Financing a Car Purchase

car moneyThis past week I was reminded of how different a simple financial transaction can be depending on what you are buying, how much you are spending, and your personal history of using credit. I was helping an individual find and buy a used car. Advertising would lead you to believe that there are plenty of good used cars to select from and financing is affordable.

We took advantage of the resources available on the web to comparison shop. My personal lesson in how the experience can be different began after a suitable choice was found, test driven and selected. It included the following key points:

  • High mileage vehicles face limited financing options. The vehicle we found had an odometer reading just over 100,000, was in excellent condition with a history of excellent maintenance.  The dealership told us only one bank they worked with would offer financing for high mileage vehicles and your credit history had to be excellent.
  • The cost of the vehicle must be sufficient to justify writing the loan. The vehicle was priced right compared to what online sources reported for its make and mileage. When an offer was made to put some money down to lower the monthly cost, a warning was given that we couldn’t. If the amount financed dropped too low, financing wasn’t available. There was no money to be made for writing the loan.
  • Interest rates are higher for older vehicles with high mileage and you are limited on how long you can finance. Okay, so we already knew this part; we had already visited with the local bank to determine financing options available through them, and they identified the same issue.

Transportation is a key part of being able to get to work and meet family needs, especially in rural communities where public transportation is non-existent. After my shopping experience, I understand more clearly the barriers families face in obtaining reliable transportation that is affordable. To learn more about the issue and possible steps to address the problems with affordable transportation read this study.

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Generational Poverty

student“The nut does not fall far from the tree” … “Like Father, Like Son” … “A chip off the old block.”  These expressions tell us that we are connected to our parents and all the generations that precede us. The good news is… we are not only the sum of our genetics.

I have had the privilege of knowing a young man who is Hispanic and hearing impaired since being his elementary school sign language interpreter. He grew up in foster homes after 5th grade. Despite the examples set by his parents, he has grown into a loving, kind, consistent and dedicated parent. Because of his hearing impairment, he has never held a job that would provide much more than minimum wage and benefits, yet he manages his money well and has provided a good home for his two children.

So where did he learn the skills of parenting and managing money? Why is he focused on his kids doing well in school so they can go to college, even though he never wanted or expected the same for himself?  He learned from the people that surrounded his life…mentors.  His first foster-mom was his teacher…a woman he lovingly calls g’ma is a retired nurse and neighbor…his elementary school bus driver and his wife belong to his church and invite him to supper and to celebrate birthdays and holidays…and I like to think that I, his interpreter, along with my husband who provides him a job on the farm when he is laid off, have made a difference.

According to Dr. Donna M. Beegle, the author of The Poverty Training, there are 5 research-based practices that help move people out of poverty.

  1. Focus on what they do know and what skills they do have.
  2. Tell them what is good about them. This will help them develop resiliency.
  3. Help them grow their assets, both internally (conflict resolution skills, sense of purpose, etc.) and externally (adult relationships, caring schools, etc.).  
  4. Develop a trusting relationship with them and help them know the right people to encourage education.
  5. Understand (without judgment) what motivates their actions.

Want to make a difference and break the poverty cycle for someone in your community? Consider participating in the November Juntos facilitation training in Iowa City.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Maybe After A Million Words

words“Maybe after a million words.” That’s a quote from Anne Sullivan in the movie, The Miracle Worker. The movie is about Helen Keller and the governess, Anne Sullivan, who helped Helen learn to communicate through sign language. In the scene Anne Sullivan is explaining to Helen’s mother that signing is like “baby gibberish” and that children do not understand language in the beginning but somehow learn it if they hear it often enough. Anne Sullivan predicted that Helen would be able to communicate, “…. maybe after a million words.”

That’s a lot of words!

I mention this because I believe financial literacy is like any other language and like any other language we need to hear it often to understand it. Young children learn best by observing and mimicking adults. Our children may not understand the concept of credit, money, or savings but they are very good observers and they learn from us. This process is called financial socialization and research by the Consumer Financial Protection Bureau indicates that children form personal financial habits as early as preschool and these attitudes often carry into adulthood.

So how can we help our children learn appropriate financial behaviors?

Parents are often the biggest and most positive influence of the financial socialization of their children. They can help their children by providing opportunities to learn and interact with money. Have children create shopping lists and help them to comparison shop and select grocery items. Include children in family financial decisions, planning, and saving for goals such as vacation and college education. You don’t have to have a lot of money, in fact children often learn best when choices are limited and they can observe the difference between needs and wants.

Consider reading to your child about money topics. Some good choices are; The Berenstain Bears’ Trouble With Money, (Stan & Jan Berenstain), or A Bargain for Frances, (Russell Hoban)

mary w kayak

A great resource for families and libraries is the Money as You Grow Book Club guide which provides several family activities and more reading suggestions. Also, childcare providers can learn about hands on lessons and receive Childcare training credit by joining us for “Munchkins & Moolah: Teaching Preschoolers to Share, Save and Spend” classes.

Mary M. Weinand is a Human Sciences Family Finance specialist who works with individuals to help strengthen their ability to make informed judgments and make effective decisions regarding the use and management of money.

Mary likes to save for rainy days but carries an inflatable kayak in the trunk of her car for the sunny ones!

 

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Grab and Go Box

School bag. Flat style design - vector, line icon.

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My sister lives in Texas, where it is Hurricane Season. In the Midwest, we can have floods, tornadoes and severe winds. After the Katrina Hurricane, southern state Extension colleagues put together instructions for making a “Grab and Go Box.”  If you had a moment’s notice, would you be able to grab your necessary papers before leaving?  We have weather issues too.  Are you prepared?

Place papers in sealed waterproof plastic bags and store in a durable, sealed portable box. Store the box/backpack at home in a secure easily accessible location. If you need to leave your home, – grab the box and take it with you.  Keep the box with you at all times.

Things to include in your Grab and Go Box are:

  • Cash or traveler’s checks and roll of quarters (ATMs might be down)
  • Emergency phone numbers for: doctors, pharmacies, financial advisors, clergy, repair contractors, family
  • Copies of prescriptions – for medications and eye wear
  • Medical reports – children’s immunization records, health and dental insurance cards
  • Insurance policies – auto, flood, renters/homeowners – showing the policy numbers and contact numbers
  • Copies of deeds, titles, wills/trusts, durable power of attorney, healthcare directives, stock and bonds certificates, recent investment statements, home inventory, birth, death, adoption and marriage certificates, passports, employee benefit documents, last year’s state and federal tax returns.
  • Backup copies of computer financial records
  • Computer user names and passwords
  • Keys to safe deposit box
  • Irreplaceable personal photos
  • List of Numbers – social security, bank accounts, loan, credit card(s), driver’s license and investment account
  • List of debts obligations –due dates and contact information

Having an out of state contact can be helpful so you can let family and friends know you are okay.  When my sister evacuated from Hurricane Rita, my family was grateful that she called me about her whereabouts during her travels.

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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Are You Prepared???

lightening

Last weekend, we had thunder, lightning, tornado, high winds and rain. Welcome to living in the Midwest.

One of my colleagues lives on a farm; during the storm, he looked out at his barn to see an orange glow on the west side of the barn, then a moment later it was gone.  The next morning he found that the white siding was singed and black, and some of the power supply wiring had melted and frayed.  He realized it had been a close call, and that the barn had been spared because of the heavy rain.

He thought about what could have happened – the barn could have been destroyed by fire, which would have been a major loss for his dairy operation. Luckily, the cows were out to pasture.

In addition, a fire would have also destroyed his collection of tools, weight equipment, half basketball court in the barn, musical equipment and many other items that were kept in the barn. When I talked with him today, I asked if he had an inventory — would he have been able to make a list of everything he had lost?  Even great insurance coverage only works if you can list everything that needs to be replaced.

He thought maybe he should make a list or take some time to videotape the barn’s contents for insurance purposes. Would you be prepared if something happened?

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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How Your Employer Impacts Your Finances

6870886851_76c9703cca_z retirement savingsI was visiting with a young family member and they shared their employer’s expectations for employee’s to donate generously to the corporate identified charities. The employer has set up an option through payroll to make those contributions and track involvement.

For families who are not in the stage of paying down debt or establishing a solid emergency fund, workplace giving through a payroll contribution has some advantages. For tax purposes, this method eliminates the need to get documentation about a donation directly from the organization, unless the contribution is more than $250 per month.  In some cases, employers provide a matching gift, so an initial donation could amount to even more giving. Additionally, a donation goes further because a payroll contribution reduces administrative costs by being funneled directly to the organization.

While working on changes to some retirement education programs, there were several articles extolling the positive impact when employers institute “automatic enrollment,” which means they withhold a certain percentage of their employees’ pay, put it into the 401(k) with identified investments, and then give the employees the opportunity to opt-out of the plan. The Bureau of Labor reports, of employees covered by a retirement plan at work, 30% fail to participate and estimates are the figure would drop to 15% if automatic enrollment was standard practice.

On both counts I see the value in the steps taken, but when you look more closely you discover some flaws. Financial planning emphasizes customizing steps to the specific risk factors of clients. A young family might be in a position where applying income earned to debt reduction makes more financial sense. A smart alternative for them would be to donate time and energy to local charities. Smaller amounts, lower than what an employer withholds from income that doesn’t compete with immediate needs, placed in wisely selected investments could also generate a realistic retirement nest egg.   In the long run, if debt is reduced and emergency funds are built, an employee might be less likely to borrow from the retirement account or liquidate it early.  As always, standard financial recommendations and actions might solve an identified lack of action, giving back to the community and contributions to retirement savings,  but can create unintended results. It’s okay to exercise your options and personalize how your paycheck is distributed.

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Sales Tax

thumb_tacksWhile standing in line at the grocery store behind a mother and her son, I was reminded of an instance with my sons many years ago. I thought it would be a good financial lesson to give my sons some money to purchase various grocery items. They made some wise choices and counted the money they would need to pay for their groceries including tax. After they paid for the items, I noticed my youngest son waiting for the clerk with an outstretched hand. “Honey, what are you waiting for?”, I asked.  He replied, …. “my tacks (tax)!”

Clearly my son was a bit confused about sales tax …. but then again many of us might not have a clear idea of what these funds are for. Given the current election climate and general discussions of taxation, now may be a good time to review sales tax and how is collected and distributed.  According to the dictionary, “sales tax is a consumption tax assessed when individuals and businesses purchase goods or services”.

Sales taxes are usually added to the cost of a product or service and are generally paid by the customer and can vary by state. Most states and taxing authorities impose a sales tax on goods and service and businesses are responsible for collecting sales taxes and remitting them to appropriate taxing authority. Taxes are (usually) paid by the retail consumer – whereas goods that are sold to wholesalers or manufactures are exempt from taxes.

In Iowa the state sales tax rate is 6. 0% but some communities add additional sales tax known as local options sales tax. In the U.S. sales taxes can play an important part in the growth and advancement of local communities and is often used for; community development, public services, and protective services.

For more information  * Tax rates in your area, https://www.idr.iowa.gov/salestaxlookup/index.asp.

* Business tax information contact: Iowa Department of Revenue and Finance, PO Box 10465, Des Moines, IA 50306-0465, or fax it to (515) 281-3906, or go on their website at www.state.ia.us/tax or  : http://smallbusiness.findlaw.com/business-taxes/sales-and-use-tax.html#sthash.svM2KMqG.dpuf

mary w kayakMary M. Weinand is a Human Sciences Family Finance specialist who works with individuals to help strengthen their ability to make informed judgments and make effective decisions regarding the use and management of money. Mary likes to save for rainy days but carries an inflatable kayak the trunk of her car for the sunny ones!

 

Guest Blogger, Mary Weinand

 

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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Planning is Key to Sales Tax Holiday

salestaxholiday-smIowa’s Sales Tax Holiday is coming up August 5 & 6: that’s 48 hours when you’ll pay no sales tax on clothing and footwear priced under $100.  This is a nice opportunity for us all to save a few dollars – but are you prepared?

Just like always, a smart shopper wants to buy the important items and skip the unimportant items. The more people you have in your family, the more you’ll benefit from having a plan!  Here are some ideas:

  • Budget. Figure out what you can afford to spend. Staying within your limits will prevent you from spending extra money on credit card interest.
  • Inventory. Go through your existing clothing to see what fits and is worth keeping, and eliminate items that are worn out, out-grown, or simply no longer useful. If you have several children in your family, this may take some time!
  • Big picture plan. After inventorying the clothing you’ll keep, the next step is to make a big-picture plan for what items you’ll need or want to purchase this fall. If you like to have at least 5 pairs of dress slacks to wear to work, and you only have three, then you might put 2 pairs of dress slacks on your list – you might even identify colors needed or preferred.  If you already have 3 pairs of jeans, and really two is enough, then you will know you can bypass the racks of jeans in the store.
  • Prioritize. Sometimes (or often!) we can’t have everything we want.  Sort your list into two groups: items that are essential, and items that would be nice, but not essential (okay, you can make 3 groups if you want: high, middle, and low-priority).  In addition, since you made your big picture plan with the whole season in mind, even your “essential” list may add up to more money than you want to spend in one weekend.  So think about timing – which items will be needed in the next month, versus those that can wait, because you won’t need them till it gets colder?
  • Strategize. When you see the store ads for the weekend, that will help you make a plan of attack.  If two stores have dress slacks on sale, you might plan to check both stores before making a purchase.  If your favorite athletic shoes are on sale, that item may move to the top of your list for the weekend, while you decide some other item can wait.  Really ambitious shoppers might make a scouting trip through the stores they are likely to shop at, to pre-select the items they like.

A little planning can go a long way in stretching your clothing and footwear dollar.  If you want to come away from the holiday weekend feeling like a super-consumer, the steps above are a great way to start!

One last tip: If you buy something during the tax holiday, then discover you purchased the wrong size, or that the color isn’t right, you can do an even exchange (tax free) for the same item in another color or size.  

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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The Benefit$ of Returning to Iowa

vetsMy daughter, her husband and two kids have lived with my husband and me since her husband retired from the Air Force in late April. Last week their belongings arrived from Japan, filling our two-car garage. We are excited to have them living close now, after 6 years of living so far away. We are doubly blessed now that her husband has found employment 20 minutes from our home. Soon, they will purchase and move into their first home. In May of 2014, Governor Branstad signed the Home Base Iowa bill, making this all possible.

The Home Base Iowa bill was designed to support veterans already living in Iowa and to provide  financial and employment incentives to attract those leaving the military. My daughter and her family are the recipients of some of these benefits.

My son-in-law received preferential treatment as he began his job search.  His current employer was not actively seeking new employees when he willingly interviewed and hired him. His employer said he always tries to find a place for any vet wanting to stay in the state.

The Military Homeownership Assistance Program provides $5000 in down payment and closing cost assistance. At tax time, the assessed value of their home will be reduced for property tax purposes, by $1850, reducing their tax obligation.

When he is ready to retire, his retirement benefits will be exempt from state income taxes.

My daughter and family are excited about this new phase of life and look forward to moving into their new home. The VA Loan process is now in the third month and moves agonizingly slow, but the savings will be well worth wait.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Where to Turn for Help

alice

When I was young adult I longed for the days when I wouldn’t have to count every penny. I envisioned a future where my college education would pay off and I would not have to worry about money anymore.

Well, I am well past college age but I have yet to reach the worry-free future I envisioned. What I have come to realize over the years is that managing money is often complicated and stressful and a recent report published by the Iowa United Way confirms that one third of Iowans struggle financially.

Last month the Iowa United Way published a report on Asset Limited, Income Constrained, Employed (ALICE). The report shows that ALICE families work hard and earn above the Federal Poverty Level (FPL), but still struggle to afford a basic household budget of housing, child care, food, transportation, and health care. Hopefully, when people read the report they will recognize they are not alone.

Many people don’t know where to turn when they have questions about money. As Human Sciences specialists in Family Finance we offer many classes on finances that can help people feel a bit more prepared. Our classes provide a safe environment to ask questions and learn from each other.

One example is the SMART CHOICE health insurance education class. Studies show that the cost of healthcare has become a significant portion of our family budget yet many of us don’t know how to choose a plan. Health MWeinandinsurance coverage and terms can be complicated and there are many decisions about types of care, service providers, out of pocket expenses, etc.

Like many financial decisions, it is important to begin with an understanding of what you need – like your family’s typical usage and healthcare priorities. The SMART CHOICE Health Insurance is designed to help people gain a set of skills so that they can choose a plan that best fits their family’s needs and then use that plan efficiently once enrolled. The course provides core information about health insurance, tools to use to make appropriate decisions, and a chance to compare hypothetical policies.

For more information about our resource list or to contact your local Family Finance specialist visit:

Family Finance Programs  http://www.extension.iastate.edu/humansciences/family-finances-families .

Family Finance Specialists  http://www.extension.iastate.edu/humansciences/staff-family-finance

Related Content Links

Download a copy of the United Way ALICE Report  http://unitedwayalice.org/Iowa/

Smart Choice Health Insurance  http://www.extension.iastate.edu/humansciences/health-insurance

Mary M. Weinand is a Human Sciences Family Finance specialist who works with individuals to help strengthen their ability to make informed judgments and make effective decisions regarding the use and management of money.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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