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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Thanksgiving

The Pilgrims celebrated their first successful harvest in 1621.  The feast was a three-day celebration that included the survivors of the Mayflower and Native Americans.  The newcomers had adapted to the new environment and learned how to grow and harvest the food they needed to survive the winter months.

It would be awesome to be able to say that as a nation we have developed into a country where everyone is self-sufficient and can meet their own needs, but individuals and families still struggle. 

Thanksgiving’s celebration is an opportunity to share, and making contributions to the food pantry would be a great way to support community members.  A call to the local pantry can help with ideas of what to purchase.  Suggested items are easy to open canned vegetables, fruit, meats, beans, soups, and stews.  Peanut butter, cereals, crackers, and pasta are also good choices. Think about complete meals that can be prepared with simple tools and few additional needed ingredients. Don’t overlook spices that can help enhance meals prepared with standard food pantry items.  

Another approach is to focus on a specific group – infants, young children, cultural groups living in your community – and bundle together foods appropriate for their preferences and eating habits.  More ideas can be found here.

Money Tips authors, Brenda, Barb and I, wish you a joyful Thanksgiving!

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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Lending Money in Tough Times

Man handing out money.

Times are tough when money is tight. When you are in need of money NOW, you may find banks unwilling to loan money, especially if your credit score is poor. For some, the only option is to borrow from family or friends, especially if you need the money fast.

If you are the lender, it will be hard to say no. You want to help a friend in need and if you say no, you will feel guilty if they lose everything. If you lend the money and they still lose everything, there may be hard feelings because the debt goes unpaid. If the loan is made to a family member, family gatherings will be uncomfortable. The lender may make mental inventories of anything purchased (while the debt is unpaid) especially if purchases are viewed as WANTS instead of a NEEDS.

When making the decision to lend money, it is important to keep emotions out of it. You should not lend money that you can’t afford to lose. If you do expect it to be paid back, don’t expect it to be paid back quickly. You may want to consider the money as a gift instead of thinking of it as a loan.  Then if you get the money back, it will be a pleasant surprise…instead of a disappointment when it isn’t paid back.

Another thing I have done in the past is to buy groceries or to offer to fill up the gas tank for a friend or family member.  This would free up money for the emergency that would have been set aside for gas or groceries. I have also offered to pay for a service, like painting a bedroom which helped the family member make ends meet, without having to ask for a loan. Make sure your spouse is in on the decision to lend money.

As of the 2019 tax year, the IRS has a $15,000 gift tax rule. A small loan will not make a difference, but if you do not charge interest on a loan of that amount or more, it may be considered a gift. If you do not charge interest, the IRS can say the interest you should have charged was a gift . In that case, the interest money goes toward your annual gift giving limit of $15,000 per individual. If you give more than $15,000 to one individual, you are required to file a gift tax form.  The rate of interest on the loan must be at least as high as the minimum interest rates set by the IRS.

These are tough times, especially for the farming community. Be sure to share information, phone numbers and links from the Iowa Concern Hotline.

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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To Reconcile or Not

Bank Check
Bank Check

Reconciling a checking account, comparing the bank’s records of checking account activity with your own records, is one of those things I learned when I opened my first account at the age of 16. There is something very satisfying when it matches to the penny AND it ensure that my checking account balance is correct.

It is a challenging to teach tech-savvy individuals to value and adopt the practice of reconciling their bank accounts. Many just rely on a phone app to ensure there is enough money in their account before writing a check. The flaw in this strategy is this: what if there are outstanding checks that have not yet cleared, so there is actually less money in the account than there appears to be on the banking app on your phone?

This week I learned an alarming new reason for reconciling your bank accounts. Over a period of several months, my daughter had purchased supplies for a group she volunteered for. She electronically deposited the reimbursement checks into her account by taking a picture of the checks with her phone. She put the deposited checks in a neat stack on her desk so she would remember to file or destroy them later. Weeks later, her husband found and deposited the checks not knowing they were waiting to be destroyed. He encountered no red flags or warnings, and the checks were deposited a second time. The error was not discovered until the group for whom she volunteered reconciled their account. Had they NOT reconciled their account, the error might never have been discovered.

I find this alarming. There was a period of time where I wrote checks at a large chain store; they scanned my check and handed it back to me. What if a dishonest clerk would have scanned it twice and pocketed the cash from the register? Her register would have balanced at the end of the day. What if I had lost the check and someone deposited it? What if…?

What measures are you going to take to protect yourself from this potential problem? For information about reconciling a bank account, check out How To Reconcile A Bank Account.

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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Buying Health Insurance

Xray

I think it is safe to say that you do not really understand how expensive health care can be and what an insurance policy covers until you experience a medical event. Up till then, you’ve just seen the written policy, which has to summarize services for a wide variety of health issues and often uses language that is hard to understand. The result is a book called “Evidence of Coverage.” Not something you find on the bestseller list of reading material. 

Knowing that a “book” is not what consumers want to read, insurance marketers will often highlight internet access and wellness coaching,  rather than details about out of pocket costs.

Here is an example: Jamie breaks an arm. With a higher-premium policy that pays a larger share of the cost of care, Jamie’s total out of pocket cost would be $4,000. If Jamie had selected a policy based only on premium costs and selected the plan with the lowest premiums, Jamie’s total out of pocket expense for the broken arm would be $6,000, due to a higher deductible and higher co-pays for covered services.

Steps to picking a plan go beyond comparing premiums. You can learn how in a workshop, “Smart Choice: Health Insurance ™ Basics.”  This free workshop is offered online on November  6th, 7:00-8:00 pm.  Register by November 4th at http://bit.ly/schi14326

Getting the most out of your coverage and learning more about navigating the claims process is part of Smart Use: Health Insurance™ Actions.  It will be taught online on November 13. To receive log-in information, register for this program by November 11th at http://bity.ly/schi14328

Smart Choice: Health Insurance™  was developed by a team of experts from across the nation led by University of Maryland Extension.  

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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A Missing Link in Your Spending Plan?

checking a box

Making a spending plan is a key to being on top of your finances. When you look at the income you can realistically expect and then decide in advance how you want to spend it, that plan puts you in control; it helps you ensure your money is used where it matters most.

But is a spending plan all you need? The answer is a definite NO. Lots of people make spending plans but still don’t gain control. Why?  Because even the best spending plan is useless if you don’t FOLLOW it. And that doesn’t happen automatically. You need a strategy.

The good news is that for most people, part of their spending plan is easy to follow; fixed expenses like rent and other bills are predictable, and are usually paid just once a month. The tricky part for most people is staying within their planned limits for flexible expenses (groceries, fun, etc).

It comes down to questions like this:
If you plan to spend $320 on groceries for the month, how do you make sure you don’t spend more than that?

The answer? Keeping track. The only way to make sure you follow through with your plan is to have a strategy for checking up on your spending throughout the month. There are “old-fashioned” ways to do that, like writing down spending in each category, using either written ledger charts OR computerized spreadsheets. The “envelope method” also can help you follow your plan; it involves separate envelopes containing cash for each category of spending you wish to monitor (groceries, gas, fun, etc).

There are also “apps” that can help you track. These apps work in a variety of ways: with some, you enter your spending in your mobile device as you go along; with others, your debit card spending is linked to the app, so that, for example, all purchases at the grocery store are automatically added to your running total of food expenses.

The money management apps for mobile devices are generally provided by commercial organizations, and Extension does not recommend commercial products, but consumers have found many of these apps useful. One caution I suggest, however, relates to internet security when accessing your financial accounts. Choose settings within the app that will prevent the app from connecting to your bank account via open public wi-fi.

Tracking your spending, especially in the categories where you are most at-risk of exceeding your planned amounts, is the best step you can take to make your spending plan work. And that is the way to achieve your financial goals!

For more information, find our free 4-page publication “Tracking Your Spending.”

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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Business On The Side

Mary Weinand
Our guest blogger is our colleague Mary Weinand, Human Sciences Specialist, Family Finance, in southeast Iowa

Given the economy, many people are trying to make ends meet with a side job or small business. Before you begin, consider what expenses might go with the business as well. Running a business can be profitable but it can be expensive too. Deductible expenses help entrepreneurs with many of the costs of running a company. Business owners include expenditures on tax returns so that not all of the business sales are taxed as earnings.

The IRS realizes there is a cost to doing business but there may be limits and timing issues for many deductions. Business expenses are reported in the year they are paid – which can differ from the year income is earned. There are some exceptions to this rule, which can allow a business to carry a loss forward to the next year. If your expenses exceed your income for the year you may be able to carry forward some of the business expense to the next year. Check with your tax accountant to make sure you are reporting correctly on your taxes.

According to IRS.GOV, you have to file an income tax return for 2018 if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Instructions for Form 1040.

Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment. You calculate net earnings by subtracting ordinary and necessary trade or business expenses from the gross income you derived from your trade or business. You can be liable for paying self-employment tax even if you currently receive social security benefits. The law sets a maximum amount of net earnings subject to the social security tax. This amount changes annually. All of your net earnings are subject to the Medicare tax.

Some common deductions for small businesses:

Vehicle – If you use your vehicle in your business, you can deduct vehicle expenses. If you use your vehicle for both business and personal purposes, you must divide your expenses based on actual mileage.

Employee Salary – If you pay someone to perform business services then you can deduct their salary or contract services on your taxes. Be sure the service is related to the business and not for your personal benefit. For example, if you own a home cleaning service you can’t deduct the employee salary to clean your own home.

Interest – You can deduct the expense of interest for money borrowed for business activities.

Business-Related Education – You can deduct seminars, classes, educational tapes or CDs, and convention fees related to your business.

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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Your Biggest Financial Decision

What’s the biggest financial decision you’ll ever make? Going to college? Buying a house? Maybe, but it may also be true that the biggest financial decision is the decision about when to claim Social Security. And that is a decision where you’ll hear people give opposite advice – some will recommend claiming early, and others encourage you to wait.

Because it’s a big decision, it’s worth exploring your options carefully using readily available online tools. Tool #1 is well-known, but read on to tool #2, as well, because it offers a bonus.

Tool #1: Set up your account at www.socialsecurity.gov and check out your options. Notice how your monthly Social Security income changes depending on your age at claim. You’ll notice that it’s not just what year, but also what month, that matters. For example, if you turn 67 in November, but really don’t have any plans until summer, working an extra 5 or 6 months will give you a higher monthly income.

Tool #2: Check out the Social Security Estimator from the Consumer Financial Protection Bureau (CFPB).  Although this tool is not personalized to your individual history of work and earnings, it does something the Social Security tool does not. It shows the cumulative impact of your decision about when to claim. 

Here’s how the CFPB tool works: You enter your birthdate, and type in how much has been your highest annual earned income in your career. Based on that, it estimates what your social security retirement benefit would be at your full retirement age, and at other ages between 62 and 70. When you select an age, it shows what your monthly income will be, AND (in the left margin) it shows the total amount you will receive from Social Security if you live to the average life expectancy of 85.

graphic depiction of output described.
Combined graphic showing calculator results at ages 62 and 70

I ran an example for a person born in 1960 whose highest earning level was $50,000/year. If they claimed at age 62 and lived till age 85, they would receive a monthly benefit of $1,112 and would have received a total of $305,800 from Social Security during their life. By contrast, if they claimed at age 70 and lived to age 85, their monthly benefit would be $1,958 and their total by age 85 would be $352,440. Note: all these figures would actually be higher, because of adjustments for inflation.

There is no “right” age to claim Social Security; your choice depends on your situation – your needs, other sources of income, health situation, and more. But using available tools, including the CFPB calculator which enables you to easily see the total impact of your decision at age 85, will help you make a well-informed decision. Find more retirement planning information our retirement resource page.

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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Unretirement

Questions are part of our Writing Your Retirement Paycheck program. The more common questions are about finances, but every now and then, someone will ask, “How am I going to know when to retire and will I like it?” The question of when is sometimes tied to finances, which is fairly straightforward to discuss, but helping someone like retirement is a challenge.   

A number of individuals in the United States practice unretirement. A word being used to describe reentry into the workforce after a formal retirement. In an article published by the National Institute of Health, 80% of near-retirement individuals expect to return to the world of work in some capacity.  After 2 years, 25% are working full time.  Returning to work is less likely to occur if an individual experiences health issues. Interestingly, financial need does not appear to be a common reason for reentry into the workforce.

Retirement plans are highly individual; one size does not fit all. The successful transitions all have individual differences, but three elements are frequently mentioned.

  • A planned trip or activity to create a bridge between the everyday routine of going to work and the freedom of setting your own daily schedule. It creates a distraction and gives a chance for individuals to refocus on a new lifestyle.
  • Setting goals to complete in the early years of retirement. If chosen wisely, these goals help with time management, simulate thinking, and can result in enjoyment of new accomplishments.
  • Developing new relationships with individuals and groups outside of the workplace prior to retirement. New associations can help replace the psychological value individuals gained from their roles in the workplace. 

Planning for the transition to retirement is financial, but also includes mental preparation for a new lifestyle. Without that step, we might find ourselves part of the “unretirement” movement.  

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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Managing Someone Else’s Money – Being a Financial Caregiver

Today’s guest blogger is Sandra McKinnon, Human Sciences Specialist in family finance serving southwest Iowa.

Are you managing money or property for a loved one who is unable to pay bills or make financial decisions? According to the Consumer Financial Protection Bureau, 40% of those over 60 years old have a power of attorney. That amounts to over 26 million people in the U.S. with this responsibility.

Being legally designated as power of attorney is one of 4 different types of financial caregivers, also known as a fiduciary. You must be trustworthy, honest and act in good faith.

Other types of fiduciaries include: a court-appointed guardian of property (known as a conservator); a government fiduciary (such as a Social Security representative payee); and a trustee under a revocable living trust. Each of these is a separate responsibility.

Each has duties, powers and responsibilities. In general, there are 4 basic legal duties of a fiduciary:

  1. Act only in best interest of your family member or friend
  2. Manage their money and property carefully
  3. Keep their money and property separate from your own
  4. Keep good records and report as required

Another role of a financial caregiver is to watch out for financial exploitation and be on guard for consumer scams. If you suspect exploitation of an older adult, call the Eldercare Locator 1-800-677-1116 or visit www.eldercare.acl.gov. They will assist you in finding the state or local agency that investigate.

For more information, visit https://www.consumerfinance.gov/consumer-tools/managing-someone-elses-money/ or seek guidance of an appropriate legal professional.

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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