Even the savviest savers sometimes overlook ways to keep and protect more of what they earn each year. Here are a few common errors from money.cnn.com and Money magazine that you can steer clear of so you’re not one of the clueless.
1. Failing to Check Credit
Everyone is entitled to one free credit report a year from each of the three major bureaus, yet John Ulzheimer of smartcredit.com tells Money that only 4 percent of those reports are claimed. Discovering errors could prevent you from paying too much for a loan or being denied a credit card or even a job. To get them, go to annualcreditreport.com.
2. Missing College Aid
According to Mark Kantrowitz, publisher of finaid.org, a lot of people don’t realize that if they applied for financial aid and were denied it for their first child, they can reapply and perhaps qualify once their second is ready for college. (One good way to figure out what colleges think you can afford is to visit finaid.org/calculators.) Missing the boat for aid and scholarships is another common mistake — different schools have different deadlines. To make sure you leave nothing on the table, reapply for aid annually and start researching scholarships in the fall before your child enters college.
3. Avoiding a Trust
If you assume that trusts are only for the wealthy, you assume wrong. Even if you don’t have millions to bequeath, you can benefit from a revocable living trust, which will save your heirs time and money by keeping your assets out of probate. Once your lawyer sets up a trust, don’t forget to transfer title of assets into it, says Justin Fulton, a financial advisor with Signature in Norfolk, Virginia.
4. Skipping Tax Implications
Investment gains are great, but they’ll be reduced by the amount of your tax bracket, so they should be managed carefully, says Frank Armstrong, CEO and founder of advisory firm Investor Solutions. You can also offset capital gains by reviewing your portfolio in the fall and dumping any losers before year’s end. By selling them for less than you paid, you can then deduct the loss from your capital gains to lower your taxable earnings.
5. Investing With Insurance
Beware of buying cash-value life insurance policies for retirement funding. While the tax-deferred saving feature might be tempting, the steep fees can eat away at so much of your returns that it may make more sense to invest the money on your own, says insurance consultant Glenn Daily.