This week we’re sharing tips on establishing an emergency savings plan, which IRA plan to choose for an inheritance, and what to know about a credit report. Here’s what you need to know now.

  • Starting an emergency fund can seem overwhelming, but Sarah Winfrey from Business Insider shares a few tips that emphasize that you’re never too old or too young to start saving. To begin the process, Winfrey suggests paying off any debt and saving what’s left over, then analyzing your budget to cut any unnecessary spending. Regardless of your budget size, it is important to avoid living paycheck to paycheck and continue setting money aside. Ideally, an emergency fund should be three to six months’ of living expenses.
  • Many think inheriting a Roth IRA is better than inheriting traditional IRA, but total payout depends more on who is going to be receiving it.  Robert Powell at USA Today points out that, in the case of a Roth IRA, the original owner could have paid more taxes upfront than the recipient would have had to pay if he or she had received a traditional IRA.  A general rule of thumb is to look at the income tax bracket at the time of distribution.  For a Roth, it should be the same or higher for the person inheriting. For example, if your kids are in a higher tax bracket (business owner, doctor, etc.) it is smart to go with a Roth, but if they are in a lower tax bracket, a traditional IRA might be the better option.*
  • A credit report shouldn’t be intimidating, and it should remain top-of-mind when planning financially. Lauren Gensler from Forbes shares a few things everyone should know about building and keeping a good credit score. She explains that credit scores are used to verify whether or not you can get a loan, aid in determining interest rates, and are used by employers and landlords. While credit reports were previously harder to obtain, many credit card companies and online services provide credit scores for free. In fact, keeping an eye on your report allows you to scan it for errors, as it’s your responsibility to get them fixed.

*All tax information provided in this blog post is intended as a convenient source of information. This information is general in nature, is not complete, and may not apply to your specific situation. Please consult with your own tax advisor regarding your specific tax needs.

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