What happens when the empty nest isn't so empty?

Here's a guest post from my friend, freelance writer Trisha Wagner. Enjoy!

Do you remember the first time you moved away from home? The feeling of excitement, independence and freedom? The joy and trepidation of finally striking out on your own with no parents looking over your shoulder or bossing you around? I know I remember those feelings well and nothing ever compares to moving into your first place. Now imagine fast forwarding five, ten or even fifteen years and having to face the fact that you can no longer make it on your own. While it has become somewhat common for some college grads to bounce back to the family homestead until they get “established” the current state of the economy is forcing grown men and women out of their homes and back to mom and dad's place.

With the tough economic times that we are facing, this situation is becoming a reality for many families. To say the least this arrangement can be stressful for both parties and it is important to set some ground rules to prevent both of you from falling back into your old roles. The following tips can help you get in and out of the family home with the least amount of disruption to all involved.

Set Rules Before Moving Home. This is important for both the parents and the adult child to establish what is expected of all parties. If the move home is a result of a financial hardship, agreeing on what will be expected of you will go a long way toward a peaceful co-existence. Due to the current state of the economy your parents may want to help you financially but find themselves unable due to their own financial situation. Both parties need to agree and feel comfortable discussing these financial responsibilities before you move home.

Be Respectful Of Privacy. Let's face it, you have grown accustomed to having your own space and so have your parents. Remember this is their home and just because they want to help you doesn't mean they will relish having another person (even their child) hanging on the sofa all day. Be respectful of their privacy and the daily “routines” that we all have.

Have A Plan. Remember moving back home with the folks should be a temporary arrangement to help you get back on your feet. This means if you are unemployed you should continue to look for work. If you are currently working, you should be extra mindful of your spending habits. You don't want to be a mooch, cost your parents more money or spend your paycheck on fabulous new shoes. Make the most out of this opportunity to get your finances in order by saving as much money as you can possibly afford. This may mean making sacrifices or adjusting your lifestyle but that is the reality of your life at the moment.

Learn From Your Mistakes. No one is perfect and we all make mistakes. Successful people however learn from those mistakes. There are many reasons why an adult child may be forced to move home. Some situations are out of your control (loss of employment or major medical issues). Other circumstances may have been preventable had you managed your finances better. Don't let past missteps stop you from moving forward toward your financial goals; establish where you went wrong and make the changes necessary to prevent the same mistakes from happening in the future.

While no one wants to move back home under the watchful eyes of their parents, certain situations may leave you with no other options. At a time when your pride might be hurting don't forget to be thankful and appreciative that you have parents and a home to fall back on-- not everyone is as fortunate.

Trisha Wagner is a freelance writer for DepositAccounts.com where you can compare rates of deposit accounts from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and savings accounts.

What the stimulus bill means for you

Not a day goes by now without some talk about the "stimulus bill" being discussed by very important people in some very important chamber deep in a crevice of the Capitol building. But with so much news on the plan, the details can become muddy and confusing and before we know it we're completely lost and ready to top off our glass of Pinot Noir and take the dog for another walk before we kneel at the doorstep of Thomas.gov, take a deep breath, and start all over in trying to understand it all.

Of course, the most vital info you need to know about the stimulus bill can be boiled down to just five itty-bitty words: How does it affect me? Simple question, but traversing through all the mucky language can be harrowing. Luckily, that's why you read moi, right? ;)

I've found a fabulous article by the New York Times that does the best job I've seen of simplifying the legislation and informing you of how the stimlulus affects, well...you. Most importantly in regards to:

Income Tax: In 2009 and 2010, there is a tax credit of up to $400 for individuals and $800 for married couples filing their taxes jointly. You calculate your credit, subtracted from other federal taxes you owe, by taking 6.2 percent of your earned income.

Your eligibility for this credit begins to phase out if you’re an individual with an adjusted gross income over $75,000 or a couple with income higher than $150,000.

Unemployment: Normally, you pay federal income taxes on federal unemployment benefits. In 2009, however, you won’t have to pay taxes on the first $2,400 in benefits you receive.

Health Insurance: If you get fired, your company is required, thanks to a law known as Cobra, to allow you to pay to keep your health insurance, generally for up to 18 months.

The problem is, it can cost you $1,000 a month or more to keep the coverage.

Now, the federal government will subsidize 65 percent of the premium for up to nine months. To be eligible, you need to have been forced out of your job between Sept. 1, 2008, and Dec. 31, 2009. Also, your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples filing their taxes jointly.

If you lost your job after Sept. 1, 2008, and declined Cobra coverage, you’ll now get another chance. Call your former company in the next two months to find out how this will work.

Social Security: In 2009 a number of retirees and disabled people, including Social Security recipients, will receive a $250 refundable tax credit. The money would arrive within 120 days of the bill’s signing.

First-Time Home Buyer Credit: First-time home buyers are eligible for a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000, if they made the purchase after Jan. 1, 2009, but before Dec. 1, 2009. (This gem is for singles who make under $75,000, or a married couples who make under $150,000).

Don't forget the language isn't final, but the above is the gist of it all. Ah, I love the sound of money in my pocket (thank you U.S. government!). [NY Times via CNBC]

Beware of hidden fees

There's nothing worse than feeling swindled, especially in matters of money. One of the worst ways I can think of being ripped off -- aside from being all-out robbed (thank God I've never had to experience that) -- is to suffer the horrors of hidden fees.

You sign your name on the dotted line ... perhaps you've been uninformed, uneducated or are just plain naive, truly thinking you're paying a certain amount for a new credit card or car loan. Twelve months later, you're standing slack-jawed and in shock over an obscene bill, so confused that not even an Appletini could put you right. After that first wave of adrenalin washes through you, completely nixing the calming European facial and full-body massage you just got (hey, a girl can dream), now is the perfect time for a plan of attack going forward.

The number one cardinal sin of a girl on a budget is enduring repeated hidden fees that always seem to hide in long lists of terms and conditions or other fine print that many fail to fully read or even bother to understand. You want to save money? Now is the time to stop glossing over the fine print. As you've witnessed over the last year, the erstwhile Wall Street conglomerate may score a government bailout (if they're lucky), but no one will there to bail you out just because you didn't "think you needed to read all that." You've got take to take matters into your own hands. Don't be afraid to ask questions of anything you don't understand, and make sure to never, ever sign your name (and while you're at it, your bank account) to something that you don't fully comprehend in entirety. After all, it's your money we're talking about here.

Where do the most common hidden fees lurk? I found some great tips from Suze Orman on Oprah.com, highlighting where and what to watch for in these typical areas:

Retirement savings: Do you know how much it costs you to invest in the funds in your 401(k)? The difference between paying high and low fees can add up to tens of thousands of dollars. Call your plan provider to make sure your funds don't charge sales commissions (called a "front-end load" or "deferred-sales charge") and that the annual expense ratio is no higher than 1 percent. If your plan doesn't offer lowcost options, you and your colleagues should make a ruckus—the law is clear that 401(k)s must be operated for the employee's benefit, and high-cost funds are of no help to you. The same goes for your Roth IRA—no-load funds and low-expense ratios are the surest way to boost your bottom line. Fidelity, T. Rowe Price, and Vanguard all offer many low-cost funds.

Credit card: If your monthly payment isn't on time, you'll be slapped with a late fee as high as $39. Do that three times a year, and you've donated nearly $120 to the credit card company. Late payments also hurt your FICO score. And never, ever take out a cash advance on your credit card. The cost is often 3 percent of the amount borrowed, and the interest rate can be higher than 20 percent.

Bank account: It's easy to be hit with fees of $3 or more when you use an ATM—a charge from your own bank plus the one from which you withdraw cash. Do that twice a month, and you're spending at least $72 a year.

Recurring payments: Some bills, such as your insurance premium, allow you to choose between making one big annual payment and a series of installments. If you can afford the one-time deal, you'll avoid the $5 or so service charge levied when you pay quarterly or monthly—that's $20 to $60 a year. It's easy to save $200 annually by eliminating these types of fees. Invest that $200 a year for 20 years, earn an annualized 8% gain, and you've got nearly $10,000. It pays to be a fee fiend.

What we've learned from the economic crisis

In an open letter to two his two daughters published this week, Money Magazine assistant managing editor Pat Regnier recently mused on what the current economic crisis has taught us, and how his children -- and really all of us -- can benefit by learning from the mistakes that were made before it all came crashing down. I love this letter because it's simple, reflective and neatly summarizes how current sentiment came to fruition.

What we're experiencing now is indeed a historical event -- one that we may not see again in our lifetimes, at least to this degree. It's important for us, like Regnier, to pass on any reflective wisdom we've managed to pull from the situation so we can educate future generations to not make the same mistakes. Granted, it's normal for the economy to go through recessions and experience both ups and downs, but this is a "down" moment we can all learn from:


Dear Lucy and Emile,

You are both too young to read this letter now. But in a decade or so, I suspect you'll be hearing about the events of autumn 2008 in your history class. You might wonder what it felt like to live through a global crisis. And when you learn about the years just before the crash -- the houses that magically doubled in value, the no-questions-asked mortgages -- you'll surely ask what all of us crazy old folks could have been thinking. I'd like to take a stab at answering those questions today, while the events are still raw and before we know how this story ends. Your mom and I are learning some big lessons right now, ones we might not recall so well after the good times return.

First let's talk about the hardest question: Why didn't people see this coming? Well, we sort of did. Talk of a real estate bubble was common by 2003. But bubbles do funny things to your head -- you'll see that when your generation's bubble comes along. You may read in your textbooks about the euphoria and optimism of boom times, but what I remember most was the worry.

In 2005, a year when home values in our neighborhood jumped 25%, your mother and I would talk anxiously about not having a giant mortgage. We didn't want to stretch for a loan before we had saved for a big down payment. That conservatism hurt: Our chances of joining what was called the ownership society seemed to become more remote with each uptick in real estate prices. We were worried that our new family would never be financially secure. Or even truly at home.

So this is how you'll know when a strong market has turned into a bubble. If you stick to prudent rules you learned before the market took off, you are bound to feel at least a little bit stupid for a while. Learn to regard that sinking feeling in your gut as a sign that you are doing something right.

Another thing we're discovering is how quickly the rules can change. For years the good jobs were in construction, real estate and, of course, financial services. All those industries are shrinking right now. And for Dad, who has spent most of his adult life either working in or writing about finance, this is...uncomfortable.

I wish I had a few more tricks up my sleeve. Unfortunately, it's hard to fully hedge your career bets -- there are a lot of struggling actor-waiters, but I know only one money manager-neurologist (my magazine's own William Bernstein).

At least educate yourself to be flexible. Try to hone a couple of concrete but transferable skills, such as writing plus some basic science (and not just the "rocks for jocks" courses). Keep learning after 21, and take some career risks -- but stretch for experience, not just money. Do this especially early on, when the cost of failure is low.

Finally, remember that it's not all about you. The next couple of years are going to be bumpy, and one of the odd consolations is that it's happening to everybody. A financial or career setback is slightly less ego-bursting when you can blame it on a bum economy. By the same token, though, that means you ought to be humble about your success when the wind is at your back. The practical lesson is to live a bit below your means in the flush years to give yourself some backup.

But more important, back up others. My deepest regret today isn't how much I saved or what I did at work but how little I've pitched in - with money, with time - in our community. It's obvious to me now, when I'm anxious about what's ahead for my own family, how important it is for people to pull together. Wasn't that just as true a year ago, when plenty of folks were already hurting? I've learned this year that I owe much more. And I'm writing this down so the two of you can hold me to that.

Love, Dad

All you need is love ... and a talk about money

They say when you get married you need something old, something new, something borrowed and something blue. Well, that's cute and all, but what "they" (whoever they are) conveniently forgot to include is you and your better half should also have similar spending styles, or at the very least, be cognizant of what you're getting into.

There comes a point in every relationship where you'll need to have "the talk." No, this has nothing to do with baby names, sketchy in-laws or where you should spend future Christmases every year. It has everything to do with money. This talk should probably occur before you walk down any aisle, even before you spend countless hours choosing just the right shade of periwinkle blue for invitations.

According to a 2005 Harris Interactive survey of about 2,000 people, 29% of respondents ages 25 to 55 in a committed relationship admitted to lying to their partner about their spending habits. Yes, that's right, one-third of people surveyed felt compelled to lie about their finances! But wait, it gets even juicier: 33% of women were more likely than men (at 26%) to be dishonest. Lying in a relationship headed toward wedding bells and Pepsi cans dragging behind toilet-papered limos is obviously not a good sign, so be the savvy money vixen you are and instigate "the talk!"

Hopefully you two have already discussed your childhood, whether you were raised with or without allowances, first jobs, etc. (If you haven't touched on this stuff yet I'm going to go out on a limb here and say maybe you're being a little rash to jump the gun and elope to Vegas just yet.) Once you exchange core financial tenets, telling each other your financial goals is really where the magic starts to happen. Kick off your Christian Louboutins, pop open a bottle of champagne (after all, now is the perfect time to celebrate your union!), set the mood with some Ella Fitzgerald and get comfy -- it's time to make your romance ebb with visions of monetary goals and mutual budgets!

Each of you make a list of 5 to 1o financial goals you hope to accomplish, such as buying a house, buying a Porsche, or saving money for an early retirement. It's all so romantic, isn't it? Now compare and discuss your lists and touch on how you'll meet your combined goals. How much would you need to set aside and invest every year to afford that Porsche? How many years would it take? This gives couples realistic goals to financially strive for, instead of being dumbfounded when your other half comes home with a receding hairline and a Maserati, thanks to an insatiable mid-life crisis. Okay, maybe your financial talk won't cure your husband of any potential baldness, but you get the picture.

While I think that similar budgeting techniques aren't a make-or-break indicator of whether you two lovebirds were meant to be -- many would argue otherwise, though -- it is an important, rational way of prophesying the obvious. If Rock spends each paycheck on fancy martinis and cigars, while Doris saves most of her paychecks for a down payment on their dream house, you can clearly see why the couple's pillow talk would quickly fizzle.

You'll see when discussing finances that one of you will probably be the "spender," while the other more often than not is the "saver." There should be no negative stigma associated with either role, but it's important to see who's who, and how each of you will compensate on your long journeys to the middle. And if you just can't understand your fiance/boyfriend/husband's obsession with Wii video games, don't lose your cool! It's not ladylike, after all. Stay classy and perhaps suggest a "play money" account that either of you can dip into for the occasional shopping spree, facial, or video game purchase. No scrutiny allowed, though! We may get our kicks with a relaxing day at the spa, but that can be just as foreign to our Wii-loving Loves as their video game habits are to us girls. (This "play money" account should of course be added to after you've first saved a portion of your paycheck in a 401(k), an IRA, a gym sock under the mattress, or any other way you're amassing your wealth. There's a reason why it's called "play money.")

Which also brings me to my next point. While it's always fun fantasizing about the future estate you two buy at some point down the road, it's important to talk about how you'll get there, via savings plans you two come up with. These can include IRAs, 401(k)s, mutual funds, savings accounts, stock market investments ... anything, quite frankly. (Maybe not anything -- you may want to hold off on giving any weight to infomercials promising you millions based on pyramid schemes. Trust me.)

After you've covered your pasts and futures, focus on your present, such as credit cards, existing checking accounts and debt. Although I've never believed in separate bank or credit card accounts in my relationship -- hey, if he's going to be married to me, he's got to handle all of me! -- I do know many couples who like their space. If this sounds like you, be sure to let him know and vice versa. Further, do the two of you have a massive amount of combined debt? How are you planning on paying it off without resorting to desperate Bonnie and Clyde tactics? (Hint: More savings, less bank holdups.)

And last but not least, don't forget to discuss bills, the simplest financial matter that many tend to overlook when planning for the big day and beyond. Do you each pay off your bills in a timely fashion? This and other questions surrounding bills (from the big ones such as house payments and rent, down to the smaller ones such as electricity and cell phone payments) are inherently important. It's never fun for one person to be the organized bill payer, and the other to lackadaisically "forget" about being punctual with payments. This usually adds to resentment, anger, and all those other feelings that speed up the horrid frown-line process.

Honesty really is the best policy, especially when discussing your financial future. So relish it just as you would picking out the perfect fondue pot for your wedding registry. It may take time and patience, but in the end it's a melting pot that can last a lifetime!

A Brief History of the Subprime Mess and Mortgages

I was recently asked what "this whole subprime thing" is all about. It dawned on me as I was telling a truncated version of the debacle that if more people knew just a bit more about mortgages before buying their now-foreclosed homes, this whole credit meltdown might have been avoided. (Blame also goes to the banks, for okaying people who were unqualified to take on such large loans, but that's beside the point.)

And so, before I delve into the mysterious world of mortgages, here's a brief history of the subprime mess, in 30 seconds or less:

It all began in the heyday of the early 2000s, when RAZR flip phones were the latest high tech gadgets, Britney was beginning her descent into the maelstrom and 9/11 reminded many that safety was an illusion. During this time, swarms of Americans took advantage of broker-approved "easy" mortgages that lacked the stringent requirements of mortgages of yore. People banked on the hope that future job raises would occur to cushion monthly mortgage payments and U.S. employment rates would continue to prosper.

But as we all know, when it comes to matters of money, banking on faith and hope alone is never enough! You know how credit card companies try to rope you in with deals screaming "0% APR for 6 months!*" and after closer inspection of the asterisk, you see after six months that your APR balloons up to 19% per month? Well the same kind of thing happened with many mortgages. Lower initial interest rates began to soar while unemployment began to unexpectedly rise. People began to default on their loans, either by losing their jobs or lacking sufficient income, and banks began to repossess homes, which resulted in mass foreclosures across the country.

Say you're paying $1,200 per month on your mortgage, and spending instead of (ahem!) saving on new cars or giant HD flat-screen TVs -- hey, you own a home, you need to buy stuff to go with it, right? Life is good till you realize that you are among a bunch of people who are going to be laid off at work. Now add to that a ballooning mortgage interest rate that you were planning to pay off with some fantasy future raise, and credit cards that you maxed out from overspending. Oh, and guess what? By 2005, house values are in a nosedive and your home is worth drastically less than you bought it for.

This is where a resounding "Crap!" was heard across America. With no savings built up, you've dug yourself into a hole so deep not even Beatrix Kiddo (a la Kill Bill) could climb out of. The debt dominoes fell, leaving a trail of woe across the country, and there you have it -- the 30-second history of the subprime mess. Phew!

Now that you're a subprime guru, your first lesson in Investing 101, or what I like to call "I want to buy a home but I know nothing about the process," is mortgages, or the heart of darkness within the bizarre world of investment banks, credit ratings and foreclosures.

A mortgage is type of loan that is specifically used to buy property (aka a house!). The house you buy with said mortgage is used as a collateral, or guarantee, for the amount you've borrowed against it. Don't have a dime to your name but still have $150,000 left on your mortgage? Then your house will be taken from you to repay off the existing debt on it.

There are a myriad of mortgages out there, but the most common are:

• Fixed-rate mortgages -- Or loans where the interest rate is fixed for the entire term of the mortgage (usually 15 or 30 years). This is my favorite type of loan, it's steady and less risk-adverse then its brethren.
• Balloon mortgages -- Loans where the interest rate is set for a given amount of time and then the entire payment of the loan is due at the end of that time.
• Adjustable-rate mortgages (ARMs) - Loans where the interest rate can change and fluctuate as the prime or standard rate (set by the Federal Reserve) changes. (This is very risky since you can't be 100% sure which way a rate will go.)
• Interest-only mortgages -- Loans where the interest only (hence the name) has to be paid off in the beginning, resulting in a very low initial monthly payment that hinges on the hope that property values will keep rising. Still with me? By using this loan, many people could buy larger homes they wouldn't have been able to afford otherwise. When home values tanked, they defaulted because their houses were worth much less than their loan price. Home owners couldn't grow equity over the time they invested in the house.

Just by looking at these four common mortgage choices, you can quickly see which ones -- balloon mortgages, ARMs and interest-only -- might have fabulous initial perks, but are the riskiest and were the culprits in "this whole subprime thing." It's marvelously simple, isn't it? And you don't even need a suit and a finance degree to understand it!

You generally get a mortgage by divvying up a down payment, which is usually between 5% to 20% of the loan total. See how this whole "saving" phenomenon I keep raving about comes in handy? Remember, chickadees, the larger the down payment, the more you win because of the decreased amount of interest you have to pay overall. It's just like paying off a credit card bill with much more than just the minimum payments, so you don't get stuck in the endless cycle of paying off interest on the money you borrowed. And the cherry on this ice cream sundae of down payments? If you put down 20% or more on the loan, you're given a "get out of jail free" card of sorts to not have to carry mortgage insurance, which saves you tons of money. (I knew those long games of Monopoly came in handy for something!)

So you see, now, why saving is so very important. When the debt collectors come a-knockin' and you've just gotten notice you're "not needed anymore" at work come Monday ("the company thanks you for your loyal service over the last decade," though), you'll be happy you were insightful enough to sock away savings and plan for all of life's little catastrophes, subprime or not!