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Q: I am planning to rent a car during my next vacation. Do I need to get collision damage coverage insurance?
MsFF: Although you do not own the car, you are 100% responsible for any damage to the car or any liability resulting from the use of the car. For an additional fee, many rental companies will offer you collision damage and theft coverage insurance. Most people do not need collision damage and theft coverage insurance because they are covered through their credit card and/or personal car insurance. However, do not assume you are covered! Before your trip, carefully review your credit card and car insurance policy. I also recommend you call the credit card and insurance company to verify the coverage and find out the procedure for filing a claim. Make sure you bring the appropriate policy numbers, phone numbers and contact people along with you on the trip. Additionally, find out how the rental company will handle any damages. Will you have to pay all the money on the spot and get reimbursed by your insurance or credit card company later? The key is careful research BEFORE the trip can save you money so you will have more funds to spend on your vacation .
Q: I have been receiving mailers on home equity loans. What are they and are they good?
MsFF: There are two basic types of home equity lending programs – home equity loans (HEL) and home equity lines of credit. HEL's are closed-end, fixed-rate (some are variable rate) loans where you receive the entire amount of the loan at closing. Home equity lines of credit are open-end, variable-rate loans where you draw on the credit line during a certain period of time. Home equity lines of credit are preferable to HELs when you are making periodic payments like for college tuition because you draw down on the loan only when you need the money. A lower loan amount leads to lower interest payments. Unlike credit cards and unsecured personal loans, the interest charged on home equity loans or lines of credit is tax deductible (a definite benefit). The drawback to home equity programs is that the collateral to the loan or line of credit is your house and if you do not make timely payments, you could lose your home. So use them wisely .
Q: I already have an IRA so why would I need to invest in my company 401K?
MsFF: There are two main benefits to investing in your company's 401K plan. The first one is your contributions are withheld pre-tax. This means when you calculate your taxable income, the contributions will be subtracted out of your annual salary. A lower taxable income results in lower taxes. Another benefit is that your employer may match an additional amount to your contributions up to a certain point. The additional amount adds up to FREE money. Of course, you'll need to look at your employee benefits manual to understand the matching program and any vesting guidelines. Also like an IRA any income generated in your 401K account will compound tax-deferred.
If you have a question for MsFiscallyFit just e-mail it to: myquestion@msfiscallyfit.com
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