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Each week, we answer money questions from around the web on the NerdWallet app. Here are three of the trending questions from March.
How can I prepare for the 'Great Wealth Transfer’?
The so-called Great Wealth Transfer — a passing down of money from baby boomers to their Gen X, millennial and Gen Z heirs — is expected to take place slowly over the next two decades.
So, what do you need to do to get ready? Probably not much — at least not yet.
First of all, not everyone will receive a large inheritance. Given the unequal distribution of wealth in America, a select few will receive a bigger piece of this particular pie.
Even those who receive assets after a family member’s death may not see a substantial windfall. Financial advisors often advise against spending money before receiving an inheritance, because you never know if you’ll actually get what you're expecting.
If you are among those who can reasonably count on a sizable inheritance, then it’s worth considering what you might want to do with it. Would you add to savings? Pay off debt? Take a meaningful trip? Fund education accounts?
Most financial professionals warn against rash decisions after receiving an inheritance, especially because you may be grieving. Spend time brainstorming different possible uses for the money — including what the loved one who gave it to you would have wanted.
It’s also worth factoring in potential taxes and other financial implications. Consider keeping the money in a high-yield online savings account so it continues to grow while you decide how to use it.
The experience might encourage you to start your own estate planning, too.
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What should I do if my parents ruined my credit?
Imagine your parents took out credit cards in your name, ran up debt and hurt your credit score. It’s a reality for many. In fact, the phenomenon is so common that it even has a name: familial fraud.
It’s hard to get actual numbers on how frequently familial fraud occurs because people are often hesitant to report their parents to authorities. Axton Betz-Hamilton, who wrote a memoir about her experience with familial fraud, says survivors can recover — it just might take time.
If familial fraud happens to you and you want to fight back, what should you do?
- Freeze your credit. This prevents anyone, including you, from taking out new accounts in your name. The process is free and you can do it online through each of the major credit bureaus: Experian, TransUnion and Equifax. You can also easily unfreeze your credit if you need to apply for a new account.
- Report the crime. Having a police report creates a record that makes it easier to contest fraudulent accounts and charges. In addition to filing a report with your local police department, you can also file an identity theft report with the Federal Trade Commission (FTC).
- Dispute the fraudulent accounts listed on your credit report. You can get a free credit report at annualcreditreport.com. Comb through it to find the accounts you don’t recognize. Disputing them with the credit bureaus will start the process to get them removed. In some cases, the credit bureaus or lenders might decide you’re still responsible, but sharing the police reports and other documentation can help bolster your case.
You can begin to rebuild your credit by making on-time payments to existing accounts, keeping credit utilization under 30% and opening up a secured card.
Throughout this process, it’s important to take care of your mental health, too. A counselor, social worker or therapist may be able to help you deal with what happened.
Can I justify an expensive hobby?
Hobbies like golf or travel can be expensive. So how do you know if they’re worth the money?
The answer to that question starts with an examination of your overall financial goals and budget.
Take a close look at your financial priorities. These may include building up an emergency fund, paying off high-interest debt and saving for long-term goals like retirement. Ensure you’re focusing on what matters most to you.
From there, you can do a deeper dive into your spending allocations. Our team at NerdWallet likes the 50/30/20 budget, where 50% of your take-home pay goes toward needs, 30% toward wants, and 20% toward savings and debt payments beyond the minimums. Some people might prefer using a 60/30/10 or 60/20/20 split.
Hobbies come out of that middle bucket for “wants,” since they aren’t essential. Once you figure out how much you can spend on wants, you can allot a certain portion of it to hobbies. For big purchases, consider setting aside money in advance through a dedicated sinking fund.
It’s also worth brainstorming some ways to cut costs, apply discounts or even earn money from your hobby. If you’re a crafter who dreams of purchasing a pricey sewing machine and high-end materials, then you might want to get familiar with your favorite craft store’s sales cycle first.
If you love sailing, perhaps you can offer sailing lessons or paid outings on your boat. You could use the money you make from the lessons as a way to offset your costs.
If your expensive hobby brings you a lot of joy, it’s worth finding a way to fit it into your budget.
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