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New Grads, Don’t Make These 401(k) Mistakes

Day One at your first job typically goes a little something like this: Show up; feel relieved you are dressed appropriately; attempt to hide that relief; attend orientation; marvel at the concept of paid vacation days; hide in the bathroom to avoid the 401(k) election form.

At that point, if you’re anything like 22-year-old me, you call a lifeline. I dialed my brother, who gave me a brief 401(k) rundown, asked if the company would match my contributions — they would — and told me to sign up. He probably used the words “free money,” as people tend to when describing the benefits of a 401(k) match.

They do that because it is actually free money: When your company matches your contributions, they’re compensating you in addition to your salary. Your own contribution, on the other hand, is pulled out of your paycheck, and needless to say, that was a sticking point for me. I would have gotten behind the idea of free money I could pocket immediately, but free money I wouldn’t see for 45 years didn’t excite me, especially when it meant taking home less money every month. I opted out.

I stayed at that job for a year. Assuming a 6% annual return, my decision will cost me around $50,000 in retirement savings, more than I made in a year at that job. It’s a mistake I still think about. Don’t be me: If your new 401(k) comes with matching dollars, contribute whatever percentage of your salary is required to earn them. Then avoid these four other 401(k) missteps:

1. Using the waiting period as a savings vacation

Your 401(k) paperwork may not come during orientation — some employers levy a waiting period before new workers are eligible to join the plan; there may be an additional wait before you’re offered a match.

It’s a convenient excuse to put off saving, but it isn’t a good one; there are other options. One is a Roth IRA, an individual retirement account you open on your own. A Roth is especially well-suited to entry-level workers, because you get to lock in today’s tax rate: You pay taxes on your contributions, but any earnings and distributions in retirement are tax-free. (Here’s a full rundown on Roth IRAs.)

In a lot of ways, saving for retirement is about throwing a bone to old-age you, and a Roth is a very big bone. It also gets you into the habit of saving. When you’re finally eligible for that 401(k), participating will feel like a breeze rather than a new burden on your budget.

2. Settling for the default election

Increasingly, employers are making 401(k) participation the default option. You have to opt out if you don’t want to participate.

That allows our inertia to work for us, rather than against us, and leads to increased participation: According to human resources consulting firm Aon Hewitt, 83% of workers in their 20s participate in their retirement plan when they are automatically enrolled, compared with just 33% who participate when they have to enroll themselves.

But even if your plan opts you in, your work is not done. An earlier study from Aon Hewitt found the average contribution rate was actually lower in plans with automatic enrollment, likely because the default rate is set too low and workers fail to adjust it. Your goal should be increasing your contribution rate by 1% or 2% a year, until you’re saving 15% of your income, including the employer match. That 15% is a general guideline aimed at allowing you to replace 70% to 90% of your income in retirement. (If you want a more personalized goal, use a retirement calculator.)

Be sure, too, that you’re in the investments you want to be. Most plans with automatic enrollment put you into a target-date fund, which aligns with the year you plan to retire and automatically adjusts its investment mix to be more conservative as you age. These funds can be a great, relatively hands-off solution, but they also can be significantly more expensive than selecting a few low-cost funds on your own.

3. Swallowing a pricey plan

Speaking of expenses: There’s a chance your 401(k) has high ones, especially if you work at a small company. You’ll pay fees on the investments you choose, plus administrative fees if your employer passes those along — costs for things like paperwork to make sure the plan stays on the right side of the law.

It’s up to you to know what you’re paying — a 401(k) fee analyzer can do the math — and take steps to shave high costs. That could mean reevaluating the investment selection a couple of times a year to see whether new, cheaper options have joined the table. Typically, 401(k)s have a curated selection of mutual funds, often around 20 in all.

Another option for reducing high 401(k) fees is to contribute just enough to get your employer match, then shift additional savings to an IRA. Investments you choose within an IRA will still have fees, but you’ll have access to a wider selection so you can shop around for the lowest costs. You’ll also avoid the administrative fees of a 401(k). If you max out the IRA — the 2017 IRA contribution limit is $5,500 — pause to smugly pat yourself on the back, then resume contributions to your 401(k).

4. Cashing out instead of rolling over

It’s hard to imagine at this point, but one day you may leave this shiny new job for something even shinier, and unless you have an especially low-cost 401(k), you’ll probably want to take your savings with you. Good options for doing so include rolling over the balance into your new employer’s plan, if possible, or into an IRA. You’ll want to evaluate the fees of the new accounts before making a decision.

Bad options include cashing out and pocketing the savings. You’ll pay a 10% penalty, plus income taxes — in other words, you could kiss a third or more of that hard-earned balance goodbye.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.

This article was written by NerdWallet and was originally published by Forbes.

How I Ditched Debt: Lauren Greutman

In this series, NerdWallet interviews people who have triumphed over debt using a combination of commitment, budgeting and smart financial choices. Their stories may even inspire you to pay off your debt.

Aligning spending to values helped family tackle debt

Lauren Greutman, a spender, was ashamed to let her husband, Mark, a saver, know how badly she’d managed their family finances. They owed more on their mortgage than their house was worth and almost lost their home to foreclosure. When money ran short each month, they had to charge diapers and groceries on credit cards.

The Greutman family

When Lauren found herself concealing $600 worth of new clothing in her car, she knew she had to own up, change her spending habits and attack the debt. It took two years to pay off. Lauren wrote about her experience in the book “The Recovering Spender” and shared her tips with NerdWallet.

What was your total debt when you started your repayment journey?

It was $40,000.

What is your total debt today?

We are currently 100% debt-free other than our mortgage.

How did you end up in debt?

I bought what I wanted, when I wanted it. I thought it was the “good wife” thing to do to take care of the money, but I failed to ask for help. I racked up $40,000 worth of debt behind my husband’s back and had so much shame.

This shame kept me from discussing it with him. We bought a house we could not afford, drove luxury cars and tried to appear like we had it all.

What triggered your decision to start getting out of debt?

I remember sitting on our bed one night, surrounded by a mountain of bills. Mark was numb, I was crying, we were both embarrassed and scared.

I was so sick and tired of keeping up with the appearance of having it all that I confessed [the debt] to him that night. It was such a dark and desperate time, and I saw no hope.

What steps did you take to reduce your debt? What resources or services did you use?

We sold our $225,000 house with an $1,800-a-month mortgage and moved into a small townhouse that cost $700 a month. This freed up $1,100 a month to pay down debt.

We canceled cable and sold one of our cars. We learned how to budget and communicate about money. I learned to use coupons and plan meals. We cut our grocery bill from $1,000 to $200 per month.

We’d only ever learned about budgets, numbers and coupons in a very dry, clinical and boring way. But when Mark and I made the heart connection by bringing values and vision into the mix, that’s when the breakthrough happened.

Did you make any other changes?

I started my website, LaurenGreutman.com, to help others in the same situation and earn extra income. I have an online course called “The Financial Renovation” where I walk people through how to get out of debt and enjoy life on a budget.

All the extra income from my website, book sales and courses went toward paying down approximately 50% of the debt.

How has your life changed for the better since you got out of debt?

I have so much more peace and freedom. I know where my money is going and I have so much hope for the future.

Since getting out of debt, my husband was able to quit his job as an actuary and come home to work with me on my website. I live a life with purpose and passion and love to pass along the information I’ve learned to others.

HOW TO TACKLE YOUR OWN DEBT

Lauren’s motivational tip: Make a list of everything you value in life. Then list all your spending from last month. Do the lists match? Get your spending in line with your values.

To deal with high credit card debt, one approach is debt consolidation, which rolls all your balances to one new credit card or loan with a lower interest rate, allowing you to pay off your debt faster and save on interest. If you have strong credit, you might be eligible for a 0% balance-transfer credit card. You can also check rates on personal loans for debt consolidation.

Jeanne Lee is a staff writer at NerdWallet, a personal finance website. Email: jlee@nerdwallet.com. Twitter: @jlee_jeanne.

What You Should Know About Quarterly Taxes

How to Make Quick Money Online

If you have a computer, an internet connection and a high tolerance for tedious tasks, you can make quick money online. You’ll just have to think small: bite-size tasks with bite-size paychecks that can add up if you do enough of them.

Typically, these online jobs take minutes to complete and involve answering surveys, testing websites, transcribing videos or other one-off assignments. For each task, you receive anywhere from pennies to the rare double-digit dollars.

It’s up to you to determine whether that type of work and the meager earnings are worth your time. There are other things to watch for, too, such as not getting paid for your efforts. More on that later.

Here are the pluses and pain points of several popular sites that will pay for your work:

Complete tasks with Amazon’s Mechanical Turk

What: Amazon’s popular Mechanical Turk is an online marketplace based on the concept that people do some jobs better than computers. Temporary employers or “requesters” list “human intelligence tasks,” known as HITs, that workers can complete for pay. That includes tagging images, describing content that appears in videos and participating in studies. The amount you receive depends in part on the effort and time needed to complete a task. For example, you may earn $12 for transcribing an hourlong video recording and 80 cents for a three-minute recording.

Watch for: Those who’ve tried Mechanical Turk give it mixed reviews. Some people have filed complaints against Mechanical Turk and left negative reviews with the Better Business Bureau. Kristy Milland, founder of the TurkerNation.com online community, says inexperienced “Turkers” are at risk of getting swindled because it can be hard to know whom to work for. At worst, a requester may take your work and refuse to pay.

Mechanical Turk’s participation agreement states that Amazon has no control over requesters and their actions. If you don’t get paid for your work, follow the directions on the Mechanical Turk website to contact the requester. If that doesn’t work, you can contact Amazon customer service.

The good news, Milland says, is that “people will voluntarily help you find decent work and avoid these pitfalls.” She urges new workers to check out the many online communities of Turkers who share resources and insights. In addition to TurkerNation, you can join other forums such as MTurk Crowd, Facebook groups and the Mechanical Turk Reddit group of more than 20,000 people. Milland also suggests checking out Turkopticon, which reviews HITs and requesters.

These robust communities show that, while Mechanical Turk is far from perfect, many have found it to be worth their time. Some people say they earn hundreds of dollars per week.

Test drive a website on UserTesting.com

What: Businesses want their websites to be functional and intuitive. But anyone who’s fumed at a “404 not found” error message knows that those companies don’t always get it right. That’s where Usertesting.com comes in. You receive tests that involve navigating websites and recording yourself narrating the experience. (For example: “I clicked ‘add to cart’ but don’t see the item there.”)

Thanks to your insights, the companies that work with UserTesting, such as Intuit TurboTax and CarMax, learn how to improve their sites.

Watch for: Each test requires a 20-minute recording and answers to four written questions. You earn $10, via PayPal, for each test. You don’t get paid if the company whose website you tested is dissatisfied with your insight. But, according to UserTesting.com, that happens less than 1% of the time.

Take surveys, watch videos for sites like Swagbucks

What: Dozens of websites including Swagbucks, InboxDollars, Toluna and CashCrate want your opinion and will give you a few bucks for it. The workflow is fairly consistent across these types of websites. Typically, you take surveys, watch videos or shop online in return for cash or points, which you can redeem through PayPal or gift cards. While the pay varies by website and task, it’s usually low, but the tasks take little time and effort.

Watch for: Before working for these sites or any other, search online for reviews from other workers who’ve tried them. Learn what you can about their experience, earnings and success with customer service. SurveySay.com, for example, lists reviews of Swagbucks and similar sites. Search the Better Business Bureau website to get an idea of how long an online employer has been in business and what consumers have said about it.

Whatever route you choose to earn quick money online, never pay for opportunities or give bank account information upfront. Learn more about avoiding online scams and time wasters.

Doing odd jobs online isn’t for everybody, even if the website is legitimate. But this method may be worth a try if you don’t mind humdrum work — and lots of it.

Laura McMullen is a staff writer at NerdWallet, a personal finance website. Email: lmcmullen@nerdwallet.com. Twitter: @lauraemcmullen.

Stock Market Basics: What Beginner Investors Should Know

If you’re not well-versed on the basics of the stock market, the words and numbers spewed from CNBC or the markets section of your favorite newspaper can border on gibberish.

Phrases like “earnings movers” and “intraday highs” don’t mean much to the average investor, and in many cases, they shouldn’t. If you’re in it for the long term — with, say, a portfolio of mutual funds geared toward retirement — you don’t need to worry about this lingo, or about the flashes of red or green that cross the bottom of your TV screen. You can get by just fine without watching the market much at all.

But if you’re interested in trading stocks, you need to start with some basic knowledge about how the stock market works.

Stock market basics

The stock market is made up of exchanges, like the New York Stock Exchange and the Nasdaq. Stocks are listed on a specific exchange, which brings buyers and sellers together and acts as a market for the shares of those stocks. The exchange tracks the supply and demand — and directly related, the price — of each stock. (Need to back up a bit? Read our explainer about the ins and outs of stocks.)

But this isn’t your typical market, and you can’t show up and pick your shares off a shelf the way you select produce at the grocery store. Individual traders are typically represented by a broker — these days, that’s often an online broker. You place your stock trades through the broker, which then deals with the exchange on your behalf.

The NYSE and the Nasdaq are open from 9:30 a.m. to 4 p.m. Eastern, with premarket and after-hours trading sessions also available, depending on your broker.

Stock market indexes

When people refer to the stock market being up or down, they’re generally referring to one of the major market indexes. A market index tracks the performance of a group of stocks, which either represents the market as a whole or a specific sector of the market, like technology or retail companies.

You’re likely to hear most about the Standard & Poor’s 500, the Nasdaq composite and the Dow Jones industrial average; they are often used as a proxy for the performance of the overall market. Investors use indexes to benchmark the performance of their own portfolios. You can also invest in an entire index through index funds and exchange-traded funds, which track a specific index or sector of the market. Read more about ETFs here.

Bull markets vs. bear markets

Neither is an animal you’d want to run into on a hike, but the market has picked the bear as the true symbol of fear: A bear market means stock prices are falling — thresholds vary, but generally to the tune of 20% or more — across several of the indexes referenced earlier.

Younger investors may be familiar with the term bear market but unfamiliar with the experience: We’ve been in a bull market — with rising prices, the opposite of a bear market — for over eight years. That makes it the second-longest bull run in history.

It came out of the Great Recession, however, and that’s how bulls and bears tend to go: Bull markets are followed by bear markets, and vice versa, with both often signaling the start of larger economic patterns. In other words, a bull market typically means investors are confident, which indicates economic growth. A bear market shows investors are pulling back, indicating the economy may do so as well.

The good news is that the average bull market far outlasts the average bear market, which is why over the long term you can grow your money by investing in stocks.

The importance of diversification

The above statement is true about a diversified portfolio — the S&P 500, which holds 500 of the largest stocks in the U.S., has historically returned an average of around 7% annually, when you factor in reinvested dividends and adjust for inflation. That means if you invested $1,000 30 years ago, you could have around $7,600 today.

That long-term growth would have happened despite several bear markets, which you can’t avoid as an investor. What you can avoid is the risk that comes from an undiversified portfolio. Individual stocks frequently fizzle to a lifetime loss of 100%, according to a recent working paper by Arizona State University professor Hendrik Bessembinder.

If you throw all of your money into one company, you’re banking on success that can quickly be halted by regulatory issues, poor leadership or an E. coli outbreak (yes, we’re talking about Chipotle). To smooth out that company-specific risk, investors diversify by pooling multiple stocks together, balancing out the inevitable losers and eliminating the risk that one company’s contaminated beef will wipe out your entire portfolio.

But building a diversified portfolio of individual stocks takes a lot of time, patience and research. The alternative is the aforementioned ETF or index fund. These hold a basket of investments, so you’re automatically diversified. An S&P 500 ETF, for example, would aim to mirror the performance of the S&P 500 by investing in the 500 companies in that index.

The good news is you can combine individual stocks and funds in a single portfolio. One suggestion: Dedicate 10% or less of your portfolio to selecting a few stocks you believe in, and put the rest into index funds.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.

Managing Money on Minimum Wage

When you’re earning minimum wage, it might seem as though you need to work magic to make ends meet — let alone save for the future.

But you don’t have to be a financial wizard to effectively manage your money. By setting clear goals with achievable milestones, you can put yourself on the path toward a better future.

Map out attainable goals

First, set your financial goals. This might feel overwhelming when you’re contending with challenges today, but it’s actually the best way to overcome those challenges. Your goals might include getting out of credit card debt, establishing an emergency fund or saving for college. You’ll want to break bigger goals down into smaller, more quickly attainable achievements so you’ll stay engaged and encouraged.

“It’s important for people to think about those short-term savings goals,” says Jonathan Mintz, president and CEO at the Cities for Financial Empowerment Fund, a nonprofit that works with low-income individuals and families throughout the United States. “Those are the important first steps to make sure that you’re moving forward.”

Create a flexible budget

Next, build a budget that supports your goals. Consider starting with the 50/30/20 budget. This approach allocates: 50% of your income to necessities such as housing and groceries; 30% to “wants” like entertainment and dining out; and 20% to savings, such as a retirement or emergency fund, and debt, such as credit card bills.

  • 50% of your income to necessities such as housing and groceries;.
  • 30% to “wants,” such as entertainment and dining out
  • 20% to savings, such as a retirement or emergency fund, and debt, such as credit card bills
You’ll need to know your monthly income to get started. If it’s variable due to irregular hours or tips, use old tax returns to establish an average. Then use a budgeting worksheet to visualize your expenses. Include expenses that don’t occur regularly, such as car maintenance or health insurance copayments. Compare your expenses with the 50/30/20 budget and adjust those three buckets to fit your circumstances. For example, if credit card payments wipe out your 20% allocation for savings and debt, you might temporarily reduce your “wants” spending so you can still make progress toward your savings goals. To make the process easier, you can track your spending and progress with an app or website. And be sure to revisit your budget whenever your income or expenses change. Open checking and savings accounts People with lower incomes and greater income volatility are less likely to have a bank account than higher income individuals. And unbanked workers must often spend money on prepaid debit cards or check-cashing services to get paid. “Not only are those expensive ways to operate, but it actually slows down the progress that you’re trying to make,” Mintz says. A NerdWallet study found that unbanked households that used a prepaid debit card paid $196.50 to $488.89 in fees in 2013. Start by opening a savings account separate from your checking account, if you have one. (If not, open one of each.) That will make your saved cash easier to track and harder to spend, but it’ll still be accessible when you need it. Choose your accounts carefully. Some charge fees if you can’t meet minimum direct deposit or monthly balance requirements, and that can be a financial drain, says Matthew Konsa, associate director of programs at Neighborhood Trust Financial Partners, an organization that provides financial empowerment programs for people with low to moderate incomes in New York. Consider automating There are some big benefits to automating your bill payments and savings. You’ll avoid missing payments and getting hit with late fees while steadily building your fund for emergencies or long-term savings goals. However, you might not be ready to fully automate payments if you don’t always have enough money to cover your bills. And checking account overdrafts come with fees and can indirectly hurt your credit score. Weigh the benefits and risks to determine if automating is right for you. Get government help Federal programs for low-income workers can lower some of your living costs. It’s worth looking into options such as the housing choice voucher program, Medicaid, the Health Resources and Services Administration, and the Supplementary Nutritional Assistance Program. You might also be able to find help with child care, utilities, heating, car insurance and phone costs, to name a few. Use the government’s benefits finder to determine which federal programs are available to you. If you receive assistance, adjust your budget to account for it. If your income isn’t stable, make sure to research program requirements before you apply; a good week at work might jeopardize your eligibility. Many programs determine eligibility on an annual basis, but recertification periods for SNAP benefits can be as often as monthly for users without regular income. Keep this in mind if your income is close to the qualification threshold. Avoid bad debt It can be tempting to fall back on credit cards and payday loans, but those can lead to more trouble, especially if you don’t have an immediate way to pay them off. “People don’t recognize that these bridge or ‘payday’ loans are only exacerbating the challenge, rather than giving them a break,” Mintz says. Instead, he suggests seeking professional financial help from a trustworthy source, such as city counseling services and community-based nonprofits. You can also get fast cash in other ways, including selling your stuff or getting a community loan. It’s worth taking a look at your monthly expenses and trying to lower your bills to create more wiggle room in your budget, too. Build credit Regardless of your goals, building credit should be a part of your financial game plan. Your creditworthiness doesn’t just affect your credit card’s interest rate. It can also impact the apartment you can rent and your cell phone plan, among other things. If you don’t know where you stand, start by getting a copy of your free credit report, which contains information that determines your credit score. If you have poor credit — or no credit — look into options such as credit-builder loans, secured credit cards and secured personal loans. Then make sure to use your credit wisely. That means paying bills on time, avoiding credit card debt and keeping your oldest accounts open as long as you can. If you already have credit card debt, focus on paying off as much as possible, starting with the balance on the card with the highest interest rate. Boost your earnings If you’re living on minimum wage, it’s important to explore other money-making options. Start by assessing your skills, experience and interests. For example, if you’re always the designated photographer for friends’ gatherings, maybe you can offer your photo skills on a freelance basis. If you have time to explore a new line of work, take advantage of your local job training center or visit careeronestop.com for online training options. Free online courses or community college classes might also be helpful.

If you pursue a college degree, fill out the Free Application for Federal Student Aid, or FAFSA, for each year you’re in school to access financial aid such as grants and scholarships. And be wary of for-profit colleges. On average, students at these schools pay more than those who attend an in-state public school, according to data from the National Center for Education Statistics. Those who attended for-profit colleges are also more likely to be unemployed six years after starting at the school, according to a National Bureau of Economic Research paper. If you’re considering a for-profit college, ask these questions before you enroll.

Remember, you don’t have to tackle all these steps at once. Start with smaller tasks — setting goals and creating a budget — and then move on to larger ones, including building credit and increasing your earnings. With time, you’ll become more comfortable and confident managing your money.

Devon Delfino is a staff writer at NerdWallet, a personal finance website. Email: ddelfino@nerdwallet.com. Twitter: @devondelfino.

What Is Private Mortgage Insurance? (PMI)

Buying a home usually has a monster obstacle — coming up with a sufficient down payment. You can put less than the traditional 20% down payment but the lender will likely require you to buy mortgage insurance.

The concept behind mortgage insurance is not quite the same as with other insurance plans. You pay a monthly premium to the insurer who protects the mortgage lender in the event you default. There are two types of mortgage insurance: government and private.

What is private mortgage insurance? (PMI)

PMI is insurance for the mortgage lender’s benefit, not yours. It’s a concession often required when your down payment on the purchase of a home is less than 20%. Because the lender is assuming additional risk by accepting a lower amount of upfront money towards the purchase, they will often call for the borrower to purchase private mortgage insurance.

Private mortgage insurance will pay the lender a portion of the balance of the principal due if you stop making payments on your loan. PMI will typically pay the difference between a conventional 20% down payment and what a borrower actually paid upfront.

For example, if you put down 5% to purchase a home, private mortgage insurance might cover the additional 15%. A loan default triggers the policy payout as well as foreclosure proceedings; so that the lender can repossess the home and sell it in an attempt to regain the balance of what is owed.

The cost of private mortgage insurance is based on the size and type of mortgage loan you are applying for, your down payment and credit score. The average annual cost can range from 0.55% to 2.25%, according to insurance firm Genworth and the Urban Institute, an economic think tank.

GET EXPERT ANSWERS TO YOUR MORTGAGE QUESTIONS Get personalized help from an unbiased mortgage broker. Understand your options and find the best rates. Get Started COMPARE MORTGAGE RATES FOR FREE See personalized mortgage rates in seconds using our comprehensive mortgage tool. Check Rates When can you cancel private mortgage insurance?

Once your mortgage principal balance is less than 80% of the original appraised value or the current market value of your home, whichever is less, you can generally cancel the private mortgage insurance. Often there are additional restrictions, such as a history of timely payments and the absence of a second mortgage.

Mortgage lenders are required to tell you at closing how long it will take for you to reach that loan-to-value mark, and update you annually of any cancellation options. Generally, mortgage lenders are required to cancel PMI once the mortgage balance dips down to 78% of original value.

Private mortgage insurance can also be terminated if you reach the midpoint of your payoff. For example, if you took out a 30-year loan and you’ve completed 15 years of payments, PMI may be terminated.

Mortgage insurance for FHA and VA loans

Mortgage insurance for loans guaranteed by the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) operates a little differently from conventional mortgages.

VA loans to active, disabled or retired military servicemembers and their eligible surviving spouses never require mortgage insurance, but most borrowers will pay a “funding fee” ranging between 1.25% and 3.3% for purchase loans. This fee depends on a wide variety of factors, including whether you’ve applied for a VA loan before and how much money you’re putting down, if any.

VA loans are also available to certain reservists and National Guard members. Others may also qualify. The VA Eligibility Center has details at 888-768-2132.

Mortgages backed by the FHA require a 1.75% upfront mortgage insurance payment as well as monthly mortgage insurance premiums ranging from .45% to 1.05%, depending on the loan term and amount. (Premium rates as of January 2017.)

The down payment decision

Mortgage insurance allows a lot of people to become homeowners who otherwise might not be able to. And it’s natural to want to put down as little money as possible, but you’ll want to consider the real costs now and down the road.

The way the system works is: The larger the down payment, the better your financing deal. You’ll get a lower mortgage interest rate, pay fewer fees and gain equity in your home more rapidly. But ultimately it’s a matter of balancing your short-term financial capabilities with the realities of your local real estate market and your future savings and earnings potential to determine the best long-term financial result for you.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: @halmbundrick.

Car Wrecks Rise as Phones Divert Drivers’ Eyes

America’s roads are increasingly dangerous, with the number of car crashes increasing every year and reaching nearly 6.3 million in 2015, the latest year for which data is available, according to the U.S. Department of Transportation. That’s up from about 5.3 million accidents in 2011.

The rise in crashes is attributed to several factors, including an increase in driving overall, but one of safety advocates’ top concerns is distracted driving. A recent poll supports those worries: A majority of people admitted to driving distracted at some point during the past year, according to a Harris Poll survey conducted for a NerdWallet report on the state of driving in America.

» MORE: Your personality may affect — geez, look out! — distracted driving

Cell phones are our biggest distraction

Mobile phones help us connect with the world, but many of us continue to stay connected while driving, too. Two-thirds (67%) of Americans who have driven in the past 12 months said they had used a cell phone while driving, according to NerdWallet’s survey.

And this distraction is taking a toll: 14% of all fatal “distraction-affected” crashes involved cell phone use in 2015, the latest year for which data is available from the Department of Transportation.

“We all want to see these alarming accident numbers reversed,” says Robert Passmore, assistant vice president of personal lines policy for the Property Casualty Insurers Association of America, a trade group. “For that to happen, our driving habits need to change. Putting down our smartphones and staying focused on the road can reduce accidents.”

Among those in NerdWallet’s survey who used a cell phone while driving, 38% said they had texted while driving, including using voice-to-text options. Texting while driving is perhaps the best-known distraction and has been banned in 46 states and Washington, D.C., according to the National Conference of State Legislatures.

But cell phone use that contributes to crashes may be underreported, according to the National Safety Council, for reasons including:

  • In many cases, police officers rely on drivers to admit cell phone use
  • Officers may not report cell phone use if it’s not a violation in their area or if more serious or obvious violations are committed
  • Crash reports might not be updated if an investigation later finds that cell phone use contributed to the accident

According to NerdWallet’s survey, of those who used a cell phone while driving in the past year, 13% said they weaved in and out of lanes, almost went off the road, almost had an accident or did have an accident.

» MORE: Who’s going to pay for that? Maybe you (and your insurance)

Other driving distractions

Among Americans who have driven in the past 12 months, 62% said they were distracted by something other than a cell phone — including a majority (58%) who said that they ate behind the wheel and 10% admitted to performing personal care, such as shaving, applying makeup or caring for their nails, the NerdWallet survey found.

Driving distractions other than cell phones Among Americans who have driven in the past 12 months, 62% admit to doing at least one of the following: Eating58% Grooming: Shaving, nail care or applying makeup10% Caring for a child in the back seat9% Using a laptop or tablet7% Changing clothes5% Getting intimate4% Drinking alcohol4% Reading a book, newspaper or magazine4% Putting foot out window or both feet on dash while using cruise control3% Playing an instrument1% Source: Survey conducted May 3-5, 2017, by Harris Poll on behalf of NerdWallet. Respondents were allowed to choose more than one activity.

» MORE: NerdWallet’s 2017 Driving in America report

Staying focused when others aren’t

If you have an iPhone, Apple may soon help you become a less-distracted driver: The new iOS 11 operating system, set to be released this fall, includes a feature that can detect when you’re driving and will silence notifications.

There are also smartphone apps to help you avoid distracted driving, including:

  • SafeDrive, an app that turns safe driving into a game, allowing you to earn points you can trade in for discounts on products and services
  • DriveMode by AT&T is available for customers of all cell phone carriers in English and Spanish. It will silence alerts and auto-reply to text messages while you drive; similar apps are available from Sprint and Verizon (Android only).
  • LifeSaver is an app for parents who want to monitor a teenager’s driving. It locks the phone while the teen is driving and sends notifications when they have arrived at a destination. It’s also available for businesses with fleets of vehicles.

Passengers can help curb distracted driving, too. A recent survey commissioned by Travelers Insurance found that 48% of passengers said that they always or often speak up when they’re riding with someone who’s using a phone while driving.

“I think that’s very encouraging,” says Chris Hayes, second vice president of transportation risk control for Travelers. “Passengers should feel they have a stake with each ride.”

Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: lacie@nerdwallet.com. Twitter: @LacieWrites.

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