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Auto Insurance Myths Exposed

Content provided courtesy of USAA.

  • The color of the car affects my insurance rate. Not true. Rates are based on safety features, the cost of replacements or repairs and other factors the driver brings to the table. So paint your ride any color you like.
  • I have no-fault insurance so that means it’s not my fault. Duh! Wrong. No-fault insurance means you only deal with your insurance company, regardless of who is at fault.
  • My friend wrecked my whip, so his insurance will cover it. Nope. The policy follows the car, not the driver. Think twice before lending out yours
  • A ticket means my rates will go up. Not necessarily. If it was for something minor and it’s your first, the rates might not increase. Maybe slow down, and take a defensive driving course.
  • I already have auto insurance, so my new car is automatically covered. Seriously? A shiny new car needs a shiny new policy.


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5 Rules for Buying a House (And How to Bend Them)

Buying a house is a huge financial decision with far-reaching implications.

Even so, I think the financial advice rules to determine if you’re ready to make the leap to homeownership are pretty straightforward:

  1. Have an emergency fund in place (three to six months’ worth of expenses is ideal).
  2. Create and follow a budget (based on post-purchase expenses).
  3. Save up a big down payment (20% is ideal).
  4. Have confidence in your job security.
  5. Be able to keep the house for a long time (at least five years).

Unfortunately, even though these rules aren’t complicated, they aren’t followed very often. People — and in the interest of full and fair disclosure, I’d include myself in this group — buy houses all the time without following each of these “rules” to the letter, and their financial situations don’t fall to pieces as a result.

So does that mean these rules are useless? I don’t think so. In fact, I think they’re actually a great set of guidelines to follow if you’re trying to both buy a house and stay out of financial trouble. With this in mind, here are my thoughts on why each rule is important, as well as my thoughts on when and how far you can bend them.

Rule 1. Have an emergency fund.

Having money set aside to cover life’s unexpected expenses is critical when you own a house. Why? Because homeownership comes with an almost never-ending supply of expenses, many of which are unexpected and large.

To decrease the chances of your dream house turning into a financial nightmare, it’s important to have an emergency fund in place before you buy one, preferably three to six months’ worth of your committed expenses. This is above and beyond what you need for a down payment, closing costs and move-in expenses.

Can you bend this rule? Yes, just don’t break it completely by having nothing set aside. And don’t bend it for too long. As soon as you make the decision to buy, start stockpiling as much cash as you can. If you don’t have some money set aside to which you regularly make additions, you’re just asking for trouble. Home-related expenses are regularly measured in thousands of dollars, so the more cash you have on hand, the better.

Rule 2. Create and follow a budget.

Besides your mortgage payment, you’ll also have real estate taxes, homeowners insurance, utilities, maintenance expenses and possibly homeowners association fees. Also, since you’ll be taking on a mortgage debt, you may need to increase or buy new life insurance. The bottom line is that things can easily get away from you if you don’t take the time to build a solid budget for your new digs.

Can you bend this rule? Yes, but do so at your own peril. Working out a budget before you buy is essential to determine if you’re going to be able to make ends meet with the big change. If you don’t make the effort to add up the numbers and slightly underestimate what you can actually afford, you’ll probably be able to scrape by. But if you’re way off, you’ve just turned your exciting home purchase into a lifetime of not-so-exciting financial challenges.

Rule 3: Save up a big down payment.

Even if you can get a loan that allows you to get by with little or no down payment, still making a down payment (or at least having the money available) is typically a good idea. This way, if the real estate market drops and you end up needing to sell the house before the market recovers, you’ll have equity in the home or money available to cover the shortfall, and hopefully avoid getting trapped in a situation where you owe more on your mortgage than your property is worth.

Can you bend this rule? Yes, especially if you qualify for certain types of loans. Just understand that you’re setting yourself up for some steep financial challenges if you have to sell your house and it’s not worth enough to pay off your mortgage and all of the associated selling costs. A situation like this can force you to rent the house instead of selling it, stop you from buying another home, and force you to sell other assets to generate the extra needed cash. In other words, you could be facing a huge amount of stress in a very short period of time. The more you put down upfront, the less likely this is to happen.

Rule 4: Have confidence in your job security.

For many homeowners, more of their take-home pay is consumed by household expenses than any other category in their budget. Add in the long-term commitment of owning a home, and it becomes clear you need to be confident in the sustainability of your earning ability. If you’re a two-income family, try to limit the purchase to a house you can afford on one income. That way you’ll have financial wiggle room, especially if one of you loses a job.

Can you bend this rule? No.

Rule 5: Be able to keep the house for a long time.

For now, at least, the days of flipping houses for a quick profit appear to be over. So if you can’t plan to own a house for at least five years or longer, you might want to wait. For military personnel with three- or four-year assignments, buying a home rarely makes sense. Instead, try to bank some of your basic allowance for housing and then buy when the time is right for you.

Can you bend this rule? Not unless you’re in one of the very rare housing markets in the country where prices are appreciating more than 4% to 5% a year. Your local realtor should be able to help you get a better understanding of real estate price trends in your area of interest

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8 Budgeting Tips for Military Families

From credit card debt to frequent moves, military families face financial challenges that have unusual dimensions from civilian families. Here are tips that will help your family save and budget for your daily life and your long-term goals. By tracking your spending and creating habits to contribute towards retirement, you’ll be prepared to budget like an expert and save like a boss.

Track Your Spending

Many people say that they don’t know where their money goes. Empower yourself by tracking where your money is being spent. Whether you keep track of your spending by writing down your expenditures, keeping a spreadsheet, or using a website that tracks all of your accounts, it’s important to know where your money is going. Once you know, it’ll make it a lot easier for you and your family to plan and budget for the future.

Get Rid of Your Debt

Military families are more likely than civilian ones to carry significant credit card debt, as they have unique challenges. All of those moves can definitely add up! Some military families also have student loan debt, which can affect your credit score. So what to do? Make it a regular habit to pay off a portion of your credit card debt beyond the minimum payment. If you can pay off even an additional $25 or more per month, your debt will steadily decrease.

Pay Your Savings First

Savings often come in last when you’re budgeting, after bills and expenses. Let’s turn this around. When you’re budgeting, make sure you factor in your savings as though it was a bill. After you’re paid, “pay” your savings account instead of waiting to put in what’s left over.

Build an Emergency Fund

The best thing you can do for you, your family, and your peace of mind is to build an emergency fund. That way you can roll with the rainy days when they inevitably come. As with paying your savings first, make paying your emergency fund first a priority. Most experts recommend saving at least 3-6 months worth of expenses. If that seems overwhelming, try to get to $1,000 first, and you’ll have a buffer.

Creating Habits with Automatic Deductions

Dealing with personal finance requires discipline. Make it easier on yourself through automatic deductions. To really get your savings and emergency fund going, set up separate accounts outside of your main checking account. Then, have regular amounts automatically deducted from your paycheck. Let’s say you automatically deduct $50 a week into a savings account. By the end of the year, you’ll have $2,600. Not bad for $50 that you probably wouldn’t even miss.

Live Off Of Last Month’s Paycheck

Once you’ve built an emergency fund of 3-6 months, you’re ready to level up to the next part, which is living off of last month’s paycheck. The way to do this is to save the equivalent of one month’s paycheck outside of the emergency fund or your savings. You don’t need to do it all at once, as building up that amount will take time. But once you do, you won’t be living paycheck to paycheck. For more information about how to make this work for you, read this article.

Contribute to the TSP

With automatic enrollment and simple choices regarding investments, the Thrift Savings Plan has been called “a model for all 401(k) plans.” Compared to civilian 401(k) programs, the costs of administering the plan are much lower since the investments are all index funds that track the market rather than being actively managed. That results in greater savings that are passed directly to you. Since all members of the armed forces can contribute, start now if you haven’t already. Even if retirement is a long ways away, the long tail of compound interest means you’ll be very grateful to your younger self for making such a sensible decision.

Take Advantage of Military Benefits

Being in the military comes with many great benefits, from free healthcare to discounts to the GI bill. Make sure you know what kind of benefits come with being in the military. Start here with our section covering benefits in depth so you and your family can start investing in your financial futures

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What Homeowners Insurance Does Not Cover

A homeowners insurance policy offers basic protection from the most common disasters. But because it’s built with the average American household in mind, your policy might not account for some risks associated with your location or cover all your possessions.


Flood insurance is mandatory when you have a mortgage on a home in a high-risk flood area. Even if you live outside a high-risk area, don’t make the mistake of assuming you’ll never experience a flood. In fact, nearly 20% of flood insurance claims come from areas of moderate to low risk, according to the National Flood Insurance Program. Whether it’s a flash flood or just a few inches from a storm, water can cause massive damage to your home and belongings. If you’re not financially prepared, the effects can be devastating. The National Flood Insurance Program has joined with insurers to offer flood insurance. Premiums, which vary depending on where you live, start at just $129 a year.


Basic homeowners insurance policies don’t offer earthquake coverage. Fortunately, in many states, special earthquake coverage can be added to your policy.

Anyone who has seen the aftermath of an earthquake understands the devastation one can cause. The extensive shaking and cracking can demolish entire buildings, destroying your home and possessions. If you live in an area prone to earthquakes, consider strengthening your policy with this coverage.

Home Businesses

Your homeowners policy provides limited coverage for business equipment. Also, you are not covered for liability related to your home business — if, for example, someone gets food poisoning through your catering business or if a student visiting your home trips and breaks an ankle while leaving a piano lesson. If you run a business from home or have expensive office equipment, you may need additional coverage.

Valuable Personal Property

Homeowners policies can offer sufficient coverage for most personal property, but there are limitations. Valuable personal property insurance can take over where homeowners policies leave off. VPP insurance can provide coverage for losses due to fire or theft. It also covers damage or if an item gets lost — say a stone falls out of a ring or the ring falls down the drain. If you own valuable items such as artwork, jewelry, musical instruments, firearms, furs or silver, consider obtaining a VPP policy.

Broader Personal Liability

Homeowners policies offer limited coverage for liability protection. Given the litigious world we live in, an umbrella insurance policy can provide additional peace of mind. An umbrella policy helps protect you and your earnings if someone, such as a baby sitter or handyman, is injured at your home. It also helps provide protection if you (or a family member) are found liable in a serious automobile accident.

This type of insurance can provide extended liability coverage beyond your home and auto policies. Consider shielding your personal financial assets with additional liability insurance.

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Use your VA loan benefit

No down payment, lower credit score – get approved anyway. Take a second look at this surprising program


Air Force Tech Sgt. Rhonda Stockstill and her husband, Lendle, in front of the home they bought with a VA loan. (Scott Schaefer)
After a tornado ripped through Air Force Tech. Sgt. Rhonda Stockstill’s house in Moore, Oklahoma, in May 2013, she and her husband began the hunt for a new home, thinking they would go through their previous lender to get another VA home loan. That lender told them they would be better off going with a conventional loan that would saddle them with a $160,000 down payment and closing costs. The mortgage company “was making us jump through hoops. We were really discouraged,” Stockstill said. After about four months of trying to work with the previous lender, Stockstill found another, Veterans United, which helped the couple secure a Veterans Affairs-backed loan within about 30 days, with a far lower down payment and a lower interest rate than what their previous lender had quoted. The VA home loan program has guaranteed more than 20 million VA loans in the 70 years since its creation. Numbers fell during the middle of the last decade, coinciding with the rise in conventional loans to people who would not be approved now. But since the subprime mortgage bubble burst and credit rules have tightened across the industry, VA loans are back on the rise. In 2013, VA guaranteed the highest number of loans in the program’s history — 629,312. Yet it’s clear that there are misperceptions about the program. Son Nguyen, who heads the nonprofit Veterans Association of Real Estate Professionals, notes that there are 1.9 million active VA-guaranteed loans, but more than 1 million troops and 22 million veterans are eligible. Conventional loans may make more sense in certain circumstances, says Chris Birk, Veterans United’s director of VA loan education — like if you have excellent credit, sizable assets and plenty of cash for a 20 percent down payment. But the reality is, for many service members, the VA home loan program is the most advantageous, Birk said — a benefit that can save money for military and veteran homeowners. And its features were designed not only to put veterans in a home, but to make sure they can repay the mortgage and stay in it, said Mike Frueh, director of VA’s Loan Guaranty Service. What’s more, VA has improved the program to make its part of the loan process faster, easier and more transparent. Like the Stockstills, some veterans encounter lenders and real estate agents who try to steer them away from their VA home loan benefit, for a variety of reasons, many of which are misperceptions. Some reminders, little-known facts and tips: ■ Active-duty troops as well as veterans who have left the service qualify, regardless of whether they served in combat. About 17 percent of VA loans went to active-duty troops in 2013. ■ The benefit never expires and can be used multiple times. ■ The VA home loan is the only major type of loan that does not require a down payment as long as the sale price doesn’t exceed the appraised value; 89 percent of VA loans are made without a down payment. In essence, the VA’s guarantee takes the place of a down payment. ■ The program doesn’t require private mortgage insurance, an extra monthly expense when a borrower is not making a down payment of at least 20 percent. A down payment of 20 percent on a $200,000 loan would be $40,000. “By not spending that $40,000, veterans have money in their pockets to take care of unforeseen circumstances,” Frueh said. ■ Veterans usually can get their VA Home Loan Certificate of Eligibility within seconds at www.ebenefits.va.gov. But the lender often can do that for you. In 2013, 463,303 electronic certificates of eligibility were issued. ■ VA does not require a minimum credit score. Instead, the requirements are based on whether a borrower can repay the loan. However, lenders do impose additional requirements for credit scores. “Our minimum credit score is typically 620,” said Veterans United’s Birk. “Generally speaking, 620 is a pretty good barometer. That falls into the ‘fair’ [category], which is a step below ‘good.’ And it’s about 100 points lower than credit scores needed for a conventional loan.” “There’s great misperception that you need sterling credit to use this program. But it was created to level the playing field,” Birk said – to help veterans who may not otherwise qualify for mortgages. ■ Veterans generally pay a funding fee of 2.15 percent of the purchase price for a VA loan. For example, with no down payment for a $200,000 loan, a funding fee of 2.15 percent equals $4,300. For those who were or are in the National Guard or reserves, the funding fee is 2.4 percent. The fee is reduced for those who make down payments of 5 percent or more. ■ Some VA borrowers don’t pay the funding fee at all. They include veterans receiving VA compensation for a service-connected disability or those eligible to receive it if they weren’t receiving retirement or active-duty pay, and surviving spouses of veterans who died in service or from a service-connected disability. The VA also has limitations on what lenders can charge borrowers for a loan, to make sure the veterans don’t pay unnecessary fees, Frueh said. Conversely, the VA allows a seller to pay up to 4 percent of certain closing costs, including the paying the VA funding fee. ■ VA doesn’t lend money; it guarantees the loans made by about 1,500 commercial entities such as banks, credit unions and mortgage companies, although the top 11 lenders account for about half of all VA loans. Lenders, not VA, set interest rates, discount points and closing costs, and the rates likely vary among lenders. It’s best to shop around. But overall, average interest rates on VA loans trend even a little lower than those on conventional loans, Birk said. ■ VA home loans can be used to buy a home or a condominium unit in a VA-approved project; to build a home; to simultaneously purchase and improve a home; to buy a manufactured home and/or lot; and to make energy-efficient improvements. ■Veterans can use their VA home loan benefit multiple times. ■ The guarantee limits vary depending on the geographic area, based on the median home price. Generally, the limit is $417,000, but can range up to $1,094,625 in higher cost areas. This is not aloan limit — you can buy a more expensive house, as long as you can handle a down payment of 25 percent of the difference. For example, if the guarantee limit in your area is $417,000 and the house you want costs $500,000, it’s yours if you can pay $20,750 — which is 25 percent of the $83,000 diference – as a down payment. ■ The key is to work with real estate agents and lenders who have worked with VA loans. Tell them upfront that you’re a veteran. Ask questions about how many VA loans they’ve worked with. If the agent isn’t experienced and informed, it could cost you money and time, said Lorraine Santirosa, a real estate agent with Keller Williams SD Metro in San Diego. It could cost you time especially in finding a condominium, because condos must be VA-approved, she said, in order for the buyer to qualify for a VA loan. And if a lender doesn’t understand the rules and details of VA loans, “it could cause the deal to fall apart, or put the veteran in a loan at a higher interest rate.” ■ Do your own research at www.benefits.va.gov/homeloans, or call toll free 877-827-3702. For example, one veteran said he was told he had to have $2,000 or less in debt to qualify, but that is not a VA requirement for a home loan. Armed with knowledge, you can shop around for another lender. ■ VA allows veterans to lower their interest rate by refinancing their existing VA home loan, either through their current lender, if that lender agrees, or through any VA lender. ■ VA’s requirements help ensure that veterans have the financial ability to make their payments and stay in their homes — a major reason why VA loans have the lowest foreclosure rate among loan types, including FHA and conventional. Another reason, Frueh said, is that VA has about 150 staff members nationwide “whose sole job is to help veterans who are behind on their mortgage find a way to become current.” Last year, he noted, VA helped almost 74,000 veterans resolve their delinquencies and in most cases, keep their homes.

Financial institutions that did the most VA loans in 2013:

Lender Total loans Loan amount (billions) Average loan amount
1 Wells Fargo Bank 81,424 $16.8 $206,385
2 USAA 44,828 $10.6 $235,382
3 Quicken Loans Inc. 28,305 $5.8 $205,515
4 Freedom Mortgage Corp. 26,928 $6.3 $233,012
5 Mortgage Investors Corp. 26,614 $4.5 $169,720
6 Navy Federal Credit Union 25,991 $6.4 $246,549
7 Fifth Third Mortgage Co. 19,165 $4.4 $227,921
8 Mortgage Research Center 18,679 $3.9 $206,593
9 Bank of America 16,493 $3.3 $201,744
10 JPMorgan Chase Bank 16,445 $3.2 $195,442

Source: Veterans Affairs Department

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Lawmakers Reach Deal on VA Reform

Key House and Senate lawmakers have reached a deal that promises to end the partisan battle that late last week threatened to derail plans to get aDepartment of Veterans Affairs reform bill passed before Congress adjourns for the summer.

Sen. Bernie Sanders, I-Vermont, and Rep. Jeff Miller, R-Florida, who co-chair a legislation conference committee, will announce Monday “that an agreement has been reached to deal with both the short-term and long-term needs of the VA,” Sanders spokesman Michael Briggs said.

Sanders serves as chairman of the Senate VETERANS AFFAIRS Committee and Miller chairs the House Committee on Veterans Affairs.

Offices for both lawmakers released announcements on Sunday saying the two had worked through the weekend and made “significant progress” on legislation intended to hold the VA more accountable and recruit more doctors, nurses and other healthcare professionals.

The two sides have agreed to add $15 billion in emergency mandatory spending to the legislation, according to CQ Roll Call, which got hold of a summary of the agreement. The amount includes $10 billion to enable vets to get care from private providers and $5 billion to hire medical staff and upgrade facilities.

On Friday, Miller proposed $10 billion in emergency funding. Sanders had wanted $17.6 billion, a figure requested by Acting VA Secretary Sloan Gibson earlier this month.

In recent months, VA investigations prompted by whistleblower complaints have confirmed that the department has for years fallen far short of providing timely access to care for thousands of veterans. The investigation also confirmed systemic manipulation of patient data and secret appointment wait lists intended to conceal the scope of the problem.

Lawmakers have threatened to pursue CRIMINAL CHARGES against VA officials after investigations found dozens of veterans have died while waiting for care.

The Senate and HOUSE IN June passed bills intended to hold officials accountable, to include making it easier to fire problem executives and improve access to care by enabling more veterans to go outside the VA.

Lawmakers from the House and Senate veterans’ committees began conferring to come up with a SINGLE bill that could pass, but the work stalled, in particular over the $17.6 billion that Gibson said was needed to resolve the access problem.

Miller and other GOP lawmakers, as well as some veterans groups, said the VA offered no substantive documentation to back up the $17.6 billion figure.

Late last week, both Sanders and Miller released separate proposals for final legislation — Miller during a hastily called conference committee meeting that only Republicans attended and Sanders during a press conference attended by Democrats.

As the talks fumbled into bickering, there was concern that no deal would be reached before Congress goes on summer break.


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10 Back-to-School Deals for Military Families

As summer camps wind to a close and kids make their final splashes at the pool, parents have one thing on their minds: back-to-school shopping.

But when you add up the cost of all the items on your kids’ classroom supply lists, backpacks, clothes and shoes, back-to-school is expensive! The following is a list of discounts to help military families get the kids off to school in style while staying within your budget.

Make sure to visit the Military.com Discounts Center for more discounts and articles. And sign up for the Military Deals and Discounts Newsletter to get even more discounts and information in your inbox on how Military Families can save big.

1. Operation Homefront’s Back-to-School Brigade

Operation Homefront is partnering with Dollar Tree to collect school supplies for military children as part of their Back-to-School Brigade. Dollar Tree stores will collect supplies from July 7 to August 14, 2014 and then Operation Homefront volunteers gather and distribute them to military children during the back to school season in August and September. Click here for more information and to find programs in your area.

2. Tax-Free Shopping Days

For a few days each year, some states offer a “sales tax holiday” right around back-to-school time when shoppers can buy specified items tax-free. This is a great way to save on back-to-school necessities like clothes, shoes, and other school supplies. To see if your state participates in the sales tax holidays, click here.

3. Clothing and Accessories

By the time summer is over, the kids have either outgrown all their school clothes or worn them ragged from vacation and camp. Update their wardrobe with new clothes and accessories using military discounts at All American Clothing Co., Banana Republic, Beyond the Rack, Claires, eBags, Fresh Produce, New York and Company, Old Navy, The Buckle and thredUP.

Does your student need new glasses or contacts? NEX Optical Shops are offering an eyewear special until September 16, 2014 when using a MILITARY STAR Card. And GlassesUSA.com offers a military discount, including 30% off all frames.

4. Shoes

No back-to-school wardrobe is complete without new shoes. So take advantage of the military discounts offered by Payless, Nike, Foot Locker, Adidas, Rack Room Shoes, Shoes.com, Stride Rite and Steve Madden.

5. Classroom Supplies

Most schools now expect parents to help stock classroom supplies like pencils, crayons, notebooks, folders, scissors, glue, and binders, as well as necessities like tissues and hand sanitizer. Find these supplies and use military discounts as Michaels, Jo-Ann Fabric, CVS andWalgreens.

6. Backpacks and Lunch Bags

Looking for backpacks and lunch bags? Pottery Barn Kids has an adorable collection of both, and they offer a 10% in-store military discount.

7. Tutoring and Test Prep

Does your child need a little extra help with homework and studying?Tutor.com, where expert tutors are online 24/7, offers free tutoring for military families.

Do you have older kids getting ready for college testing? eKnowledge donates their SAT and ACT College Test Preparation Programs to service members and their families. You pay only a minimal price per standard program to cover the cost of materials, processing, distribution and customer service. Click here to learn more.

8. Computers and Electronics

If you’re looking to buy a computer or other necessary electronics, check out the military discounts offered by Dell and Radio Shack.

Need tech support? Geek Squad and My Nerds offer military discounts as well.

9. Wireless Communication

AT&T Wireless, Boost Mobile, ntelos Wireless, Sprint, T-Mobile, US Cellular and Verizon all offer military discounts, so if you’re in the market for new cell phone plans to keep in touch with your active student, you have a great variety to choose from. (Some offer military discounts on devices and accessories as well.)

10. Exchange Price Match Policy

Don’t forget that the Navy Exchange (NEX), the Marine Corps Exchange (MCX) and the Army and Air Force Exchange (AAFES) all offer price matching. That means if you see a lower price for the same item at another store, bring proof to the Exchange and you can buy that item for the competitor’s price. Click here for more details.

How do you save on back-to-school items?