Before we finish up on Flat Taxes for 2022, and look at some personal finance reminders, there are a few things that got my attention this week. Of course, as I have often written, many times these things are old news by the time the column actually runs on Sundays.
First, as I have often indicated, too many people in this country have not saved and do not save enough for a retirement with dignity, and the largest increase in individual bankruptcy filings before the pandemic was for people 65 and older, because too many had not saved enough for retirement, had not budgeted realistically in retirement, and were still living above their means with credit cards. An acknowledgement of that credit card component is contained in a Reverse Mortgage commercial I finally focused on this week. It made clear that it was for “older homeowners,” but, also, that one thing you could use the proceeds for was to pay off high-interest rate credit cards. The financial industry knows about the credit card problem in this age group and markets to it.
Speaking of reverse mortgages, we have discussed them in the past, but here are some possible downsides to look for, according to get.askmoney.com. It is why you need trusted legal advice before entering into such a mortgage. First, you may not be able to refinance the loan; there are usually high upfront fees, higher than those for a refinance; and the interest rates, which may be adjustable and subject to interest rates changes, are generally high. Second, they may have a higher risk of foreclosure; you may not be able to move, even into a nursing home, without paying it off; and there could be spousal issues, if you pass away and your spouse was not at least 62 when the mortgage was entered into. Each mortgage is obviously different, but these are some issues to be aware of.
Second, I needed some replacement 123/3 volt lithium batteries for my alarm system, so I went out to do my usual “comparative/ unit prices shopping,” something you need to perfect in 2022, if you are not already committed to it. At a local hardware store one was $9.50, but a two pack was $14.99 (a $7.50 unit price). At Home Depot (even without my veterans discount), a two pack was $12.97 (a $ 6.50 unit price); a six pack was $20.99 (a $3.50 unit price); but a 12 pack was $29.99 (a $2.50 unit price, a great deal if you eventually need 12). By the way, a two pack on Amazon was $11.99 (a $6 unit price, without shipping). I went with the 12 pack at Home Depot (a $2.25 unit price with my discount), and I will use them.
On the subject of Flat Taxes, some form of Hybrid Tax, and a Goods and Services Tax, I wish there could be a series of panel discussions on television the American public could watch and learn about the pros and cons of each one, and how they might actually be affected by them as a taxpayer, given things like their income level, whether they itemize on their income taxes, whether gift and/or estate taxes are an issue for them, etc.
I can remember years ago seeing a panel of experts on PBS discussing solutions to cure the long-term financial problems of the Social Security System. They generally agreed from the start that increased taxes on some entities, and reduced benefits for some, was the winning solution, and then they just got into their individual preferred combinations of taxes and benefits. It was amazingly constructive and enlightening. There were no politicians, just academics.
Perhaps for the Flat Tax, a Hybrid, and a GST, there could be three panels over three weeks. One made up of non-partisan, academic economists, a second of politicians, and a third of behavioral economists, to retool us for any possible changes. Maybe PBS could do it. It would be a great pubic service, and it would keep me quiet.
Let’s finish up with a few of those personal finance reminders for 2022.
First, given the likelihood that interest rates will increase as many as three times in 2022, it is important that you have good credit if a loan is in your 2022 future. Perhaps not by a lot, but loans like car loans, private student loans, and mortgages will be more expensive, so the better your credit, the better your chance of qualifying and getting a favorable interest rate. So, be sure to obtain those three free credit reports, spread out over 2022. Also, if there any errors in them take the necessary steps to correct them. In addition, if your credit score is not as high as you would like, now is the time to address it. We have talked about it in the past, but three things that you can do are: pay all of your bills on time; if you have credit card debt, which I hope that you will pay off, or at least reduce, make sure it is no more than 30% of your available credit; and work on reducing your overall debt to income ratio. There is plenty of information on the internet to help you boost your credit score.
(By the way, here is a little credit score humor. A man says that he had his identity stolen, but it all worked out ok. The thief returned it because his credit score was so low.)
Second, with inflation continuing and increasing in some areas, be proactive about being aware of reports on products that look like they will be increasing for sure, and then consider stocking up, if it is possible. So, for example, I have stocked up on instant coffee, since coffee prices look like they will be going up, yet again.
We will look at a few more reminders next time.
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo.