Welcome to Scary Money Stories, Part II. While the Halloween season is usually a fun time to be scared by fictional ghosts and monsters, financial mistakes can be truly frightening. We thank our brave TD colleagues who were willing to share their worst tales and our team of bank experts that offer knowledge on how to avoid these mistakes in the future.
View these Frightening Tales
Keep your valuables safe!
Julia Critelli, a Store Supervisor for TD Bank in Sturbridge, Massachusetts, had an inexpensive safe that people use to store valuables at home. As she had worked in the banking industry for many years, she had an extensive collection of old bills, silver coins, foreign currency, and other items. The value inside wasn't astronomical (maybe a couple thousand), but it was a personal collection she valued. Julia also stored all the credit cards she wasn’t using, along with her social security card and passport. However, it was broken into on the same day she hired someone to do work at her house while she was out. Besides the theft, the worker was paid in advance and the job wasn't completed. Julia learned several important lessons that day she wishes never happened.
Antoinette Battles, a TD Bank Program Director in Farmington Hills, Michigan, recalled her first home buying experience and the lessons she learned about large expenditures and the need "to dive into the details." She was so excited to be purchasing a home, particularly because of the price. That summer, she signed all the closing papers on the home and paid her first taxes in September. She received an assessment notice indicating its fair market value was higher than even she had believed and was proof of the great price she paid for the home. All was good until she received her next tax bill, which was about double the price she anticipated.
She didn't realize that the re-evaluation of her home's worth would drastically impact her taxes. Afterward, Antoinette immediately educated herself on the correlation and now she's much more knowledgeable about the impact of calculating all the costs associated with home ownership. Antoinette doesn't regret getting on the property ladder, but she does regret not having done her "homework."
The Response
Make sure you know everything about your financial identity
Alyson Klug, Head of National Sales at TD Wealth, provides these practical tips to help prevent this tale from happening to you:
The Response
After you completed the previous steps, find a lender. Most people put an emphasis, understandably so, on finding a realtor. But a lender can help you account for costs you may not have budgeted for, which may impact the homes you decide to look at with your realtor.
Find a lender
Figure out what you can afford. You need to account for the total costs of home ownership – the mortgage payment, homeowner's insurance, private mortgage insurance (in some cases), maintenance, renovations, condo fees, utilities, and property taxes. These are many of the ongoing costs of homeownership that don't include the one-time expense of purchasing, like a down payment, appraisal and inspection fees and closing costs. All should factor into determining your budget.
KNow the costs
Do as much homework as you can on the homebuying process. Research and sign up for a first-time homebuyer class.
Do your research
Scott Lindner, National Sales Director for TD Bank, noted that while buying a home is a huge financial commitment, it's also rewarding and can be a great way to build wealth.
Incorporating taxes into your budget as a homeowner is very important. Your taxes may be one price at closing but can change when your property is assessed by your local tax authority, which can occur as often as annually according to Scott. Valuation assessments estimate the value of your property to determine how much you'll pay each year in property taxes. If your valuation is higher than what you originally thought, your taxes could increase. If it's lower, they might decrease. One way to be able to plan for the impact of increased property taxes is by having an escrow account and, depending on which mortgage product or lender you choose, these accounts may be required. An escrow account is held by the servicer of your loan for the payment of taxes and insurance as they become due. Escrow account payments are included in your monthly mortgage payment.
Usually once a year, your escrow account is analyzed, and the escrow account payment is adjusted for the coming year considering the taxes and insurance that were paid and the estimates of the amounts due in the next year. If you've paid more than what your taxes and insurance cost, you may receive reimbursement of the amounts paid. If you've paid less or the estimated amounts increase, you'll need to cover the outstanding amount which can be paid at one time or spread out and covered in your new monthly payment. First-time buyers and also experienced homeowners often have an escrow account which helps simplify tax and insurance payments while making your expected monthly payment more predictable.
There are a few key steps you can take before you enter the market, according to Scott:
There are also places to store valuables that may not be obvious, like a box in the garage or bag in the freezer. If it's valuable, treat it as such and protect it.
If the valuables are things that you do not use all the time, consider a bank safe deposit box. This works for both important paperwork and things like jewelry and watches.
Keep valuables tucked away, out of the open and in a place that is not easy to compromise. A small safe may be easy to transport.
Consider a home security system with cameras.
Make sure doors and windows lock and are secure, including your garage door.
Have a list of your valuable items.
Don't allow websites to remember your credit card and use strong passwords. Avoid public Wi/Fi for online shopping.
Remember to always report lost / stolen credit cards immediately.
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Review your monthly credit card statement for any unknown charges. Review your credit report at least annually, make sure you recognize all the transactions.
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Apply a credit freeze on your credit reports at the credit bureaus (Experian, Equifax, TransUnion). This can be completed online and restricts access to your credit file until you remove or thaw
the freeze.
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A TD colleague in Tampa, Florida recounted her scariest story when she found out two relatives had taken unauthorized loans in her name after she reviewed her student loans. After the shock, she then studied every detail to see how to pay them off in the best way in terms of amount and time.
Not doing homework when buying a house caused a nasty surprise
The REsponse
Alyson Klug offers tips she learned first-hand as a victim of credit fraud:
At the beginning of every year, a TD colleague in New York City, set up her 401K contribution to max out as quickly as possible. She did it to plan for any unforeseen circumstance, such as losing her job, so she had the money socked away. But she recently learned this method could leave money on the table in terms of how some companies structure their matching contributions.
Ashley Weeks, Wealth Strategist for TD Bank, notes the devil is always in the details! Companies that sponsor 401k plans have a lot of discretion in structuring matching contributions. Employees may "front load" their 401k by maximizing contributions early in the year and contributing nothing in later pay periods. However, this technique may leave money on the table if the company only applies matching contributions in pay periods where the employee contributes to the plan. In those cases, an employee would receive a larger employer match by making equal 401k contributions each pay period instead of front loading early in the year.
Many companies will ratably apply matching contributions throughout the year or true-up at year end to avoid penalizing employees who do not contribute the same amount each pay period, however this is not always the case. Employees should confirm the mechanics of how matching 401K contributions are applied with the plan administrator to avoid surprises.
The Response
401K mysteries
When considering home ownership, speak to your personal tax advisor about the impact that homeownership may have on your taxes.
speak to your personal tax advisor
