Let’s cut to the chase – I am NOT A FAN of leasing a car. Period. Ever. I really feel like I could stop here, but I won’t. I’ll show you the math on why leasing is not a good financial decision and, as a bonus, I’m also going to give my thoughts on buying a new car vs a used car.
Don’t worry, I’ll keep the math simple and I’ll even link a video to Khan Academy’s site where they provide a detailed explanation of the exact numbers I’m going to show here. Did you know that Khan Academy provides lots of great videos on financial topics to help create better money habits? They do.. You can find their website here. I just love Khan Academy, don’t you?! But, I digress. Back to the topic..

Crunching the numbers

Refer to the spreadsheet below for the simple calculations used in this example.

Scenario 1 – Keep the car:

Let’s say you’re in the market for a new subcompact and the cost to purchase the vehicle will be $17,700. If you finance the car to purchase it, you will need to pay a deposit. Let’s assume $2,000. With a reasonable interest rate of 4.22%, monthly payments will be $465/mos for the 3 years until it’s paid off. Total cost to purchase and keep the vehicle is $18,740 (note that the difference between the purchase price of $17,700 and the $18,740 is interest you’re paying the bank).

Your other option in this scenario is to lease the car. As you can see, the monthly payments are a lot less over the 3 years but if you choose to buy the vehicle at the end of the lease term, you will pay a total of$19,924 and $1,184 MORE to own the same vehicle. I like to refer to it as the cost of lower monthly payments. Oh, and by the way, if you don’t have the cash to pay the Lease Buyout, you’ll need to finance it which means more interest and a greater difference in price that you’ll pay to lease vs. buying the car.

scenario 2 – sell/give up the car:

Refer to the spreadsheet below for the simple calculations used in this example.

I know what you’re thinking:”yeah, but Denise, I’m planning to give up the vehicle at the end of the lease. I’m sure that’ll be a better deal than buying the car, right?”
Sorry, but the math doesn’t support it. Even if you enjoy low monthly payments for 3 years while the purchaser endures high monthly payments, at the end of the lease term, you have nothing, while the purchaser actually owns the car. So, the purchaser can sell the car for the estimated sale price and still make out better by almost $1000!

The bottom line on Lease vs Buying

Leasing offers lower monthly payments and this is why they are so appealing. And, if you like to have a shiny new vehicle every few years, leasing allows you to easily upgrade to the newest model. But, financially, leasing is a bad deal for the consumer. I realize that car dealerships sell it as a great deal, but they’re out to make money. If it wasn’t a money maker for them, they wouldn’t be “selling it”.

What if you have a lease already?

If you currently lease your car, you are not in the minority here. Like I said, car dealerships hard sell leases and they are becoming more and more popular. I get that a low monthly payment and the idea of driving a shiny new car every few years is definitely appealing. It just doesn’t make sense financially.
So, if you currently lease your car, read your contract to see if you can get out of the lease early. Generally, there are stiff penalties for early lease termination. You may be better off waiting out the lease term and then choosing the lease buyout so you can purchase it.

If you have questions about crunching the numbers and whether early termination of the lease is a good idea, I’m happy to help you run the numbers.

Bottom line: I strongly discourage choosing a lease again, if you currently have one. Just buy a less expensive used car to get the lower monthly payments you need to manage your budget.

A Few Thoughts on Buying a New vs Used Vehicle

A car’s value depreciates approximately 20% the first year of ownership. So, why buy new? Dave Ramsey, a well known and reputable financial adviser says you shouldn’t be buying a new car unless you have a $1M net worth. I’m not sure where he came up with the number, but I like it as a rule of thumb. However, I really feel like buying used, even if it’s less than a year old, is always a #smartmoneyhabit. In addition to being a smart financial decision, it’s also good for the environment because you’re reusing. Bonus.

I’ll go a step farther on the car buying to say I strongly suggest you only buy what you can truly afford. Keeping up with the Joneses is a competition you’ll never win. Don’t give in. Don’t sacrifice what you want most for what you want now. Resist the impulse and get what you need AND what you can afford. All shiny new toys lose their luster.

~Financial Jackson

Questions? Comments? Please feel free to email me. I’d love to hear from you.

If you want to save money, the simplest and most fundamental way to do so is with a savings account.

Online savings accounts can usually offer much better interest rates than the typical brick & mortar banks like Bank of America. For example, Bank of American currently offers an annual savings yield (APY) of .03% for a basic savings (that’s practically nothing!) while Synchrony Bank, an online banking option, currently offers 1.9% (as of Oct 2019). That’s a big difference and since it’s so easy to open an account, it just makes sense to have one. Click the link here to see a list of the online banks offering the highest APY.

How to Open a Bank Account Online

You should shop around for the right bank account to meet your needs. It should be FDIC insured, with NO fees. Also, check to see if it requires you to make a minimum deposit or keep a minimum balance. Avoid ones that require a minimum balance because it’s too hard to keep track of and fees can add up quickly and eliminate any higher interest that it may be offering.

Then look at the interest that the account will pay you on your deposit.

Once you pick the best one for you and your needs, it’s time to get started. 

The good news is that most online banks make opening an account as simple as possible, with easy-to-use online applications. And if needed, you can even chat with friendly professional bankers to help you through the process. Keep reading for step-by-step instructions to setup an account with Synchrony Bank. (If you choose a different bank, it will work in a similar manner).

Before you start, you may want to get together your personal information.

Note: most banks require that you and any joint applicant are U.S. citizens, or lawful permanent residents, and are at least 18 years old.

If you’re funding your new account electronically, you’ll also need the information of the account you’re using for your initial deposit.

Once you complete the application, your new account is usually set up — and earning interest — within a few days!

How to open an account with Synchrony Bank:

• Go to www.synchronybank.com
• click on the drop-down menu item at the top labeled ‘PRODUCTS’
• Choose ‘High Yield Savings’ (see pic below)

• Scroll down the page and click on button that says ‘Open Account’
• Then click on ‘YES, OPEN A SYNCHRONY BANK ACCOUNT’
• Complete the application. It’s that easy.

REMEMBER to have all of your information handy, including bank account information for your initial deposit, if you are funding it electronically.

Most banks have apps you can download onto your phone so you can transfer money easily; but, you can also log onto your account with any computer to transfer money as needed.

If you have any questions about setting up an online savings account, please don’t hesitate to contact me.

~Financial Jackson

Do you have children who have turned 18? If so, please keep reading to find out which legal documents every young adult should have, why they’re needed, and where/how you can get them completed.

Health Insurance Portability and Accountability Act (HIPAA)

Because of HIPAA, healthcare providers are unable to disclose information about a patient to ANYONE, even a family member, unless explicitly authorized by a patient. You, as a parent, have no more right to obtain medical information on your legal-age son or daughter than you would to obtain information about a stranger on the street. And that’s true even if a young adult is covered under his or her parents’ health insurance, and even if the parents are paying the bill.

A medical provider can choose to disclose protected health information to the family member, even without the patient’s authorization, if, in their professional judgement, it serves the best interest of the patient. But providers often come down on the side of patient privacy, particularly if they have never met the family member.

It’s not easy to ponder, but imagine your 18-year-old child, while away at school, is severely injured in a car accident and is taken to the hospital. As soon as you find out, you call the hospital to check on your child’s condition but are told they are not authorized to provide you with any details because they do not have prior authorization permitting them to share information with you.

Sitting down with your adult child and having them sign the appropriate documents naming a parent or guardian as an authorized party to handle matters in the event of an emergency can eliminate many potential unforeseen issues.

Important Documents:

HIPAA authorization

A signed HIPAA authorization is like a permission slip. It allows healthcare providers to disclose your health information to anyone you specify. Your adult child is naming you as an authorized party and is giving you the ability to ask and receive information from medical providers about your child’s health status, progress, and treatment. This is particularly important in the event your adult child is unconscious or incapacitated. Without a HIPAA authorization in place, the only other way to obtain information regarding your child’s health would be to have a court appoint you as his or her guardian.
Young people who want parents to be involved in a medical emergency but fear disclosure of sensitive information need not worry; HIPAA authorization doesn’t have to be all-encompassing. Young adults can stipulate not to disclose information about sex, drugs, mental health, or other details they might want to keep private.

Medical power of attorney (POA)

A Medical POA or Health Care Proxy (as it is sometimes called) communicates your wishes in case you are unable to make medical decisions. In signing a medical POA, you appoint an “agent” to make medical decisions on your behalf in case you are incapacitated and unable to make such decisions for yourself. In many states, HIPAA authorization is rolled into the standard medical POA form.

Included in a medical power of attorney should be a living will. A living will specifies your wishes with regard to interventions in life-or-death scenarios in case you are unable to do so.

It is important to note that because state laws differ, you should obtain a Medical POA that complies with the laws where your young adult will be residing. If your child is away at college, that institution my have their own specific forms, so you should check with them and be sure to sign any of their forms IN ADDITION to these documents.

For example, my children are away at college – at Rhodes College and University of Michigan. But, both of my children reside in Texas. That’s where their license is, where they are registered to vote, etc. So, I have made sure I comply with the laws of the state of Texas. In addition, I have also signed the applicable forms provided by each school. You can usually find out which forms the school uses by going to University’s health services website and/or emailing the health services department.

Durable power of attorney (POA)

As an additional step, young adults should consider appointing a durable POA, enabling a parent or other designated agent to take care of business on their behalf. If the young adult becomes incapacitated or if they are studying abroad, the durable POA would enable the agent to sign tax returns, access bank accounts, and pay bills, for example.

When discussing this form with your young adult, you should stress the significance of this legal document, because the powers granted to the person named in the durable POA are broad and provide the ability to make medical, legal and financial decisions on the young adult’s behalf. Please encourage your young adult to name someone they trust explicitly.

Where to get these forms completed

Just a reminder that these forms vary by state law so it’s important to follow the rules governed by the state your young adult is residing in. There are several ways for you to get these forms completed:

1. If you have a lawyer who has already drawn up estate documents for you in the past, you may request them to draw up these documents for your young adults as well. Price range is $450-$500.
2. Utilize Mamabearlegalforms.com. This website is knowledgeable, walks you through utilizing a question and answer approach; and then completes the forms for you to print and sign. Price range is $100-$150.
3. Utilize a free option on eforms.com or legalzoom.com.

Have questions? Please email me at: moneysmartjackson@gmail.com or leave a comment. I would love to hear from you.

I know this isn’t a pleasant topic but it’s so important! None of us are guaranteed a tomorrow and dying without a will puts an unnecessary strain on your family. It is not ok when you get sick, or when you die, to leave financial chaos behind you for everyone else to clean up. It will be hard enough for those around you to bear the grief of your terrible illness or death; imagine, for a minute, their pain. Please don’t also force them to have to deal with all the matters you could have taken care of while you were alive and healthy.

As an added bonus, by taking care of this unpleasant yet very important matter, I promise you will also gain peace of mind for yourself, knowing that your heart and mind are free from worry about the what-if’s in life because you have planned and prepared for it.

A 2017 survey found that nearly 6 in 10 Americans don’t have a will.. That’s crazy!

What is a will?

A will is simply a piece of paper that states who you want to get what when you die. But, it’s also a legal document, which is where the trouble can begin. When you’re dealing with a will, you’re dealing with the courts.

Why making a Will is Important

A will states what YOUR wishes are. Do you have children? Who do you want to care for them if something happens to you? Are you remarried? Do you want your current spouse to be taken care of? Or, conversely, do you want to make sure the new spouse does not get your children’s inheritance? Each state has its own laws when it comes to settling the affairs of someone without a will. If you don’t have one, a judge will appoint an administrator. Usually, they appoint the spouse and then the children to serve as a personal representative, but is that something you really want to leave to chance?

I recently had lunch with a friend who just lost her dad. She had just found out that he died intestate. Intestate means dying without a will. She was overwhelmed by the thought of having to figure out how to sell his house and guess as to how he would want his remaining assets to be distributed. So, while grieving, she also has to deal with the mess he left behind.

Making a Will Online

Hopefully, I have motivated you to draft a will. But, maybe you’re feeling overwhelmed with the idea of long and expensive lawyer visits. Good news! If you are looking to make a simple will to take care of basic things like your property, children, investments and personal items, then you can do it online.

A very easy and cost effective way to go about making a will is to utilize a legal forms company. This website will walk you through and help you answer all the situations specific to your wants and needs.

IMPORTANT: Choose the correct state that you are living in and follow the rules when it comes to having your will signed and dated by appropriate witnesses! Failing to do this can invalidate your will!

Let’s get it done!

You’ve got this! A will is the last gift you’ll leave your family and loved ones. Your loved ones depend on you to make a will. Don’t be one of the 6 in 10 that don’t have a will. Click on the link here and get it done today. And, if you have questions or concerns, you can always comment on this blog or email me: moneysmartjackson@gmail.com.

You’re ready to ditch the credit card? Way to go! Paying off your credit card balance and making the decision to delay instant gratification in an attempt to build real wealth is such a big step forward and you should give yourself a pat on the back for getting here.

1. Pay off your card balance

Hopefully, you’ve already done this, but just in case, I’ll say it again. PAY OFF YOUR CARD BALANCE!

2. Call the credit card company

Call your card’s customer service number (it’s listed on the back of your card).

Warning: The customer service rep will most likely try to change your mind and encourage you to keep your card. They’ve been trained for this very moment – to keep you on the line so they can change your mind. Don’t fall for the gimmicks:

• “You’ll lose all of your hard-earned reward points.”
• “Your FICO score will be negatively effected”
• “We’ll offer you 5,000 airline miles if you stay”
• “What if we waive your annual fee this year?

If this happens, just stay persistent and steadily repeat, “I’m calling to close my account.”. Don’t hesitat to ask for the customer rep’s manager if you aren’t getting through to them about closing your account.

3. Get it in Writing

Here’s the most important part: Get it in writing! No matter what you do, you want written confirmation that you closed your account. This has happened to me before where I called to request the account to be closed; the customer service rep said they closed it; and I saw it on my credit report over a year later. No fun calling these folks once, much less having to do it twice!
Once you receive your written statement that shows your balance is all clear and your account is completely closed, keep the letter in your files and congratulate yourself!