Before we wrap up the flat taxes for 2022 and look at some personal financial reminders, here are a few things that caught my attention this week. Of course, as I’ve often written, these things are often old news by the time the column actually comes out on Sunday.
First, as I have stated many times, too many people in this country have not saved and are not saving enough for a dignified retirement, and the largest increase in individual bankruptcy filings before the pandemic was for people aged 65 and over because too many people don’t save enough for retirement, budget unreasonably in retirement, and still live beyond their means with credit cards. Confirmation of that credit card component is contained in a Reverse Mortgage commercial that I finally got my hands on this week. It made it clear that it was for “older homeowners” but also that you could use the proceeds to pay off high-interest credit cards. The financial industry is aware of the credit card problem in this age group and is acting on it.
Speaking of reverse mortgages, we’ve discussed them in the past, but here are some potential downsides to watch out for, according to get.askmoney.com. That is why you need reliable legal advice before entering into such a mortgage. First, you may not be able to refinance the loan; there are usually high initial costs, higher than those for a refinancing; and interest rates, which may be adjustable and subject to changes in interest rates, are generally high. Second, they may have a higher risk of foreclosure; you may not be able to move, even to a nursing home, without paying it off; and there may be marital problems if you die and your spouse was not at least 62 when the mortgage was taken out. Every mortgage is different, of course, but these are some things to keep in mind.
Second, I needed some replacement 123/3 volt lithium batteries for my alarm system, so I set out to do my usual “comparison/unit pricing”, something to be perfected in 2022, if you’re not ready yet. At a local hardware store, one was $9.50, but a pack of two was $14.99 (a unit price of $7.50). At Home Depot (even without my veteran discount), a pack of two was $12.97 (a unit price of $6.50); a six-pack was $20.99 (a unit price of $3.50); but a pack of 12 was $29.99 (a unit price of $2.50, a good deal if you end up needing 12). By the way, a pack of two on Amazon was $11.99 (a unit price of $6, excluding shipping). I went with the 12-pack at Home Depot (a unit price of $2.25 with my discount), and I’ll be using them.
As for flat taxes, some form of hybrid tax, and a goods and services tax, I wish there would be a series of panel discussions on television for the American public to watch and learn about the pros and cons of each, and how they might even be affected by it as a taxpayer, given things like their income level, whether they itemize their income taxes, whether gift and/or inheritance taxes are an issue for them, etc.
I remember years ago seeing a panel of PBS experts discussing solutions to solve the long-term financial problems of the Social Security system. They generally agreed from the outset that raising taxes for some entities, and cutting benefits for some, was the winning solution, and that’s when they got into their individual preferred combinations of taxes and benefits. It was incredibly constructive and enlightening. There were no politicians, only academics.
Maybe for the flat tax, a hybrid and a GST there could be three panels for three weeks. One composed of impartial academic economists, a second of politicians and a third of behavioral economists, to prepare us for possible changes. Maybe PBS can do it. It would be a great public service, and it would keep me quiet.
Let’s finish with some of those personal financial memories for 2022.
First, given the likelihood that interest rates will rise as much as three times in 2022, it’s important that you have good credit if a loan in your future is in 2022. Maybe not much, but loans like car loans, private student loans, and mortgages will be more expensive, so the better your credit, the better your chance of qualifying and getting a favorable interest rate. So make sure you get those three free credit reports spread out over 2022. If there are any errors in them, take the necessary steps to correct them as well. Plus, if your credit score isn’t as high as you’d like it to be, now’s the time to tackle it. We’ve talked about it in the past, but three things you can do are: pay all your bills on time; if you have credit card debt that I hope you will pay off, or at least be able to reduce, make sure it doesn’t exceed 30% of your available credit; and work on reducing your overall debt-to-income ratio. There is a lot of information on the internet to help you improve your credit score.
(By the way, here’s a bit of humor about the credit score. A man says his identity was stolen, but it all worked out. The thief returned it because his credit score was so low.)
Second, as inflation continues and increases in some areas, be proactive to be aware of reports on products that are sure to increase, and then consider stocking up if possible. . So, for example, I’ve stocked up on instant coffee, as coffee prices look like they’re going to go up again.
We’ll check out a few more memories next time.
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo.