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Do Adults Need An Allowance?

April 10th, 2014

imagesVD4IXD5M allowance

Parents use an allowance as a tool to teach their children about money and responsibility.  Do the adults need one too?

An allowance is a pre-set small sum of money a child receives regularly to spend on toys, clothes, books, games, or whatever.  The parent sets up payments, weekly, bi-weekly or monthly depending on the age of the child.

The concepts of saving and planning for purchases are valuable life skills to be learned by children and also needed by adults.  A survey found that over 40% of American families spend more than they earn and nearly 50% have less than $ 10,000 in retirement savings. Your six year old may be better at saving money than you are.

To balance your spending plan is to do one of two things – spend less or make more.

Unfortunately, when people make more money, they sometimes spend more to maintain or increase their standard of living.  They increase their debts rather than using the extra income to increase their savings/investments. This is not a recipe for financial well-being.

An allowance can be a tool to help you limit your discretionary spending.  Give yourself an allowance (weekly, monthly or per pay period) and keep your spending within that allowance.  You’ll find that it helps you reach your savings goals and build financial security.  Children need limits so they can learn to make choices among a variety of spending options; we adults can also benefit from that same type of limit.

~Susan

Goals, Saving, Spending plans

When can you buy health insurance outside the open enrollment time?

March 13th, 2014

 pregnant parentsMany people know that under the Affordable Care Act, insurance companies cannot refuse to cover you. This is true, but what many people don’t realize is that this rule only applies during open enrollment. Generally insurance companies are not required to accept applications for coverage outside of open enrollment. People can’t just wait around to get sick, before making the decision to purchase insurance.

If you don’t purchase insurance during open enrollment, you may still be able to purchase insurance before next year’s open enrollment but only if you have a life event that qualifies you for what is called a “special enrollment period”.  Some of those events include:

  • Getting married
  • Having, adopting or placement of a child
  • Permanently moving to a new area that offers different health plan options
  • Losing other health coverage – due to job loss, divorce, loss of eligibility for Medicaid or CHIP, expiration of COBRA coverage, or a health plan)
    • Exceptions – Voluntarily quitting other health coverage or being terminated for not paying your premiums is not loss of coverage.
  • People enrolled in the Marketplace coverage, having a change in income or household status that affects eligibility for tax credits or cost-sharing reductions.

I have two friends who are planning to take advantage of a special enrollment period. They are pregnant and due in June, after open enrollment ends. Because this is a change in their situation, they can add health insurance after the March 31 deadline.  They can enroll in or change their health insurance plan outside the open enrollment period. The special enrollment period is 60 days from the date of the qualifying life event.

Open enrollment for Marketplace coverage ends March 31, 2014. The next proposed open enrollment period is November 15, 2014 - February 15, 2015.

~Susan

Consumer Knowledge, Goals, Insurance, Smart shopping

Bucket List – Enjoy some of your list now!

March 11th, 2014

 

Most people think of their bucket list as things they want to do before they die.  But if you save your money early, you can enjoy your dreams as you live.  Most people don’t regret achieving some of their goals early.  To accomplish the bucket list items, you may need to save or earn more money wisely.  Think of your list, do items cost a lot of money?

Put money away is one way to achieve your dreams.   Usually it is the how to squirrel away money without wrecking your current life.

All found money should go toward your bucket list – money you never anticipate; treat that money with “respect” for future generations.  Consider birthday money or tax refund in the same way. If your salary increases, make sure your expenses don’t, but the increase in a savings account which will allow you to update one of your wishes.

Use one of your hidden talents – hobby or skill or side business can add money in your pocket.  That extra fund can get you closer to one of lifelong dreams.

Remember it is “OK” to change your dreams.  People change, circumstances change and your bucket list can change too.

~Susan

Goals, Saving

Buying a Home – Part Two

February 13th, 2014

house

Look back to last month’s post for the beginning steps.

Start Shopping for a Home – this is the most exciting part of buying a home, but it can also be discouraging. Use tools: newspapers, real estate listings are useful, but the Multiple Listing Service can be your friend.  It often features pictures and views of the house, and you can sort by size, location, rooms and price.  Realtor.com is another website for screening homes.

When walking through a home, focus on the things you can’t change.  Paint and flooring can be changed, but the size of the home, number of bedrooms and bathrooms, and the view can’t be changed.

Make an Offer – Once you have found a house that meets your needs, you are ready to make an offer. Ask your realtor to share comparable sales – similar types of houses in the area that have been sold recently. Those sales can give you an idea of how much to offer to pay for the house you are looking at. Make a reasonable offer, and the seller will be likely to accept it. If it is too low you insult the seller.  Using Zillow.com or Truilia.com, you can see the actual value of neighboring homes. 

If the seller accepts your offer, it is time for the next step: Get a Home Appraisal.  The mortgage lender does this step, in order to make sure the home will be appraised for at least the value you are offering.

Get a Home Inspection. The buyer hires a professional inspector for this job.  They look at visible portions of the roof, foundation, plumbing, electrical, and heating and cooling systems.  From an investment point, this is one of the most important steps to buying a home.  Your purchase agreement should give you a way to back out of the deal, if the home inspector finds a serious problem.  This is called the contingency.  Your offer should be contingent upon a successful inspection. Walk through with the inspector and the completed report.  When I bought my current home, the inspector identified an aged furnace and not all of the outlets were grounded. In addition, a radon test was conducted and it was 3x the approved level.  My offer to buy the house was contingent on having the radon problem mitigated.

Settlement/Closing. The step of actually transferring the property from the former owner to you, the buyer, is called the closing.  Prior to that date, the lender will give you a written estimate of the costs, so you have enough money to cover your closing costs. There is lots of paperwork, and many signatures are required.  The seller gets paid, real estate agents receive their commissions, lender fees are paid, and you get the keys to your new home. Iowa State has a fact sheet on Buying a Home PM1460.

~Susan

Consumer Knowledge, Credit, Goals, Insurance, Uncategorized

A month down the road… Resolutions

February 4th, 2014

TargetWe’ve lived a month since New Years.  Maybe you set a goal and are well on the way to accomplishing it– if so, Congratulations!  Keep up the great effort, and drop us a comment about HOW you are making it work.

On the other hand maybe you have stopped believing in new years resolutions, or just never got around to setting one. OR perhaps you are one of many who set a resolution, gave it some real thought, but are finding  it’s more difficult than you expected, or perhaps you’ve been so busy you haven’t truly worked on it.

I see myself in that second paragraph – things I wanted to accomplish, but never  made time to form a true plan.  Even so, being surrounded by cues that encourage us to improve our lives leads me to see possibilities. And the lengthening daylight feeds hope and helps me look forward…

Perhaps you, like me, are looking to renew your efforts toward a goal.  Maybe it seemed like it would be pretty easy; once the holiday season was over, things would fall into place pretty smoothly.  In the last month we’ve learned it isn’t quite so easy, but we can actually see that as good news: we’ve learned that we’re going to need a clear plan, maybe some limits or structure to get us moving in the right direction.  Let’s make good use of that lesson learned!

Here are a few suggestions for renewing efforts toward a goal:

  1. Make a clear plan (or fix the plan you had).  Include some limits, and a method to hold yourself accountable.  Example: if you want to control spending, pull only a certain amount of cash out of your bank account each week, and don’t get any more until next week (and don’t cheat and use plastic or write checks for things the cash was supposed to cover).
  2. Do at least one thing every day to move yourself in the direction you want to go.  Example: if you want to organize the pile of papers that has accumulated, do one small task each day.  You might take the top five items off the pile and put them in their place.  Or remove some out-of-date documents from your file cabinet so there is room for new papers to be added!
  3. Get help – find a cheerleader. It can be hard to work alone. Find someone who can be in your corner, who will encourage and remind and support you without nagging.
  4. Expect obstacles.  Things won’t always go right, and a small setback is not the end of the world. Be prepared to move on after a setback.  And… if you can avoid situations that might create obstacles, be sure to do so!

These suggestions are not big news – you may have heard them before. But we all need reminders of the common-sense steps that can move us forward.  For more, go to Small Steps to Health and Wealth, from Rutgers Cooperative Extension.

Best wishes as you move toward your goal!

~Barb

Goals

The Wisdom of Advice and Accomplishing Goals

January 29th, 2014

dust panSometimes I wonder about the advice we share with consumers. What seems smart can sometimes turn out hard to accomplish.  I was reminded of this point after spending over an hour this weekend, trying to do the right thing.   I couldn’t remember when I had cleaned the dryer vent last and it was looking a bit clogged. One of my husband’s work sites had recently had a fire and they suspected a plugged clothes dryer vent, reason enough to take action.

I’ve worked with the vent on the back of the dryer before and know that I have to pull the unit out from the wall, loosen the screw on the clamp that holds it in place, and pull it away from the dryer. Sure enough, there was a nice pile of lint built up at the base. The problem, however, was the mass of lint at the front of the dryer. Evidently there is room between the opening for air flow and the lint trap that allows it to filter to the bottom. No vacuum attachment would fit through the slot; the brush I’d purchased did a great job of dislodging the accumulation but would only trap a small amount for removal.  Mechanical parts block it from blowing through to the back. Removing the front cover of the dryer would reveal a part over the vent with a boot—decided not to touch that part of an older dryer -and a pop riveted metal plate—access denied! Several innovations later and it’s realitively clean, but it wasn’t easy and I wondered how some individuals with physical limitations would be able to do the job.

Doing the right thing can be difficult with many tasks in life, whether it’s cleaning a clothes dryer duct or setting aside money for the future. If you promise to ask me questions that help me understand what tools you lack, directions that aren’t clear, and outside help that might be needed, I promise not to lecture.

Joyce

PS: Send tips for lint removal!

Consumer Knowledge, Goals

Is One of Your Goals to Buy a Home in 2014?

January 16th, 2014

houseHere are some steps to make this happen.

Set a Budget and Start your Housing Fund.  What can you realistically afford to pay toward a mortgage each month?  Write down your monthly expenses – car payment, credit card bills, groceries, entertainment – everything. Total the amount up and you have your non-housing expenses.  Subtract your non-housing expenses from your take-home pay. Be sure to include an amount that gives you some breathing room for financial emergencies – flat tire, medical need, change in prices. THEN: what is left? 

It is important to know what you can afford before you visit a lender.  Remember, also, that there are closing costs that can range from $5,000-10,000 or more, depending on the house.

Check Your Credit Report and Score – We have mentioned this many times in Money Tip$. Your credit report needs to be accurate before you visit with a lender.  Your credit score will help determine the APR for your mortgage.  Use www.annualcreditreport.com to check your reports.

Choose the Best Type of Loan – Do you want a fixed or adjustable loan?  How long do you need to take out the loan?  Is it a conventional or government-backed mortgage? How long will you stay in the home will be a factor too. If you qualify for a government-backed loan, you will have the option of making a smaller down payment.  Be sure you clearly understand the terms of any loan before signing on the dotted line.

Get Pre-Approved by a Mortgage Lender –Being pre-approved before looking at homes tells the realtor that you are serious and gives you some leverage for a loan.  Pre-approved means that the lender is willing to give you a loan. Knowing what you can borrow means you can start shopping for homes in your price range. 

After being pre-approved for a loan - Seek out a Real Estate Agent.  There are several ways to find a local real estate agent, including recommendations from people you trust.  If time allows, it is wise to interview more than one agent to make sure they are listening to you.  Interview them regarding the types of homes you are interested in purchasing, neighborhoods, and price range.  Also make known your needs: – how many bathrooms, bedrooms, garage, basement, and backyard, etc.   

More tips next month!  ~Susan

Credit, Goals, Insurance, Saving, Smart shopping

What Does Your Spouse Know About Finances…

January 14th, 2014

imagesMoneyIn most couples, one spouse manages the bills and the assets.   But both spouses need a baseline understanding of the family’s finances.  Only 28% of couples were “completely confident” that either spouse alone was prepared to steer their joint retirement finances (from a recent study from Fidelity Investments). 

Several years ago, I met a couple who had been married 45 years.  From day one, they sat down, opened their bills, and wrote out the checks each month together.  This was a healthy way to approach the couple’s finances.

As we know, things happen: Disability, Divorce or Death can place new responsibilities on spouses – even when they are unprepared.  The result can range from difficult to disastrous.  My aunt’s mother had never written a check, or driven a car in fifty-plus years of marriage, and had many struggles when she was widowed.These situations are out there and do happen.

Considering the “what-ifs” can open uncomfortable questions for couples who are not accustomed to sharing financial information.  We think it can wait until tomorrow, but talking about these issues helps us to plan ahead – and prevent those difficult or disastrous results.  

A key item of information to share is an inventory of assets. This includes the following items and more:

  1. Retirement accounts, checking accounts, whose name is on what account and remember to share the log-ins and passwords for the online assets; 
  2. Insurance policies and their status and the beneficiary for each account;
  3. Where the emergency fund is located and how to access it;
  4. Each parnter should understand both partners’ current and future income sources, including stock options and deferred compensation.

Other assets include: House, car, boat, airline miles, hotel points and vacation timeshares. There may be a collection that is valuable over time.  (Example: my aunt’s brother collected coins all over the world and when he died suddenly, his spouse did not have a clue of the value of the collection.)

Create a list in the order the assets should be tapped either in retirement or in case of emergency, with an eye toward maximizing the asset’s value and avoiding taxes or penalties for early withdrawal.  Put the list in a safe place after you have discussed it with your spouse.

~Susan

Goals, Insurance, Retirement, Saving, Uncategorized

Reach for some stars in 2014

January 2nd, 2014

MC900444989[1]It’s my turn to write, on the first working day of a brand new year, and I’m debating about what to write.  I really want to be inspirational  — to say something profound about allowing yourself to imagine possibilities for financial security and getting ahead.

In my experience, it seems that we tend to get stuck in ruts, and don’t even consider that things could be much different than they are.  I wish I could think of something I could write which would cause us ALL (self included) to push ourselves – to set a goal and make a plan that  would truly improve our financial well-being.

  • Imagine that you could actually be out of debt!
  • Imagine that you could actually have a three-month (or even a one-month) emergency fund!
  • Imagine that you could deposit $5,000 (or even $1,000) to your IRA this year!

I’m a big believer in setting goals that push ourselves to do more.  Because it’s all-too-easy to be lazy when it comes to our financial well-being.  I don’t mean setting grand and unrealistic goals – rather just goals that push us to do the best we realistically can do.

But here’s the catch: in order to ACCOMPLISH those slightly-lofty goals, we need to be PRACTICAL, too.  Our goal as we write MoneyTips each week is to provide those practical strategies for being on top of our finances, and to inspire you to get ahead.  So here is a practical idea to help you achieve your best goals.

To reach an important longer-term goal, you need to save for the short term, too!  

Why?  Because if you don’t have some short-term savings to cover “little” things (repairs, medical bills, worn-out shoes…), then you will find yourself robbing from your long-term goal.

Here’s how it might work:  if I’m saving $100/month for something important a few years down the road, I’d better also save $50-$100/month for unexpected needs.  That will protect my longer-term savings.

NOTE:  this is true whether your long-term goal involves savings OR debt repayment.

Happy new year!  Best wishes for getting ahead in 2014!  ~Barb

Credit, Goals, Saving

Resolutions that work

December 30th, 2013

MC900434804[1]Once again it’s the time of year when we consider what we want to do better next year.  If history shows that your resolutions usually die a quiet death sometime in February or March, perhaps this is the year to re-think how you set your resolutions!

The key: resolutions should be very clear and specific.  Some examples:

NOT: I’m going to get out of debt.

  • Instead: When I pay my credit card bills, I’m going to pay everything I charged during the month plus an extra $100 each month.
  • Or better yet, if possible: I’m going to pay my credit card bills in full every month.

NOT: I’m going to save more money.

  • Instead: I’m going to increase my 401k contribution by 1% of my income.
  • Or: I’m going to save $20/week by bringing my lunch to work at least 4 days/week, and actually depositing the $20 in my savings account every week.

You may recognize this strategy as part of the SMART goal-setting strategy.  Goals should be Specific, Measurable, Action-oriented, Realistic, and Time-defined.  Check out this earlier post for more ideas.

If you’re looking for ideas on how to improve your finances in 2014, check out the “Goals” category in this blog – you’ll find lots of good ideas.  (The categories are in the right margin of our page, just below the MoneyTip$ logo.)

Set the stage now for moving forward in 2014!  ~Barb

 

Credit, Goals, Saving