips on dealing with a difficult supervisor. Here’s some of his top advice:

It’s Not You. It’s Your Boss.

Don’t take anything personally if you have an overbearing and intimidating manager. Kane explains that most office bullying comes from bosses who are out of touch. “These are people who intend their comments or actions to be innocent, but they’re usually too out of the loop to see they’re having a negative effect on employees,” he says. Next is the highly-critical boss who means to motivate but really serves to demoralize. And he says the last type is the run-of-the-mill jerk, bosses who are generally nasty without provocation or reason. Your boss may not fit these archetypes but Kane says analyzing the theme around your bosses bullying is a great first step to developing solutions.

Talk It Out

It’s a hard conversation to have but the best thing you can do is take the issue directly to you boss first, says Kane. After all, he or she is the one directly responsible and with the most power to make a change. “The strategy is to be properly armed for a discussion, not a confrontation,” Kane warns. For a productive conversation, he suggests scheduling time to talk during the workday. “Don’t accuse and don’t complain,” says Kane. It’s a delicate situation and, if handled poorly, can backfire. ”The most important thing is that he sees the behavior is having a negative effect on morale and/or your work. Resolving that should be presented as a win-win for you both.”

So, in the meeting, be polite and specific. Dates and details will help your boss pin down exact events where you felt bullied. Explain how it may have been distracting and if  bullying is a part of your boss’ management style, offer alternatives to direct the conversation toward problem solving.

Time It Right

If you’re going to present your issues to the offending boss, Kane says do it in a timely manner. You don’t want to wait months, even years, after an offense. Wait instead until the first available moment to hash it out. According to Kane, your boss’ assistant, if he or she has one, can help identify a good work-free moment to meet. Another tip: Don’t do it at lunch or another seemingly informal situation. Kane says it could leave your boss feeling ambushed and put him on the defensive. Another great time to address the bullying is in your regular performance review. That’s your time to be honest. Companies take these meetings seriously so be fair if you complain and, again, be specific. Provide examples and articulate a favorable outcome.

Involve HR

“The path to fixing the problem has so many factors,” Kane says. Resources for resolution vary based on the size your company, if you’re unionized and how functional the human resources department is. “The role of the HR department is the biggest single factor,” Kane says. If you can’t have a conversation with your boss and the problems persist, it could be time to bring in another party. Professionals in the HR department can help you first identify if your problem has legal implications and violates any of your rights as an employee. They’ll also be able to provide you with proven conflict resolution tools or potentially mediate a conversation with your boss.

Photo Courtesy, Victor1558.

Best Lodging for Less Than $70 Per Night

Whether you’re looking for a traditional hotel experience or a more adventurous solution, your shoestring travel needs are covered. I spoke recently with Budget Travel magazine for their top lodging picks for less than $70 per night. Read more here.

What’s the best lodging deal you ever scored? Connect with me on Twitter @Farnoosh, using the hashtag #FinFit.

Common Gift Card Mistakes

[image error]Be honest: There are some individuals on your holiday gift-giving list that will, inevitably, receive gift cards. It’s not your favorite gift to give, but it’s a convenient and cost-effective solution for the friend or family member who’s so hard to buy for.

And despite the love/hate relationship we have with gift cards, they’re soaring in popularity: The National Retail Federation last year that gift cards were the most popular holiday gift request and roughly 80% of shoppers were likely to purchase one or more during the holiday season. What’s more, according to researchers at marketing firm Grant Thornton, department store gift cards were the most popular choice with nearly 40% of consumers planning to purchase them, followed by bookstores (23.7%) and electronics stores (19 %.) Other popular issuers were restaurants, coffee shops and entertainment venues like movie theaters.

But before you buy into the frenzy here are some tips on how to get the most bang for your buck:

Read the Fine Print

Before anything, check the store’s policy before purchasing a gift card. They differ widely but almost all have limitations. Many retailers used to have expiration dates on cards and dormancy fees that would charge holders for months their cards went used when they finally got to the register. But in 2010, the CARD Act changed that, restricting issuers from charging fees for 12 months and extending expiration until five years after purchase. Focus on policies for lost or stolen cards. For example, can they be cancelled and replaced? Will they be able to be redeemed online?

Score A Deal

There are various places where you can purchase gift cards from drugstores to the stores, themselves. It’s sometimes worth it to check in frequently with retailers where some host deals throughout the year, says Dan Rogers, CFO of Plastic Jungle. Brookstone, for example, recently offered $50 gift card for just $25! That deal has since ended but Plastic Jungle and similar sites are year-round hubs to buy and sell unused gift cards.”We buy gift cards from consumers and sell them back at a discount,” says Rogers. Right now, for example you can get deals like 15% off Express and Sunglass Hut gift cards. With an estimated 20% of gift card balances going unredeemed, according to Grant Thorton, it’s also a great site to cash in cards you can’t use.

Don’t Feel Bad

Finally, don’t feel guilty for not working tirelessly over the perfect gift. It’s not as bad as you think and is no longer considered a thoughtless gift, says, Patricia Rossi, etiquette coach and author of Everyday Etiquette.”Unlike some gifts, it’s never the wrong size or color.” Rossi makes an exception however for spouses and other close relatives, but says for an employer or coworker it can be a perfect gift that’s not too personal. She says, “It can also be used to treat someone to an experience or purchase that they might not make otherwise, a spa day for example.” If you insist on personalizing the gift, Rossi recommends finding a card for a store where the recipient already shops or a service they’ve used. Take it an extra step by adding some flair to the present. “Retailers have gotten really savvy, says Rossi. “Many offer beautiful small boxes for the card, for a just few extra dollars, that you can wrap to make it really special during the holidays.”

Photo Courtesy,  401(K) 2012

How To Buy A Winter Coat

[image error]A warm coat will be essential this year, with the coming winter expected to be colder than the previous season in most U.S. regions. The Northeast will likely see more snow and even the state of Florida is expecting a cool down, according to forecasting firm AccuWeather.

It’s a must-have item that experts say is worth paying a bit more for.

“A winter coat is an investment piece,” says New York fashion expert Amy Salinger. “You’ll wear it at least five times a week and want it to last more than one season, so think of it as a cost per wear item.”  While a few hundred dollars may seem pricey, over the course of the season, she says, it’ll be worth it.

That said, you can find high-end labels for less this time of year. ”Right now is the best time to buy a buy a discount winter coat,” says Salinger. Quality designs by designers like Laundry By Shelli Segal, Michael Kors, Calvin Klein and others usually fall on the higher end but are currently available at discount stores like T.J. Maxx, Marshalls and Loehmann’s for significant discounts. Macy’s, for example, currently has winter coats 25-50% off. Salinger says these sales will dwindle toward mid November so don’t wait to go shopping. Get your coat today.

Here’s more on how to buy a winter coat that will keep you warm and stylish.

The Right Style

Parkas, peacoats, and puffers are all great, classic winter coat options. Parkas are those heavy jackets with fur-lined hoods. This style comes in handy if you’re not a hat person, live in a snowy region or plan on spending significant time outdoors. The same goes for a puffer coat. Puffers come in many styles from vest to long coat but are marked by their puffy look and down feather stuffing, which can make keeping warm comfortable as well. Then there’s the classic peacoat. Originally worn by U.S. and European Navy members, the peacoat usually comes in wool and can be a simple solution to falling temperatures. Finally, for the professional, a chesterfield coat is another conservative option. This top coat is a classic for anyone that needs something long enough to cover a suit or sport coat.

So many options. Which is best? The one that best fits your style – but has the potential to last several wears.

“Buy something classic,” says Salinger. She suggests a neutral tone to get the most use through the season. “Neutral doesn’t mean just black or brown. It could be camel, hunter green or another darker, richer color that wil go with everything.” When it comes to trends, Salinger says leather trim will be hot this winter and the fashionable consumer should look to small things – belts, buttons and epaulets for example – to give your coat some personality.

Materials Matter

The make of your coat is is just as important as its style.  Materials including wool, cotton, and leather are always good to insulate heat but they’re also highly breathable due to their natural fibers. This will keep you warm without baking you like a potato inside the coat, which can happen with some synthetic fibers. If you prefer a synthetic parka or puffer however, retailers including REI, The North Face and Uniqlo all make more stylish puffer coats with no resemblance to the sleeping-bag-shaped coats from childhood. Uniqlo recently expanded into the U.S. with stores in New York and California and many of its items are available to purchase online. Most of their coats are priced below $100 and their Japanese HEATTECH materials are designed to be lightweight, absorb moisture and generate heat.

The Best Cut

When it comes to protecting your body from the cold, length is important but with so many styles and cuts, how do you know which length is right for you? A good winter coat doesn’t have to scrape the floor in order to keep you warm. A shorter jacket, like a peacoat, should fall just below your backside. A long coat is best kept at knee-length. When trying the coat on, make sure the sleeves fit to your wrist with your arms extended. According to Salinger, many consumers buy their winter coats too big. “You’re staying warm, not sharing your coat with a friend,” she says. Get a fitted coat, paying special attention to the shoulders, waist and length depending on your height.

Photo Courtesy,  lululemon athletica.

#AskFarnoosh: Refinancing My Student Loan

Ken asks:

I have $25K in federal student loan debt with a 6.55% fixed interest rate. I am wondering if there are any good options for refinancing. I considered borrowing on my HELOC to take advantage of the lower variable rate but decided against taking equity out of my house in case I have to relocate in the next year or two and have to sell my house. I do have an excellent credit rating and the only debt I have is my mortgage and student loans (other than credit cards which I pay off each month).

Dear Ken,

It sounds like you are already earning a reduced interest rate on your student loan. The typical rate on the unsubsidized Stafford loan is about 6.8%, but by opting for automatic payments you earn a 0.25% rate reduction. Nice work!

At this point, your refinancing options are slim. The U.S. Department of Education does offer Extended Repayment – which stretches the standard 10-year loan up to 25 years, reducing your monthly payment by a third (but doubling your interest) – but only to borrowers with $30,000 or more in federal student loans. Even if you did qualify, it’s not something I’d really recommend since it will mean paying so much more in interest over the life of the loan.

I agree with you that tapping out your home equity to pay off your student loans is a risky proposition – especially if you plan to sell or relocate in the near future. HELOCs – unlike federal loans — typically carry variable rates, which means your monthly payments may change over time. “Also if you default on a home loan, you can lose your home. But if you default on a student loan, they can’t repossess your education,” says Mark Kantrowitz, publisher of Finaid.org and Fastweb.com. That said, if you can get your hands on a fixed-rate HELOC that’s below 6.8%, avoid closing costs and still have enough equity left over in your home’s value to avoid going underwater, you may want to explore this option further. Start by calling local credit unions about their various loan options. Perhaps you can even get a personal loan with a fixed rate to help you refinance.

If you’re really struggling to make your monthly payments due to financial hardship, Kantrowitz reminds us that there are flexible repayment plans such as income-based repayment, which pegs your monthly student loan payment to no more than 10% of your income and family size.

Common Tipping Mistakes

There’s perhaps no aspect of etiquette more confusing than tipping. It’s a gesture that shows our appreciation for great service and some workers depend on tips. But in some instances, tipping is completely unnecessary. To avoid some common mistakes, here are a few tipping do’s and don’ts. Read more here.

As always, we want to hear from you. What are some of your tipping tips? Connect with me on Twitter@Farnoosh, using the hashtag #finfit.