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Ask The Expert

About Richard Barrington, CFA & MoneyRates.com Senior Financial Analyst
Richard Barrington

Richard Barrington, CFA, is the primary spokesperson and personal finance expert for MoneyRates. He is a 20-year veteran of the financial industry, including having served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. He earned his Chartered Financial Analyst designation in 1991 with the Association for Investment Management and Research (AIMR). Richard has written extensively on investment topics, including investments, money market accounts, certificates of deposit, and personal finance as it relates to retirement.

Richard has been quoted by numerous media publications such as The New York Times, The Wall Street Journal, and Pensions & Investments magazine.[...] Read more Richard can discuss economic and market history in detail and is well respected for his ability to relate to a broad audience from a personal financial standpoint. Richard approaches financial topics with an understanding that fresh perspectives are often more valuable than mainstream consensus. He has written for over 50 financial Web sites, such as Investopedia, Yahoo, MSN, Allbusiness, and Encarta, and is most sought after by members of the media for his niche expertise in these topics: Certificates of Deposit, Money Market and Savings Accounts, Saving for Retirement, Housing and Mortgage Meltdown, Interest rates, Investments, Macro Economic and Government Policy Issues, Historical Financial Events, Discerning Long Term Implications

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Should a husband and wife combine all their finances?

November 17, 2014

| MoneyRates.com Senior Financial Analyst, CFA

Q: I recently got married, and I'm wondering how much my wife and I should combine our financial accounts -- checking accounts, credit cards, etc. Does getting married mean we should combine everything?

A: Your financial futures are now intertwined, but that does not mean you have to share every single financial account. In fact, sometimes a couple can manage more effectively if some things remain separate.

Here are some suggestions for a new couple who's figuring out how to integrate their finances:

Communicate and collaborate. Start by laying everything about your financial situation on the table: current resources and income, as well as liabilities like student loans or credit card debt. Once you both see the full picture, start to collaborate on the future. Discuss how to solve any immediate problems, and figure out what your financial goals are. You may get a clearer picture of which accounts to combine and which ones to leave separate once you know what role you expect those accounts to play.

Pool your major resources and expenses. To start with an obvious example, you probably wouldn't get married but each continue to maintain your own apartment. In other words, it makes sense to combine the big things like living quarters, and it also makes sense to combine long-term savings accounts, as long as you agree on the purpose of such accounts. Also as part of this exercise, look at things like the health care options and retirement benefits offered by your respective employers to see how you can best benefit from these programs as a couple.

Agree on your responsibilities. Come to an understanding on your respective responsibilities -- who is responsible for paying which bills, and how much is each of your going to contribute to your savings accounts? Part of your responsibilities should be full and immediate disclosure of any problem that comes up, such as a career setback or an unexpected expense. Financial problems only get worse if either spouse is exposed to them without accurate information.

Some day-to-day things can stay independent. None of this means you have to share everything. It can be more practical to keep checking accounts and even credit cards separate, so you don't have to coordinate every expenditure on a day-to-day basis. Just make sure you have a shared understanding about spending and debt management with regards to these accounts.

Of course, every relationship is a little different, so the same principles won't necessarily work in every case. However, if you and your wife talk through the above issues -- even if you come to different conclusions -- you will have a basis for making your own decisions about how to manage your joint finances.

Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

More from MoneyRates.com:

    The best savings account rates: A saver’s guide
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    How can I find the best business bank account?

    November 10, 2014

    | MoneyRates.com Senior Financial Analyst, CFA

    Q: Where can I find information on high-interest business accounts? All I see advertised are accounts for individuals.

    A: To a large extent, the same interest rates advertised for individuals should be available for business accounts at those same institutions. Just don't expect to see much in the way of high interest these days. According to the FDIC, the average rate nationally is just 0.06 percent for savings accounts and 0.08 percent for money market accounts. Even the best rates these days are still around 1 percent.

    The good news is that you might be able to leverage a business relationship into more favorable terms from a bank -- it's just that those better terms may not necessarily involve your interest rate. Here are some things to keep in mind as you search for the right bank for your business needs:

    Do not expect a break on rates. You might expect that a business account is typically larger than the average personal account, so this size should entitle you to preferential savings or money market account rates. The problem is that banks really do not care much about large deposits these days. Jumbo accounts, which are deposits in excess of $100,000, receive no rate premium for savings accounts, and just 4 basis points extra for money market accounts. Banks are actually overloaded with deposits, and do not feel they need to offer higher interest rates to attract them.

    Be especially careful about checking account fees. Since business banking tends to be transactional rather than passive, you may want to focus on the cost of your checking account needs rather than on savings account interest in choosing a bank. At today's low interest rates, checking account fees can easily exceed savings account interest.

    Discuss your banking needs as a package. It is fairly easy for an individual to choose separate banks for savings and checking, depending on where the terms are better. Businesses often need closer coordination for cash flow management purposes. Banks are going to be most interested in revenue-generators like credit lines and payroll accounts, and discussing your business needs as a whole should improve your negotiating position.

    Be sure to shop around before you choose. Just be aware that services, interest rates and costs vary greatly from bank to bank. Do not choose a bank without doing some comparison shopping.

    In general, business accounts are more active than individual accounts. In choosing the right bank for your business needs, start by projecting what type of activity you expect your business accounts to generate. Then, choose a bank based on minimizing the cost of that activity, and on receiving the quality of service that will help you do business seamlessly.

    Got a question about saving, investing or banking? MoneyRates.com encourages you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

    More from MoneyRates.com:

      The best money market account: How to find it
      Bank fees: Are your charges creeping up?
      Does a money market account belong in your IRA?

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      Is a 40-year mortgage worth considering?

      November 3, 2014

      | MoneyRates.com Senior Financial Analyst, CFA

      Q: I grew up hearing about 30-year mortgages, but now I am seeing 40-year mortgages advertised more and more. Is that an option I should consider, or is 40 years just too long? For example, should someone sign up for a 40-year mortgage without being sure of staying in the house for 40 years?

      A: Thirty-year mortgages may well have sounded radical when they were introduced, and with people these days living longer than ever, why not a 40-year loan? Well, while this type of product may have its uses, there are some important drawbacks.

      Here are some things to keep in mind when considering a 40-year mortgage:

      1. Timing impacts risk, but it is not necessary to plan on staying 40 years. Your planned stay in the home does not have to match the length of the mortgage, just so long as there is not too great a mismatch. Because the initial payments on a 40-year mortgage are almost all interest and very little principal, these loans build equity very slowly. So, if you move after just a few years, there is a chance you will owe more on the house than you get for selling it.
      2. Look what the extra 10 years will do to how much interest you pay. Between the fact that longer loans generally mean higher rates and signing up for another 10 years worth of interest payments, a 40-year loan will cost you a lot more over the life of a loan. Before you commit, look at an amortization schedule to see how much more this option will cost you in the long run.
      3. Current mortgage rates do make longer mortgages more attractive. While keeping the above point in mind, at least current mortgage rates are low enough to take some the sting out of a longer repayment period.
      4. Leave time for retirement saving. The flip side of low mortgage rates is low interest earnings on savings accounts and other deposit vehicles. This makes it necessary to save more for retirement, and the longer you take to pay off your mortgage, the more those payments may crowd out retirement savings.
      5. Rent vs. own economics are a key factor. In some areas of the country, rents are extremely expensive, and while a 40-year mortgage may build equity slowly, renting does not build it at all. If this type of mortgage is truly cheaper than renting (when factoring in property taxes, insurance and other expenses associated with owning), it is worth considering.

      This type of product may well be a necessary evil in parts of the country where housing is very expensive, but where possible, it would be better to settle for a cheaper housing choice (e.g., renting or a smaller home) than to sign up for something that builds equity so slowly.

      Got a question about saving, investing, or banking? MoneyRates.com invites you submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

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      How should I invest a burial trust?

      October 24, 2014

      | MoneyRates.com Senior Financial Analyst, CFA

      Investing a burial trust

      Q: I just set up a burial trust to take care of funeral expenses when I die. I am 80 years old but in good health, so I don't expect to go anytime soon -- though you never know! My question involves how that burial trust should be invested. I'm assuming savings accounts are the best vehicle for this kind of thing because the money is available at any time, but I hate to think of the money earning so little interest. The longer I live, the more ground it will lose to inflation.

      A: Certainly, savings accounts are a natural solution for a burial trust -- as you say, their ready availability makes them a good fit for this type of need. As you point out though, the disadvantage is that savings account rates are extraordinarily low at this time. It may be a less conventional solution, but you might also want to consider a CD instead of a savings account.

      Right now, according to FDIC averages, five-year CD rates are more than 10 times greater than rates on savings accounts. So, suppose you found a five-year CD with a penalty for early withdrawal equivalent to six months' worth of interest. Five-year CDs earn in about a month what average savings accounts earn in a year. So, as long as the burial trust was not needed for at least seven months, you would come out ahead with the five-year CD, even after paying the penalty.

      Whichever vehicle you choose, be sure to shop around for the best CD rates or savings account rates available. Choosing the right bank can make as much of a difference in the rate you get as choosing the right deposit vehicle.

      In some cases, there is an alternative to setting up a burial trust. Some states allow deals between funeral homes and their customers in which the customer pre-pays funeral expenses. Obviously though, you would want to make sure you are dealing with a reputable funeral home with a thriving business, so you can be confident that the arrangement will be honored when the time comes. Obviously, you should look over the contract carefully, and provide a copy to your executor or a close family member.

      The benefit of this is that it effectively removes the inflation risk -- by paying up front, you lock in the cost of the funeral. The drawback is that paying up front means that the funeral home, rather than your burial trust, gets the benefit of any interest earned between now and when you die. Whether the benefit outweighs that drawback largely comes down to whether you think inflation will continue to exceed deposit rates over the remainder of your life.

      Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

      More from MoneyRates.com:

      Photo: AndreyPopov/Thinkstock
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      Where should I start my business?

      October 21, 2014

      | MoneyRates.com Senior Financial Analyst, CFA

      Where to start a business?

      Q: What is the best state in which to start a business? I am a certified life coach so I can conduct business pretty much anywhere. I am looking for a place with a high income rate vs. cost of living. From a Forbes article I read, the best currently is Washington State. Is this true, or do you think there are better options?

      A: Though it looked at conditions for individuals rather than businesses, the MoneyRates.com Best States to Make a Living study might be a good jumping-off point for this discussion, because it factored in the two criteria you mention: incomes and cost of living. Beyond that though, there are some additional factors you may want to consider when choosing where to start your business.

      The state of Washington topped the MoneyRates.com survey, and it meets your test of having a high average income -- one of the highest in the nation. The cost of living there is a little above average, but this is offset by the fact that Washington has no state income tax. Other states with relatively high average incomes when adjusted for the cost of living and state taxes are Virginia, Texas and Illinois.

      Beyond the relationship of income and cost of living, there are some other things you should take into account when deciding where to start your business:

      1. What is the market for your services? You may want to look at demographic information. Which states have large populations in your average age group, and where is the population growing?
      2. How much competition is there in your field? Be sure to check on the number of similar service providers in your target area to make sure the market is not over-saturated.
      3. Do you plan to hire people? If so, locating in a state where incomes are high could become a liability rather than an asset for you.
      4. What is the regulatory environment for business start-ups? Tight regulations can be a barrier to entry as well as a source of ongoing compliance costs, so look before you locate.
      5. Can you provide your services online? MoneyRates.com has consistently observed that online banks have a cost advantage over traditional banks, which allows them to offer more free checking accounts and higher interest on savings accounts. Similarly, if there are aspects of your services that can be provided online, perhaps you can take a cue from this and locate where you can minimize your operational costs while marketing to more affluent parts of the country.

      Good luck with your venture. You are wise to want to pick your spot, because the research you do in advance can pay off every day once your business starts up.

      Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

      Photo: Monkeybusinessimages/Thinkstock
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