Next week is Money Smart Week! Started 14 years ago by the Federal Reserve Bank of Chicago, Money Smart Week is designed as a public awareness campaign to help consumers better manage their personal finances. There are programs in all 50 states. Here in Iowa, more than 200 partner organizations have joined in the fun, promoting financial education with many interesting opportunities to learn. All Money Smart Week programs are free, and strictly educational (no marketing allowed).
ISU Extension and Outreach has been a MSW partner for many years. Programs are offered for audiences from preschoolers to seniors. From scout nights to shred days, essay and poster contests, geocache for college cash, piggy banks, books, and kites – in many cases, a chance to win a prize makes the learning even more fun. Educational program topics include establishing a budget, protecting financial information, raising money-smart kids, and more.
Go to www.MoneySmartWeek.org for more details about activities in your area. Check out your local libraries for a display as well as programming. Spread the knowledge!
Last week, I was doing programs for individuals who live in subsidized housing. The age ranged from 26 – 90 years old. They had only one thing in common – they shared the same housing facility – but I sensed there was a genuine caring for each other.
I shared an activity where each person had twenty cards of basic expenses one encounters each month. Housing, Transportation, Utilities, Food, Insurance (Health, Auto, Renters), Debts, Laundry, Cleaning, Clothing, Child Care and others. I asked each person to pare the cards down to just the ten most essential ones – the ones they had to have to live. For some this was challenging, as they wanted all 20 cards. Others looked at how they were currently living and only kept the cards that reflected their current situation.
It all gets down to “Needs” vs “Wants”. When we were children many of us had a laundry list of wants, but we learned from our parents that what was most important was the needs.
When the activity was complete, each person had identified his or her own spending priorities. Then, as sometimes occurs in real life, there was a second part to the activity: their resources were reduced and they had to remove 2-3 cards. I asked them which activity was more difficult – the first one or the second one. Several indicated giving up a few cards was more challenging. For some it was making the selection of ten cards.
Think about your priorities.
Today’s guest blogger is Carol Ehlers, an ISU Extension Family Finance specialist helping Northwest Iowans make the most of their money.
My college bound daughter began getting financial aid offers these past few weeks. Rather than crunching numbers from financial aid offers, we’re using a tool from the Consumer Financial Protection Bureau to help us make sense of it all. It’s called “Compare Financial Aid.”
The tool allows students to compare costs from three schools at a time. By entering only the names of the universities, we could see the estimated price of each college, the graduation rate, the loan default rate and median borrowing. Based on your individual situation you can calculate the estimated debt burden and the estimated monthly student loan payments students might face after graduating.
The tool gets more interesting after we click the “enter financial aid” button. When we enter data from the schools’ financial award letters — including expected family contributions and military benefits, if applicable — the calculator provides students and parents with a more realistic view of our college options, financially speaking.
We took the tool on a test drive. By entering the names of three schools — we chose a public university in-state, a private college and a public university out-of-state — we found that the sticker prices of the three schools ranged from $18,600 to $37,000 for the first year. By entering personal financial aid and scholarship information, we could build a personalized financial projection, which includes projected ‘Debt at Graduation’ and ‘Monthly Payments’ on college debt. These costs can be viewed next to graduation and retention rates.
For my family, as for all families with a college-bound student, balancing a realistic look at costs alongside a school’s track record of success is very helpful in making an informed choice about a college investment.
Are you a 20-30 something? You may be experiencing financial struggles. With college debt, it is hard to save and invest for the future. If you are an older family member, you may watch your 20-30 something experiencing these challenges. A recent survey found that 46 percent of millennials are receiving financial support from their parents. Fortunately, most young adults have a sense of optimism, and are planning to build a stronger financial future.
Are you looking for ways to bring your finances to the next level? Here are some tips:
- Skip the credit card offers – Having more credit cards on top of student loan debt just complicates the situation.
- When you get a raise, increase your savings. If you receive a windfall; put it in your retirement savings.
- Get comfortable with investing. Read about investing, learn the language of investing and after your emergency fund is in place, start investing.
- Stop the bleeding. Double check that you are not going more in debt; check your lifestyle, and live within your means. To get ahead, remember to focus not on what your earn, but instead on what you save.
- Pay off student debt. The sooner you bring down this debt, the sooner you will be able to accomplish your other goals.
- Imagine your future – what choices will take you to the road of your dreams? Remember to cover your insurance and retirement fund needs.
Once you achieve a basic level of financial well-being, it is time to strive for the next level. What are you doing to move forward?
In my office I’m seeing publicity for the Iowa State Fair (August 11-21, 2016). Even though our beautiful March weather is bringing early cases of spring fever to many of us, State Fair is still five months away, and the publicity catches me a little off guard each time I notice it.
It’s actually, however, a really good reminder to plan ahead!
For many families, spending several days (or even all ten days) at the State Fair is their major vacation each year. Other families have other vacation patterns.
Whatever your vacation plans, NOW is the time to prepare financially. Saving in advance is the best way to fund a vacation — it prevents a “debt hangover,” where you’re still dealing with the headache of paying off vacation bills months after the fun was over. Advance saving for summer vacation also lets you go into the fall with a clean slate.
Even if your vacation plans are simple – perhaps a couple of day trips, or weekend trips to visit friends – saving in advance will enable you to enjoy the experience without any shadowing stress about how you’re going to pay for it. And certainly if you have significant vacation plans, now is the perfect time to start putting away funds. Planning in advance makes vacations more fun! ~Barb
The top six New Year Resolutions for 2015 included, in order:
- Lose weight
- Get organized
- Spend less, save more
- Enjoy life to the fullest
- Stay fit and healthy
- Learn something exciting
Did your 2016 list resemble any of these items? It is now the end of January. During a recent staff meeting, one of my co-workers asked, “How are your resolutions going?” According to London Business School, 25% of us have given up by the first week. Sixty percent of us will make the exact same resolution year after year. Are you one of them?
If you’re struggling with your goals, ask yourself why? Many times, people fail because they had set the bar too high to succeed. Keep in mind also that it takes at least 30 days to replace a bad habit with a good habit; in other words you need to give yourself time to learn new habits. Checking to be sure your goal is realistic, and then being patient and persistent in putting it into action, can improve your chance for success.
If you’re a parent, you already wear many hats. Adding a finance hat can help your children become more financially well-informed. How financially responsible is your family? Research has suggested that most kids absorb the family “money story.” You may wonder what that is: the family money story is what your children see at home.
If you’re like most households, where both parents work, your time to spend with your kids may be limited. That may mean that children are more exposed to media – TV commercials and other marketing – which may lead them to want items they would never otherwise consider. Fortunately, there are ways in which you can influence the “money story” that they learn.
A key way to help write your children’s money story is to get them involved in household financial activities. Some examples are:
- $ Grocery shopping – where you can share your beliefs about needs vs wants.
- $ An allowance – where they have the ability to practice making their own spending decisions.
- $ Being an entrepreneur – where they earn money, whether by selling lemonade, baking cookies, or walking dogs.
- $ Visiting the bank – where they can learn how to open and use a bank account. You can also use it as an opportunity to explain how debt and credit cards work.
Teaching children how to balance between savings, spending, investing, and giving is an important part of parenting. By putting on a financial hat, parents can use real life experiences to help children learn a money story that will serve them well throughout their life.
My daughter-in-law is a busy woman. She has a full time job, a beautiful 3-year old daughter who needs lots of attention, and she puts a significant amount of time and energy into gigs (short-term jobs) which she hopes will grow into a full-time business.
A study by Intuit predicts that by 2020, 40% of American workers will be independent contractors. The trend toward a gig economy has begun. A gig economy is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements.
Over the past few years, I have seen an increase in the number of individuals earning a majority of their income from self-employment; this requires a Schedule C when filing taxes. The biggest mistake made by these individuals is the failure to plan for taxes.
Self-employed individuals generally must pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. For 2015, the self-employment tax rate is 15.3% (12.4% for social security and 2.9% for Medicare.) Owing this tax on top of income tax can be a shock, and it can be made worse by penalties if you have failed to make quarterly payments.
It can be hard to learn all you need to know about being self-employed. Working with an accountant may be an added cost you don’t think you can afford, but you may find you can’t afford to NOT have their expert advice.
I was recently asked by my supervisor for performance goals (key actions I plan to work on); these are due by the end of the year. We do this so we keep moving forward, rather than standing still or sliding backwards in our skills and our work.
As we turn the New Year calendar, it may also be time for us all to consider setting goals for our personal lives. As the ball drops in Time Square in New York City soon, many of us make resolutions or set some goals for our lives in the next year.
As I consider my personal goals for the coming year I approach it from several directions:
- Things I want to do – “bucket list” items. I am sure travel will continue to be on my list.
- Major projects that need to be done around my home: some updating of the electrical system needs to be on my list.
- Smaller projects – I want to cull through my closet and pull out clothes I haven’t worn for a while; I can give these items to Goodwill for others to use.
Last year, I replaced a car. I visited the Grand Canyon and saw parts of Arizona I had not seen before – Sedona, Flagstaff, Jerome and Williams (where I felt like I was in the Cars movie!). It feels good to look back and see what I accomplished in the past year. I now want to set some clear goals for the coming year, so I can keep moving forward.
What’s on your goal list for 2016?
During this holiday season, many of us experience a lot of gratitude. We receive gifts, we enjoy the beauty of holiday decorations and light displays, we sing along to holiday music, we enjoy special foods that we only make once a year. We even send thank you notes to express our gratitude.
I encourage you to focus your attention on feeling and expressing gratitude during the holidays. One reason, of course, is that it’s a happy feeling, and it’s also a matter of courtesy to feel and express gratitude to those who share gifts with you.
But there’s another reason why I think gratitude is important. Feeling gratitude causes us to focus on what we have, rather than what we don’t have. As we deal with our finances and try to make choices about the best uses of our money, being mindful of and grateful for what we already have makes it easier to:
- Say “no” to impulse or unnecessary purchases
- Set money aside for future needs (including college, retirement, or other long-term goals)
- Build an emergency fund
- Give to worthwhile charities
Pausing and reflecting with gratitude on our possessions, and on the people and experiences in our lives, makes it easier to be satisfied. Being satisfied makes it easier to put our money toward important uses rather than being distracted by spending opportunities with only short-lived value.
What are you feeling grateful about?