The new year is just around the corner and it is a chance for us to start on new habits that will improve our financial situation. There are financial changes in 2014 that you need to be aware of because they can help improve your current financial situation. If you can take advantage of it, you might be able to build a better future for you and your family.
The current consumer debt is still quite high but there are a couple of things that you need to know about it.
Mortgage and credit card debts have both gone down in the past few years. As of December 2013, the average household debt for mortgage is $149,456 and credit card is $15,279.
Overall credit per household is still increasing.
Student debt and auto loans are the major contributors to the increase in consumer credit.
Obviously, the rising consumer debt in 2013 still means we are in need of financial advice for every generation. Each generation goes through several credit problems and they could all benefit from some serious financial changes in 2014.
Fortunately, there are a couple of rules and products that will take effect in 2014 can possibly help you make these improvements possible. We will discuss 3 important changes that you can take advantage of to reach your financial goals and the financial tips that will help you use them.
Financial tip: 1: Contribute more in your retirement
There are various strategies to help prepare for a good retirement but most of them is gearing towards making your contributions bigger. A good retirement means you have more than enough money to pay for what you need – food, housing, healthcare and even your entertainment activities.
So what are the financial changes in 2014 that will affect your retirement plans?
The IRS.gov reports that there will be changes to the salary range that qualify for the tax credits when filing their contributions. Most of these amendments will allow higher income ranges to benefit from these tax credits to possibly help them increase their funds for their saving goals. Their tax deductions will be phased out if they qualify for the new Adjusted Gross Incomes (AGI) range. The income ranges that are affected are the following:
Taxpayers making traditional IRA contributions: singles and heads of households with an employer sponsored retirement plan and AGI of $60,000 – $70,000 (from $59,000 – $69,000); married couples with a joint filing and one spouse having an employer sponsored retirement plan and AGI of $96,000 – $116,000 (from $95,000 to $115,000); and, contributors who do not have employer sponsored retirement plans but is married to one that has it and has a combined AGI of $181,000 to $191,000 (from $178,000 to $188,000).
Taxpayers making Roth IRA contributions: married couples with joint filing and combined AGI of $181,000 to $191,000 (from $178,000 to $188,000); and, singles and heads of household with AGI of $114,000 to $129,000 (from $112,000 to $127,000).
Low to moderate income taxpayers making Saver’s Credit (Retirement Savings Contribution Credit): married couples with joint filings and AGI of $60,000 (from $59,000); heads of households with AGI of $45,000 (from $44,250); and, singles or married but filing separately with AGI of $30,000 (from $29,500).
Given these changes, you may want to maximize your savings by availing of the tax credits that will enable you to put more breathing space into your budget. This will take effect during the 2014 tax year. The freed amount can be used for other saving goals or investments.
Financial tip 2: Prepare for your home loan
The second of the financial changes in 2014 involves home loans. On January 10, 2014, the amendments in the Truth in Lending Act will take effect. Most of the adjustments will make mortgage lending a lot more strict so borrowers will be kept from getting a loan that they cannot afford to pay back.
The goal of these changes is to screen borrowers further by increasing the underwriting process. Based on the information gathered from ConsumerFinance.gov, there are two important changes that will take effect in 2014.
Ability to Repay
The new law will require lenders to check the following requirements to determine if the borrower is indeed capable of sending their monthly mortgage payments.
Income or assets (present and reasonable assumption for the future)
Present job conditions
Ability to make monthly payments to other financial obligations
Ability to make monthly contributions to other credit accounts
Ability to make monthly payments on anything related to the home loan
Overall credit obligations (e.g. alimony, child support, etc)
Debt to income ratio
The law implies that lenders must seek the aid of a third party source to get all of these information about the borrower.
Qualified Mortgage Rule
The other part of the changes in the Truth in Lending Act involves qualified mortgages. These are the mortgage applications that are assumed to have passed the rules imposed on the Ability to Repay qualifications. The improvements on this rule is meant to keep lenders from offering high risk products and other features of banks and financial institutions. The limitations are set to help keep incapable borrowers from being approved of the loan when they are clearly unsuited for it financially. The rule lists certain loans that cannot be considered as a qualified mortgage like the ones with balloon payments or terms that exceed 30 years.
This is a great way to protect lenders from defaulting borrowers and at the same time, keep consumers from getting a loan that is beyond their capabilities to pay back. If you are planning to buy a home in 2014, you need to make sure that all of the requirements specified by the changes will be met. Most especially, you may want to consider improving your credit score to help ensure the lowest interest on your mortgage loan.
Financial tip 3: Monitor your credit report
The last of the financial changes in 2014 that we will discuss in this article is connected with the big changes that will happen to credit scores. At least, this is true for the FICO score.
The most prominent credit score company, FICO, released a new product known as Fico Score Open Access and it allowed lenders and creditors to share the credit score of their clients without additional charges. Apparently, consumers will get access to this for free so they can help monitor their credit health.
Although it is up to the lenders and creditors how they will take advantage of this feature to increase their customer’s brand loyalty, it does not hurt for individuals to take advantage of it. Ask your credit card company or lender how you can avail of this freebie. Some companies are making it available in their own websites or making the score known to clients through their statements.
With all the improvements and financial products being released, there is really no excuse anymore to not monitor your credit report. You have to start taking this seriously. Not only will it keep you from abusing your credit use, it will also tip you off if you had been a victim of identity theft.
All these financial changes in 2014 are all meant to help make you a financial success. It is up to you to decide how you will use it to improve your current money situation. You have to remember that being a financial success does not necessarily have to mean that you will be completely without any debt. However, you need to learn how to control it.
But if the debt is already getting out of hand, do not fear. There are debt relief solutions that you can use to help get you out of your credit problems. Here is a video from National Debt Relief that will help you take control of your debts.