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Financial Guide To Breaking Up: How To Divide Everything From Belongings To Bank Accounts

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Breaking up with someone you’re not married to can feel just as traumatic as an actual divorce, especially if you’ve been cohabitating. Emotions aside, you have to figure out who gets the apartment, that awesome sectional you both saved up for, maybe even the dog.

In fact, breaking up can be expensive if you’re not prepared. Fortunately, we’ve got you covered. Here are five steps you should take to protect your finances after a split.

1. Remove your ex from bank accounts and credit cards.

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Ask your bank to change account ownership to one name.

Lauren Anastasio, a wealth advisor at SoFi, said you should start by taking stock of any accounts that might have shared access. For instance, if you opened a joint savings account together, you’ll need to decide whether to remove one person’s name from the account or close it altogether.

“The most important thing here is to get the money split up and separated ASAP, particularly if you’re still in an amicable phase and both of you are wishing to be fair,” said Kelley Long, a certified public accountant, financial planner and member of the American Institute of CPAs Consumer Financial Education Advocates.

She noted that a time may arrive when at least one of you loses patience. “That can quickly devolve into vengeful behavior, including cleaning out financial accounts,” Long said. If both of your names are on the account, whatever funds are in it are considered to belong to both of you equally. So if your ex decides to withdraw it all, you’re pretty much out of luck ― unless you want to file a lawsuit.

“Same goes for credit cards,” Long said. “If either of you made the other an authorized user on a credit card account, revoke that as soon as you can.” Long noted that you can often do so online. But keep in mind that if your ex had access to the credit card number, removing them as an authorized user might not be enough since they could still use it to make purchases online or over the phone.

“If you’re at all concerned about malicious use of your account information, ask your card company to change your account number as well,” Long said. Just don’t forget to update any recurring payments.

In most cases, it’s a better idea to have your bank or card issuer update the account ownership rather than close the account. “Closing credit cards could impact your credit score, and liquidating investment accounts will likely come with tax consequences,” Anastasio cautioned.

2. Change the passwords on subscription accounts.

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Cut off access to Netflix, Amazon and other services.

In addition to financial accounts, you’ll want to be sure your ex doesn’t have access to other types of accounts in your name, such as a cell phone or subscription service tied to a credit card. Even if you believe they’ll be mature and respect your privacy after the breakup, it’s not worth the risk.

“You don’t want to be surprised to find that your ex furnished their new apartment with your Prime account or ran up a huge data bill,” Anastasio said. “Take steps immediately to restrict access to everything, down to your Netflix account.”

3. Decide how to handle real estate.

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Keep in mind that real estate law varies by state.

It’s less common for unmarried couples to buy real estate together than it is for married couples. And when unmarried couples do take that plunge, there’s usually some sort of contract in place. Even so, the issue of dividing real estate does sometimes come up amid a breakup.

“Real estate is a difficult asset,” said Dana Stutman, a matrimonial attorney and founding partner of Stutman Stutman & Lichtenstein in New York. If you hold any property jointly, you have to consider factors such as who contributed to the down payment, who paid for renovations, who’s been paying the mortgage and who has been spending money to maintain the property when determining who gets to keep it.

Even if the property is in one person’s name, the situation can be complicated if you’ve both been living there, and especially if children are involved, according to Stutman. She noted that landlord-tenant law can come into play in this case.

“There’s not much you can do about dividing real estate if you’re anticipating breaking up unless you already have a contract,” said Stutman. “I would see a real estate attorney in your state.”

4. Divide personal property.

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Figure out an equitable arrangement for splitting up everything from furniture to pets.

There are a few ways you can go about splitting up shared possessions such as furniture and household items. A good rule of thumb is that if it was yours before you were together, you keep it. And if it’s a gift, it belongs to the recipient.

However, these aren’t hard and fast rules. If you’re able to have a calm and amicable discussion, consider dividing possessions according to who will use and enjoy them most. “My ex and I traded several items when we broke up,” Long said. “He had an attachment to some furniture that used to be mine and I really wanted a rug he’d purchased, so we swapped and called it even.”

If there’s an item that you both want and you can’t come to an agreement, the best course of action is to sell it and split the proceeds.

Keep in mind that when it comes to pets, the law views them as property, even if you treat them like your children. “There’s no custody of pets,” Stutman said. This can be a particularly touchy subject to deal with, but try to do what’s in the best interest of your fur baby, even if that means letting them go so they can have a roomier yard or more attention.

5. Change your mailing address.

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Ensure you receive important financial documents.

Finally, if you’re the one moving out, make sure you update your address as soon as possible so that you receive important communications and statements from financial institutions.

“If you’re not sure where you’ll land, it’s worth it to rent out a P.O. box for a while so that you can ensure you’re getting all of the mail coming to you,” Long said. “This was a point of contention with my ex… There were important pieces of mail that I missed because he decided it was time to move on before I’d had a chance to update addresses with everyone.”

Dealing with the financial side of breaking up

“When it comes to splitting up after many years together, the good news is that it’s most likely less messy than when you’re married,” Long said. “At a minimum, you (hopefully) don’t have to get lawyers involved.”

However, when it comes to dividing shared possessions, including money, the same concepts often apply. “Fair doesn’t always mean equal,” Long noted.

In a perfect world, when you and your ex first decided to move in together and mingle finances, there was a very clear understanding between the two of you regarding who owns what, and what happens if you do split. Having a contract in place, similar to a prenuptial agreement, can accomplish just that, according to Stutman.

Of course, hindsight is 20/20 and you might not be so lucky to have the terms of your relationship laid out on paper. But you do have the law to guide you.

“The most important thing to keep in mind is that if you’re not going to be married… you’re not avoiding the application of law,” Stutman said. “You’re merely avoiding the application of matrimonial or domestic relations law.”

Stutman noted that laws surrounding shared assets vary by state, so it’s important to find out what rights and limitations exist depending on where you live. And if you do need assistance navigating the law, it doesn’t hurt to consult a professional.

“Paying for a [legal] consultation is worth every penny,” said Stutman, who admitted that it is quite expensive. “I get that,” she added, “but it’s only penny wise and pound foolish” to not seek such help. After all, even if you’re only talking about $10,000, it can be worth paying a few hundred dollars for an hour consultation to protect it.

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4 things kids need to know about money

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(NC) Responsible spending includes knowing the difference between wants and needs. Back-to-school season, with added expenses and expectations around spending, is the perfect time to not only build your own budget for the year ahead, but also to introduce your own children to the concept of budgeting.

The experts at Capital One break down four basic things that every child should know about money, along with tips for bringing real-life examples into the conversation.

What money is. There’s no need for a full economic lesson,but knowing that money can be exchanged for goods and services, and that the government backs its value, is a great start.
How to earn money. Once your child understands what money is, use this foundational knowledge to connect the concepts of money and work. Start with the simple concept that people go to work in exchange for an income, and explain how it may take time (and work) to save for that new pair of sneakers or backpack. This can help kids develop patience and alleviate the pressure to purchase new items right away that might not be in your budget.
The many ways to pay. While there is a myriad of methods to pay for something in today’s digital age, you can start by explaining the difference between cash, debit and credit. When teaching your kids about credit, real examples help. For instance, if your child insists on a grocery store treat, offer to buy it for them as long as they pay you back from their allowance in a timely manner. If you need a refresher, tools like Capital One’s Credit Keeper can help you better understand your own credit score and the importance of that score to overall financial health.
How to build and follow a budget. This is where earning, spending, saving and sharing all come together. Build a budget that is realistic based on your income and spending needs and take advantage of banking apps to keep tabs on your spending in real-time. Have your kids think about how they might split their allowance into saving, spending and giving back to help them better understand money management.

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20 Percent Of Americans In Relationships Are Committing Financial Infidelity

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Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from CreditCards.com. That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to CreditCards.com industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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7 Examples Of Terrible Financial Advice We’ve Heard

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Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of taxvanta.com, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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