Money Apps

Mobile banking continues to grow in popularity. The new apps, however, aren’t without risks of errors.

When making payments via transfer be sure to double check the payment and confirm you are using the correct person or business receiving the payment, before hitting send. You can issue a stop payment for a check, dispute credit card payments, or cancel an auto bill payment, but a transfer is permanent and cannot be reversed. If it is the first time you have sent money to someone, ask that they send a request for payment or send them a small test payment to confirm it is the right person.

Money transfers are immediately removed from your account, but the receiver usually has a waiting period before the transferred funds can be spent or withdrawn.

If the transaction will be used to file tax returns, you may want to use an alternative method. The IRS does not consider a transaction valid without printed proof. Apps are revised and updated. The software developer is not obligated to provide you with permanent access to previous transactions.

Fraudulent apps closely resemble the legitimate ones. Names and logos can easily be copied and used to build very close look a-likes. Verify the source of the app by visiting the company through another URL, before downloading and entering personal information or account details.

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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The Point of Pause: How Many Hours Will It Cost You?

I realize that I still have unopened boxes from when I moved into the house 5 years ago. My closets and rooms are full. My rule is if something is coming in, something is going to have to go out. Every time I think about buying something for the house, like a recliner, even a kitchen gadget, I ask myself, “What will need to be taken out to give room for this new item?” It’s all about balance.

Traditionally, as a personal finance educator, I teach budgeting by focusing on balancing money coming in and going out of the household. For example, if we have $3500 in monthly income, then we only have $3500 to spend, save and share. Saving includes goals we are working toward, like retirement, children’s education, a vacation or a kitchen remodel.

How much do we really spend? Tracking where our money goes for a month or two helps give us real numbers to work with in a budget. Many times people do not actually know where that $20 bill in their pocket went. Spending also includes all the out-of-pocket expenditures like eating out or the quick stop before work for a cup of coffee.

Before spending money, focusing solely on the dollars, what if we think in terms of hours worked? Would it give us pause before spending? Would budgeting our hours worked make more sense? Would it help us look at our spending differently? For example, when finding a recliner, we would ask ourselves, “Is it worth it? Do I work enough hours to buy this item?” Here’s a scenario to illustrate the point of pause – Ben clears $20 an hour and works full-time. Ben’s rent is $750, so he has to work 37.5 hours to pay rent. That’s almost a week’s work! He tracked his food expenses and discovered he has to work 11.5 hours each month. He rarely goes out to eat. So how many hours does Ben have left to pay for utilities, goals, clothing, car maintenance, etc.? Can he buy the recliner he has been eyeing?

Guest Blogger: Sandra McKinnon

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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Secure Act: Part 1

The Secure Act was originally written to make changes to retirement laws. The act passed through the House last May and was held by the Senate until November when it was added to the Appropriations Bill and signed into law in December.

The law change catching attention is the starting age for required minimum distributions (RMDs). If you are retired and reached 70 1/2 before the end of 2019 you are required to take distributions. Everyone else can wait until the year they reach age 72. The annual RMD amount continues to be based on life expectancy tables published by the IRS.

The other change attracting attention relates to distribution rules for inherited retirement accounts. These accounts, including IRAs, 401(k)s and other similar qualified accounts, generally have named beneficiaries. When there is just one beneficiary and it is the spouse, then the withdrawal rules are the same as if the account originally belonged to the spouse. The SECURE Act did not change this.

However, when the account beneficiary is not the spouse, the rules for taking distributions have changed. In general, the beneficiary must take distributions on a schedule that will liquidate the account within ten years. Stretch IRAs, which set up for distributions over the beneficiary’s life expectancy, are no longer an option. Beneficiaries will want to plan for the tax implications of those distributions.

Exceptions to the ten year distribution schedule include: disabled beneficiary, chronically ill beneficiary, beneficiaries not more than ten years younger than the deceased, and children that have not reached the age of majority. Separate rules apply to these individuals, and also to situations where multiple beneficiaries are named, so professional guidance is recommended.

More about the Secure Act will follow in subsequent posts……

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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Secure Act : Part II

Welcome to part two of our review of the the Secure Act! We’ll introduce you to some of the other retirement plan changes employees can expect to hear about as new rules and options are added to their plans.

A part-time employee who has worked a minimum of 500 hours each year for three continuous years can now begin making retirement savings contributions to an employer’s retirement plan. This change expands eligibility beyond the old rules that allowed an employer to use a 1,000-hours-worked rule before full time employees are allowed to participate in a retirement plan.

New tax credits are available for small business owners who start a retirement plan for their employees. Additional credit is given if the plan uses an automatic enrollment structure. The additional business tax credit is also available if an existing plan is converted to automatic enrollment. The business tax credits range from $500 to $5000 and can be claimed for three years. Small employers can also participate in multiple-employer plans that allow many unrelated businesses to join together to share costs of plan administration.

Old rules allowed employers to include annuity options in their 401K plans, but if the insurance company selling the annuity contract failed, the employer was required to guarantee the continuation of the contract payments. The Secure Act removed the employer’s responsibility to protect retirees. The inclusion of annuities in retirement plan menus is expected to increase.

The cap for auto enrollment contributions to an employer’s retirement plan was 10% of employee pay; the amount has been raised to 15%. Employers must continue to give employees the option, once a year, to change their contribution.

The Secure Act also removes the restriction that prohibited individuals age 70 1/2 or older, who are still working, from making contributions to an IRA.

In our next post we will visit some of the non-retirement changes included in the new Secure Act.

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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Secure Act: Part III

Eligibility for participation in retirement savings plans, incentives for small businesses to establish retirement plans, and rules for contributions and distributions are the main focus of the Secure Act, but there are other changes worth understanding in the new law.

  • Loans allowed by an employer from retirement funds can no longer be distributed through a credit card account or similar arrangements. If received through a credit card, the funds must be claimed as income and are subject to taxes and penalties.
  • Withdrawals from retirement accounts can now be made for the birth or adoption of a child within one year of the event. The limit is $5000 per account owner and it has to be claimed as income, but there will be no penalty tax added.
  • At least once a year, your retirement account report must include a statement of monthly benefits the owner can expect in retirement. The amount will be based on a single lifetime or joint lifetime annuity.
  • 403B and 457 plans have new rules for transferring account funds to a new employer’s plan or to a qualified plan distribution annuity.

And in areas unrelated to retirement accounts:

  • 529 plans can now be used to cover the costs of registered apprenticeships, homeschooling costs, private elementary, secondary and religious schooling. Up to $10,000 can be used to repay student loan debt. (State alignment is necessary so check your state rules.)
  • The Kiddie Tax on unearned income is being reset to rules in place before the 2017 TCJA law. Under TCJA, unearned income was subject to the Estate or Trust tax rates. Amended returns can be filed for 2018.
  • The penalty for failing to file a tax return is a maximum of $400 or 100% of the tax due.

Rules and implementation guidelines will further define these changes, so check with financial professionals and your employer’s HR departments for more details.

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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Checking My Credit Report

My New Year resolution is to pick one of the three credit bureaus and request a credit report. I’ll be able to read the full report online, sometimes immediately. Because 80% of us do not follow through and accomplish our resolutions, this one will be a winner.

Credit reports can surprise you. I have found accounts listed that I thought were closed and older ones still listed.  Some active loans in repayment are not listed. 

Accounts listed on the report, will include contact information.  I have used the address to write and ask for the account status to be updated. (Keep a copy of the letter for your own records).  I have also written lenders and asked them to report my loan history to the credit bureaus.  If you have a thin report, very little credit use, asking a landlord, bank, or store to report your history of payments can enrich your report and result in more favorable interest rates and loan terms.  New offer credit cards are averaging 19.21%.  Individuals with a track record of using credit and an excellent credit score may be able to land a card with a 15% interest rate.

If your resolution involved raising your credit score, be patient.  It is easy for one to drop and usually a long time to build up the points.  The Consumer Federation of America and Vantage Score have a 12 point online quiz to help you understand the workings of calculations and actions you take that impact your score.  Be sure to read the answers provided when your selection is scored, you can learn valuable tips to change credit use.  The average score in the US is 695 for FICO and 673 for Vantage. A favorable score for the best credit offers is 700. 

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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Goals That Work

As we wrap up 2019, are you thinking of ways to try to “do better” or “be better” in the new year?  The idea of a fresh start is appealing, but if you’re like me, you may be hesitant to set goals, based on a track record of not following through in the past.

That leads me to one key to success: we should only set goals that are truly important to us. We have to really want the goal. To put it another way: there’s no point in setting a goal because you think you should. If you’re going to set a goal, only do it because the result matters to you.

Once you have a goal you can fully commit to, a next step is to plan how you will get the money – how much will you save each week or month? That will mean reducing some of your other expenses so that you can put money toward your goal. Think specifically about what changes you will make in order to save; deciding in advance that you will not go to the coffee shop, or not buy any clothing, or… (whatever) will make it easier to steer clear of tempting situations.

My final tip for now is to keep your goal on your radar. For example, if your goal is a new computer, then keep a picture of the type of computer you want in a location where you’ll see it regularly – on your refrigerator, at your computer desk, and/or in the section of your wallet where you keep your money and credit/debit cards. That will help you stay motivated; it’s easier to say no to extra purchases when you have a reminder in front of you of why you are making a sacrifice.

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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Social Security Myth

Dollars becoming Euros

The government has been robbing the Social Security Trust! Most of us have heard this version of Social Security history.  Is it true?  Myth is a more correct answer.

Social Security’s history includes details of social movements taking place long before the Act became law in the 1930’s. The movements focused on providing some level of income security for individuals who aged out of the workforce.

Two decisions – both made at the time the bill was written – explain part of how the Social Security Trust Fund was diminished:

  • Benefits were earned when a worker had made three years of contributions prior to reaching the age of 65. BUT – to be fair to workers who would not be able to make three full years of contributions prior to their 65th birthday, the legislation granted them annual payments as well.  In the period 1937 to 1939, this annual payment resulted in a payout of $25,562,000. The actual amount paid out is larger as the payments would have continued until death.  
  • Social Security was also set up as a “pay as you go” program.  What came into the fund was paid out. Ida Mae Fuller is the first person to apply for and receive a monthly benefit. She contributed a total of $24.75 in the three years prior to reaching her 65th birthday. Her first benefit check was $22.54.  Because she lived many years past age 65, Ms. Fuller’s $24.75 investment yielded a total retirement benefit of $22,888.92.  Part of her payment would have come from new contributions and part from income earned from the excess deposits.

Social Security never achieved the trust fund it needed to give it stability. Benefits paid to American retirees in the early days of the program were far in excess of the contributions.  Legislative changes expanding benefits and building in cost of living adjustments have continued to keep the fund from building a sufficient cash reserve that would generate earnings to sustain long term benefits. 

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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Gift Cards: Know What You are Buying and Giving

Wondering what to buy someone on your gift list? For many shoppers, a gift card is the answer. Gift cards are convenient and found in multiple retail locations as well as through online merchants. According to the National Retail Federation, consumers plan to purchase three or four gift cards this season with an average amount of $47 per card. The most frequently purchased cards are for restaurants, department stores, coffee shops, Visa/Mastercard/American Express/Discover, and entertainment such as movies or music.

Consumer Reports and the Iowa Attorney General’s Consumer Protection Division offer these tips when purchasing gift cards:

  • Buy directly from stable and trusted sources. If a retail business closes, the recipient has a worthless card. Use caution when ordering cards through online gift card resellers.
  • Read the fine print and look for fees (activation or inactivity), costs to purchase the card, as well as any shipping and handling fees if you order the card through a website or by phone.
  • Retailers are not required to replace a lost or stolen card. However, some may with proof of purchase. Include the original receipt with the card.
  • The card’s Personal Identification Number (PIN) should be under a protective sticker and not scratched off. Scammers copy gift card codes then steal money loaded on the card.
  • Remember that a merchant card is valid only at the walk-in or online store of the issuing retailer.
  • Make sure the intended recipient will use the card. A large number of gift cards are unspent. Someone in a different region of the U.S. may have fewer options to use the card. Alert the recipient if the card has an expiration date.

If you have a dispute regarding a retail gift card, you can file a complaint with the Iowa Attorney General, Consumer Protection Division (www.iowaattorneygeneral.gov or 515-281-5926 or, toll-free at 888-777-4590) or the Federal Trade Commission (https://www.ftccomplaintassistant.gov or toll-free at 877-FTC-HELP)

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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Giving

Today is #GivingTuesday, an annual event begun in 2012 to spark a “global generosity movement unleashing the power of people and organizations to transform their communities and the world on December 3, 2019 and every day.”

As it follows on the heels of “Black Friday” and “Cyber Monday” and even “Small Business Saturday,” I find “Giving Tuesday” a huge relief – a welcome change of pace, not focused on shopping.

There are three ways we can use our money: Spend, Save, or Share. I don’t think the “sharing” element always gets its due attention. Sharing happens in many ways, including charitable giving and also including gifts to people we care about. It’s true that for many people, Black Friday and Cyber Monday focus on shopping for gifts we want to give to others; that is sharing, after all. But I see the kind of gift-giving I do with family and friends to be a little different. It’s less of a pure kind of sharing, because it’s usually reciprocal: “I need to give them something nice, because I know they’ll be giving me something nice, too.”

What I really like about Giving Tuesday is that it seems to encourage a more selfless sharing, with a main focus is on promoting the good of others, on something bigger than ourselves. If I can buy gifts for people who already have plenty, then surely I can also GIVE selflessly to causes that will help make the world a better place, or to people who have real need.

As you consider your giving options, focus on why you want to give when deciding whether and where to make donations. Giving to organizations you know (often local organizations) can ensure that your gifts are used well; when considering larger national charities, check them out with organizations that evaluate charities, such as  www.give.orgwww.charitywatch.orgwww.charitynavigator.org, or www.givewell.org.  

Giving is part of my monthly budget every month all year round. So on Giving Tuesday I am reminded to consider where this month’s gifts will do the most good, and also to reexamine whether I can give a little more…

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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