When it's OK to hurt your credit
It's smart to keep your credit score high, said Geoff Williams at US News, but on occasion, it's "OK, reasonable, or even smart" to make financial decisions that will cause your score to drop. In some scenarios, taking a hit to your score can actually contribute to the "greater good" of your overall financial health. Applying for multiple loans, for instance, will lower your score by a few points, but it can also provide more options for favorable financing. When you're starting a new business, taking on credit card debt might be unavoidable. However, a small score drop that helps you save money in the long run is likely worth it. Joining a debt management program will also hurt your score, but if it helps you get control of your finances, it's better than hitting rock bottom.
Assessing muni bonds
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With Puerto Rico unable to pay its $72 billion debt, and state and local budgets falling short across the U.S., are municipal bonds still a safe bet? asked Tara Siegel Bernard at The New York Times. Individual investors hold more than two-thirds of the $3.7 trillion invested in municipal bonds, either directly or through mutual funds. But despite the troubling headlines, those investments are mostly safe. Default levels remain "exceedingly low and are not expected to rise meaningfully." The default rate of the S&P Municipal Bond Index was 0.17 percent in 2014 and about 0.11 percent in 2013. But there are "some basic lessons that bear repeating." Invest in a diversified portfolio of municipal bonds and know what you own. Some 52 percent of municipal-bond mutual funds contain Puerto Rican debt, but the exposures range from less than 1 percent of the fund's assets to nearly half.
Don't forget about your IRA
"Too many investors view IRAs simply as parking accounts for their rollover 401(k) money," said Ruth Davis Konigsberg at Time. As a result, most IRAs go untouched. Less than 9 percent of investors with an IRA contributed to it in 2013, according to a study by the Investment Company Institute. Other studies put that number even lower. It's true that IRAs don't offer the same benefits as 401(k)s, but it's still a chance for your money to grow tax-deferred. The annual contribution limit, at $5,500 (or $6,500 for those over 50), is lower than the $18,000 allowed for a 401(k), but even that amount "can make a sizable difference to your retirement security."
