What’s Gap Insurance?

October 8th, 2015

IMG_0192This week, driving home from a meeting, I saw a flipped car on the other side of the road. The next night, I was talking with some friends about this accident, and the topic of Auto Insurance came up.  One person piped up about Gap Insurance.  Another person had never heard about Gap Insurance.

So what is Gap Insurance? Gap Car Insurance will pay the difference between the actual cash value (ACV) of the vehicle and the current outstanding balance on your loan or lease.  Depending on the policy, it may also pay your regular insurance deductible.   Some financing companies and lease contracts require Gap Insurance.

So how does it work? If your vehicle has been totaled by a covered peril such as an accident, theft, fire, flood, tornado, or vandalism, your insurance company will pay you the actual cash value for your car if you have comprehensive and collision insurance.  This amount is often considerably less than the amount you still owe on your loan or the amount due for a lease payoff.

When the amount of your ACV payout is less than what you owe on your lease or loan, the loss from this financial shortfall is the “gap” you would be left owing.  Note:  Not all gap policies pay your deductible.

Here is an example – a story to show how gap insurance might work.

  1. You purchase a new car for $20,000 and drive it off the lot.
  2. After paying the down payment ($1,000) you owe $19,000 in car payments over 4 year period (0% interest loan = $395 car payment.)
  3. You purchase car insurance (including comprehensive and collision) with a $500 deductible to protect you against damages and loss.
  4. You have an accident while you are still upside down on your loan or lease (meaning you owe more on the car than it’s worth) and your vehicle is totaled out.
  5. The insurance company determines that the actual cash value of the card is only $16,500, but at the time of the loss you still owe $18,500.

If you have gap insurance, it will pay the difference of $2,000.  ($18,500 loan balance – $16,500 car insurance payment).


Consumer Knowledge, Insurance

When Dad Speaks, I Listen – Part 2

October 6th, 2015

IMG_0192Using the tips my father had shared many years ago about the process of buying a car, I recently purchased a car to replace the one I drove for 8 years.  The car I traded had 213,000 plus miles. The picture is the new car.

I spoke with the salesperson and he indicated that the mechanics had checked the traded-in car and didn’t find any major problems.  The salesperson shared that was a sign of a car that had been well taken care of – regular oil changes, tires rotated, and regular maintenance.

My dad told me a long time ago that if you take care of your car properly, it will take care of you.  Only when the battery went dead did I have a problem, but since I had a relationship with the mechanic who provided me service, that issue was resolved in a timely fashion.

Whether it is a car, an appliance, or a lawnmower – if you take care of them, they will take care of you.


Consumer Knowledge, Smart shopping, Spending plans

Just Ask

October 1st, 2015

Packages-Thinkstock-482302288My daughter had a negative experience a while back when the Post Office delivered a package to her apartment; it didn’t fit in her mailbox, so they left it outside her door.  Unfortunately, she never received it; she believes that someone walking through the hallway simply stole it.

She called the Post Office, who verified that it had been delivered and said there was nothing they could do; she called the apartment complex management, who said there was nothing  they could do about it either.  But when she called the company she purchased the item from, they were wonderful – they expressed regret, and replaced the lost merchandise.  For the replacement package, she contacted the post office about her options, and they explained that she could have all packages held at the post office, which guarantees that packages won’t be stolen from her doorstep in the future.

My daughter’s story provides lessons about consumer precautions when having merchandise delivered.  Note: there is one more option she would have explored, if the vendor hadn’t replaced the lost merchandise.   She would have checked with her credit card company to see what protections they offer; many credit cards offer automatic protection against lost or damaged packages.  It’s something to think about when choosing a credit card.

But there’s a bigger lesson here, too: it’s smart to ask.  When things go wrong, or even when nothing has gone wrong but there is something you need, you can only gain by asking a business or agency to help you.  They won’t always be able to help, but they usually will if they can.

Do you have a story of a time you asked and it paid off for you?



Consumer Knowledge, Goals, Spending plans

No Place Like Home

September 29th, 2015

Guest blogger Kelsy Reynaga writes:

Wheat-Thinkstock-178465588Maybe you recognize the quote “There’s no place like home” from The Wizard of Oz. Since I’m a Kansas girl, people love quoting this classic movie to me. The main character (Dorothy) was lost and wanted to go back home. On her journey she met some interesting characters who guided her through her journey.

In a way we are all like Dorothy: we have something that we would like to achieve but may not know how to get there. The process of setting goals is important not only in your personal life but also for your financial success. You may have a goal of buying an elephant (!) OR something more realistic like paying off your student loans. In the financial world there is an acronym used for goal setting called SMART:

  • S stands for Specific; clearly identify what you want in exact terms.
  • M stands for Measurable; identify how much you will need, or how will you know you are making progress toward your goal.
  • A stands for Attainable; identify steps that lead to achieving your goal.
  • R stands for Realistic; if your goal is challenging, what sort of obstacles may stand in your way?
  • T stands for Time-defined; when do you plan to reach the goal?

Let’s walk through these steps with an example. Suppose I want to see some elephants. I need to be more specific about where I want to see them. Do I want to go to the local zoo or travel to another country? How much do I need to save to travel to Africa? Can I do this? Is this goal realistic? How long will it take for me to save up money for this trip? Those questions are practical and can be applied for any goal.

By using SMART, you are able to think through the goal and realistically plan for it. If I officially decide that my goal is to visit Africa to see elephants in their natural habitat, then I might learn that I need to save $4,000 to visit Africa for 2 weeks. This can be done if I save money from each paycheck for this trip. One obstacle may be that I am not currently saving any money from my paychecks; I’ll need to identify how to overcome that obstacle. If I decide that I want to achieve this goal in 3 years, I create timeline which lets me figure how much I need to save each month for this big trip. By first looking at the big picture goal, and then going into detail, you prevent a lot of stress and wasted time, and you are more likely to achieve your goal.

Perhaps if Dorothy had used SMART instead of just dreaming about being home, she might have reached home much faster.

Kelsy Reynaga is a senior at Iowa State University majoring in Child, Adult and Family Services and minoring in Financial Planning & Counseling.


myRA- Another way to Contribute

September 24th, 2015

125183558Changes – good changes – are coming in how individuals can make contributions to the new myRA accounts.  Our May post shared some details of how to enroll and who was eligible. At that time, the only way to participate was to have your employer withhold contributions from your paycheck. Beginning this fall, you can submit to the US Treasury your bank routing and account numbers for auto-withdrawals.  The new option  should make it possible for self-employed individuals to participate in this new Roth option.

When you file your tax return at the beginning of 2016 you will also be able to direct all or part of your  federal tax refund to your account. In the refund section of your tax return simply mark the “Savings” box, provide your myRA account and routing numbers, and designate how much of your refund you want to put towards your savings. If your income falls within the range that qualifies for the Retirement Savings Tax Credit, you’ll realize additional tax savings.


Retirement, Saving ,

Making it Simple

September 22nd, 2015

YMYF-CoupleBankFormSometimes the worst part of getting things accomplished in the finance world is the process you must follow to file paperwork. Loan applications take several steps. My local bank officer has often lamented the number of forms he must have me sign to meet the “rules and regulations”.

Evidently there is hope that the steps will improve in some cases. Parents have often felt extra pressure at tax time to have their returns filed as soon as possible so the FAFSA form that qualifies their child for student aid can be submitted in a timely manner. Schools advise parents that the sooner the form is submitted the better  the student’s chances for an attractive financial aid package.

Several years ago, the IRS made it possible for individuals to electronically link their tax return to their financial aid application, which simplified the process and helped with accuracy. Recently the President signed an order that will make it possible for parents to use the previous year’s tax return on their application. The change doesn’t occur until 2016-17, but it should eliminate some of the stress felt by families. Students enrolled in college for Fall of 2016 will be the last to experience the “January rush” to get their 2015 tax returns completed so that information can be used for FAFSA.  Students planning to attend school in Fall of 2017 will be able to complete financial aid paperwork in the fall of 2016, using tax information from the previous year (2015) to qualify for student aid.  The financial aid process will be simpler without the rush to file tax returns.

Now if we could just simplify the paperwork for real estate and auto loans!


Consumer Knowledge , ,

Craig’s List Adventure

September 17th, 2015

craigsListInitially, my brother and I thought dad would be in a nursing home within 6 months. He required assistance to climb the stairs to his room; his balance and posture was so poor that he would tip over when standing without a walker; one toe would drag a bit, causing him to trip; he was often confused and unable to focus. His deterioration over the past year seemed to be accelerating.

I had hopes that physical therapy would improve his balance and posture, build strength and teach him how to navigate our home safely. The $160 in co-pays for a month of physical therapy would be quickly recouped if it allowed him to live even one day more in my home as opposed to going to a nursing home. The therapy, combined with the reduction in stress when he came to live with me, has made a huge difference in both his physical and mental state. He now walks without walker or cane,  can climb stairs unassisted, and instead of a 6 month stay, we now think dad could easily be living with me for 6 years.

The therapist gave dad “worksheets” for him to continue his exercises at home. Dad has lost his ability to apply what is pictured and described on the pages. And, the pages were easily misplaced and for him…“out of sight” meant “out of mind.” I began to see a deterioration in his mobility after he slacked off on his exercises – even though he spends most of his time physically active outside. Winter is coming and inactivity has proven detrimental to his physical and mental health.

An acquaintance, who cares for a parent with dementia AND is a cardiac rehab nurse, suggested an exercise machine that works the upper and lower body, providing a full range of motion…costing a mere $5000. It would provide the much needed exercise and is too large to lose like “worksheets.” She was quick to suggest looking at Craig’s List where she had found one for her mom for $3000. The mention of Craig’s List made the hair on the back of my neck stand up.

My adventure with Craig’s List was positive. Communication with the seller is anonymous…we emailed back and forth through their on line system where no names or addresses were revealed unless you shared it yourself. At a public parking lot we met for the first time to get a sense of each other’s character and the risk we were exposed to.  I then followed him to his home in the country. I texted his address and my location to my husband throughout my travels so he knew where I was at all times. Because I paid cash, the machine was mine for $2800 which is still less than one day in a nursing home. I am happy to say, dad is logging 45 – 50 minutes a day on his new machine and I have not had to remind him once to do his exercises. His mobility has improved, it occupies his time and makes him feel like he is doing something to improve his situation.

This has been a good investment. ~Brenda

Consumer Knowledge, Smart shopping

Shift in Priorities

September 15th, 2015

imageI dread the day when dad no longer knows who I am, but in some ways I think these earlier stages of Alzheimer’s may be more difficult, for me as a caregiver, than the final stages. Dad is/was a very intelligent person, and he knows it. He was a problem solver…very creative, inventive, entrepreneurial, and giving of his time and talent. He never sat still and did nothing. He doesn’t remember or chooses to forget the fact that he is 81 and has an incurable disease that has stripped him of many of his skills and talents. To do nothing (sit and stare at a TV or take naps), is unbearable for him. He becomes depressed, cries, and then starts scheming…trying to find a way to get to his wood shop, three hours away.

He wants to be turning beautiful wood bowls on a lathe or putting a new roof or siding on my shed; cutting wood on a table saw or skill saw. His passion is bees and I am thankful it occupies a lot of his time and most of his thoughts right now. What he really wants/needs to do right now is build 24 new supers (wooden boxes) for his bees to fill with honey. His doctor says he shouldn’t use power tools and I agree.

I have been trying to get dads finances in order. I suspect his eye care and dental needs have been neglected for several years and had hoped to schedule appointments this month, but have instead purchased 30 super kits for his hives which dad can assemble and paint for his bees. He is anxious for their arrival and I am thankful that, though the kits are more expensive than building from scratch, he will be busy, productive and also safe (no power tools required).

I never thought I would see a day where I would put a ‘want’ ahead of a much needed dental or eye exam, but that is exactly what I have done today. Putting off dad’s checkups for one more month is not going to hurt anything.

Taking care of dad’s physical NEEDS (food, shelter and clothing) is easy. Caring for his psychological needs and wants is much more difficult and time consuming, and this month…more expensive. ~Brenda

Goals, Spending plans

80/20 Rule

September 10th, 2015

80 20 rule grThink about time management, and the clutter in your home, and then think about this next statement.

Most people use only about 20 percent of what they own. Think about the clothes that you have worn in the last two weeks – you probably only wore 20 percent of the clothes that you have. The other 80 percent is just taking up valuable space, getting in the way, and causing more work than is necessary. Some people would call that clutter in your life.

This rule also applies on the job. The rule indicates that 20 percent of a person’s effort will produce 80 percent of the results. As a business person, if your goal is $100,000 in sales, 20 percent of your efforts toward this goal will result in $80,000 in sales. The remaining 80 percent of what you do will only result in the remaining $20,000.

Attention to the 80/20 rule can help you prioritize your time, focusing on tasks that have the most impact. The rule, called the “Pareto Analysis Principle,” is useful to anyone who is juggling many tasks.


Consumer Knowledge, Goals

Keep Your Travel Budget and Memories in Check

September 8th, 2015

IMG_0032Earlier last month, I was entertaining an elementary friend and her husband who visited Dubuque. I tried to mix the free activities with a few items that had a small price. There are several fall celebrations that you might want to take in, too.

Families are always looking for ways to cut expenses so here were some of the free items included: drive down Loras Boulevard (built-in roller coaster ride), visiting Julien Dubuque memorial; river walk with the new art work; spending time at the Arboretum and Saturday morning Farmer’s Market.

To mix things up, we took in the 4th street Elevator (Felenon Place Elevator); currently there is a Titanic exhibit at the National Mississippi River Museum and Aquarium, so we visited that as well as the overlook of the Mississippi River at Balltown. The next afternoon, we had a river cruise. The bonus here was seeing an eagle nest on one of the shore trees and looking at a loaded barge going up the river and seeing the downtown area from the river point of view.

We did find a few good places to eat while they were visiting.
Explore the free opportunities while you are traveling.


Smart shopping, Spending plans