Who needs an emergency fund?

jar of coins

If you’ve gotten along for years without any money in the bank, you might scoff when people suggest that establishing an emergency fund should be a priority. Perhaps you respond with: “I always find a way to deal with emergencies, even without money in the bank!” You are not alone. A recent survey found that 4 in 10 Americans could not cover an unexpected expense of $400; that might be the cost of replacing an appliance that died or an unexpected car repair.

If you’re one of those 4 in 10 Americans, you’ve probably paid a price for your lack of savings. 

  • Perhaps your landlord or the utility company has lost patience with you, and will no longer give you any leeway; they may even threaten to evict you or disconnect your services. 
  • Perhaps family members avoid your calls because they’re tired of you asking for money. 
  • Perhaps you pay tens (or hundreds) of dollars a month in late fees and interest because of unexpected expenses have put you behind on bills.

Here’s the hard truth: living with no savings creates real problems for individuals and families. Savings is essential for financial stability. It can also reduce family arguments and help you sleep better at night.

So the question is this: HOW does a person build up savings? There are lots of “tricks” people use to save money. For example, they may save all their change, or every $5 bill they receive in change; or they may have a “frugal week” each month, in which they give up extras like coffee, soda or eating out, and then save the money they would’ve spent on those things. I love hearing about the variety of strategies people use!

When it comes right down to it, though, there are two core elements of any savings plan:

  1. You must treat your savings like a bill, and pay yourself FIRST. If you wait, planning to save “whatever is left,” the saving probably won’t happen. Make your spending plan for the month (or the week), figure out how much you can save, and do it first. That is the best way to succeed with saving.
  2. You MUST be saving because it is important to YOU. If you try to save just because I told you that you should, it won’t work. You have to want to save in order to be willing to make the changes required for saving. So think about WHY you want to have some savings built up. Maybe you’ll think back to the stress and drama you experienced the last time an unexpected expense occurred; avoiding that stress might be your reason. Setting an example for your children might be your reason. Keeping the utility company happy might be your reason. Note: It helps if your partner and family also agree that saving is important.

How much should you have in your emergency fund? That’s up to you, but I encourage you to set a realistic goal for the short term. If money is tight, it might take a couple of years to get to $1,000. You need some success sooner than that, so a goal of $100 might be a good place to start. When you reach that goal, you can celebrate! (And then start toward $200).

How have you succeeded with saving? We’d love to hear your stories!

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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Medical Bill Mysteries: New Tool

Stethoscope with a $100 bill

For the past year-and-a-half I have joined others in being surprised, frustrated and horrified by the “Bill-of-the-Month” news stories presented cooperatively by National Public Radio (NPR) and Kaiser Health News (KHN). The NPR/KHN team receives real bills from real people across the U.S., for treatments ranging from a cat bite and a knee brace to spinal surgery and stroke.

In every case, the consumer submitted the bill because it either seemed outrageously high or it just didn’t make sense. The investigative reporters dug into the issues, usually gathering information from the medical provider and the insurance company as well as the consumer. Sometimes they found errors that could be corrected to reduce the bill; more often, they uncovered prices that were simply inexplicably high. Sometimes, but not always, shining the light of publicity on the situation led to a reduction or elimination of the bill.

Last month Kaiser Health News launched “Your Go-To Guide to Decode Medical Bills.” This new tool includes three components: 1) Pro Tips for Navigating Surprise Medical Bills; 2) a helpful Glossary; and 3) an example of a medical bill and corresponding insurance documents, with notes highlighting key items to pay attention to. The guide is not a magic wand – it doesn’t make navigating difficult medical bills easy. But it does point consumers in the right direction, so we can get started advocating for ourselves and our loved ones.

The guide reminds us that our consumer options begin even before we seek medical treatment – with a set of items to check on before going in or making an appointment. If, despite advance preparation, you end up with a surprising medical bill, a key step is to request an itemized bill. Medical providers are required by law to provide this if consumers request it. Along with other tips, the guide identifies two websites that can help you compare the price you were charged with prices of other providers: Health Care Blue Book and Fair Health Consumer.

As consumers we need to be our own advocates. It helps to have some guidance on how to do that effectively!

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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Retirement: Longevity vs Life Expectancy

When planning for retirement, we often look up our life expectancy. One good source of life expectancy information is the Social Security Administration.   Among the many tools they offer is a life expectancy estimator. I looked up my own life expectancy.  Assuming I live to retirement age (67), the average life expectancy for a woman my age is 87. So that means I should plan for retirement to last till 87, right? Not so much. Remember: life expectancy information gives the average.  (I might not be average – what about you?)

I recently discovered a tool called the Longevity Illustrator, offered by the Society of Actuaries.  Why is this different than a life expectancy estimator? Because longevity is not the same as life expectancy! Longevity is broader — it addresses the likelihood that a person will live to various ages.

The Longevity Illustrator provides insight into possibilities — what are the “odds” that a person will live to extremely advanced age, for example? Again, I used myself as an example; remember that my life expectancy, assuming I live to age 67, is about 87. The longevity illustrator points out that there is nearly a 50-50 chance I’ll live to age 90, a 28% chance I’ll live to age 95, and a 10% chance I’ll live to age 100!!

What does that mean for our retirement planning? The longevity illustrator explains that each of us needs to decide what level of certainty is important to us. For me, they pointed out that:

  • If I am comfortable with a 25% chance that I might run out of money, then I might plan for a 28-year retirement.
  • If I want more security — perhaps only a 10% risk that I would outlive my funds, then I should plan for a 33-year retirement.

Anytime our decisions involve unknowns, like retirement does, we need to prepare for some complex thinking. We need to consider a variety of possibilities, and recognize that there will be no certainty; instead, we need to think in terms of probability. We also need to be prepared to be flexible. It’s a challenge, but having good tools can help.

Check out the Longevity Illustrator from the Society of Actuaries and see how it can inform your retirement planning decisions!

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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Insurance Claim Denied? Appeal!

Stamp: Denied They are words we hope we’ll never hear: “your health insurance claim is denied.” It happens, though – millions of times each year. Sometimes a denial is legitimate – the treatment truly is not covered by the insurance policy. But at other times the claim was denied in error.

A recent study by the Kaiser Family Foundation revealed that, when faced with a denied health claim, fewer than one percent of consumers appeal.* The study did not explore why consumers don’t appeal. It is likely that sometimes they don’t appeal because they are so busy dealing with all their health problems and don’t have the energy to deal with it. In addition, I can imagine that consumers may be intimidated by the complexity of the insurance world; I can also imagine some people may not even realize that appealing is an option.

When I read how few people appeal, I was concerned. I want consumers to know they can appeal, and that they should appeal if they believe a medical treatment should have been covered by their policy. NOTE: insurance companies generally allow a specific window of time in which to appeal – probably 2-4 months – so try to deal with it fairly speedily.

Knowing you have the right to appeal is the first step. Contacting the insurance company to request a written statement explaining the reason for denial is step two.

From there, options vary. You may be able to enlist support from your medical provider to justify the medical necessity or clear up any coding errors. Beyond that, ask the insurance company to outline its appeal process, and follow it carefully, keeping copies of all correspondence. If your appeal is denied by the company, ask about an external appeal process — some types of plans include provisions for external review.

If you are not satisfied with how your appeal is handled, consider a complaint through the Iowa Insurance Division. ISU Extension’s Iowa Concern Hotline (800-447-1985) is another resource when you don’t know what steps to take next; their staff attorney provides legal education and may be able to help you identify additional options.  

*Note: the data used in the KFF study was limited to plans offered through the healthcare.gov Marketplace; it is possible that appeals rates might be different for other plans, including employer-sponsored plans.

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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Measles and Money??

global information sourcesThe current widespread measles outbreak results from too many people remaining un-vaccinated. But the underlying cause is deeper – the true cause is misinformation. There are some people who don’t get vaccinated because of an existing health problem. But most people who have not been vaccinated based that choice on information that was inaccurate and/or misleading.

Misinformation abounds in today’s world, and not just in health care. As a consumer educator, I am constantly reminding people to make sure they base important decisions on sound information. That means:

  • Not relying solely on the opinion or experience of a few friends. Aside: it’s perfectly appropriate to choose a dessert based on recommendations from friends; that’s a situation where there are no costly consequences if you later regret your choice.  Your friends’ insights can be useful, but they should not be the ONLY reason you make an important decision. Examples of important decisions include where and how much to invest your money, whether and where to get a loan, major purchases (house, car, …), college selection, and so on; these are all decisions that could have substantial long-term costs (financial costs and opportunity costs) if an unfortunate choice is made, OR significant long-term benefits (financial or otherwise) if a productive option is chosen.
  • Reading and learning from on-line product reviews, but not assuming they are 100% accurate or unbiased. One source of product reviews that are generally unbiased is Consumer ReportsStaff there purchase products as ordinary consumers and conduct rigorous scientific testing to assess product performance and reliability. Most libraries carry the magazine, and some material is available on-line even to non-subscribers.
  • Considering the possible motives behind the information you receive, whether it be from a website, a salesperson, an advertisement, or any other source. Advertisements clearly have a goal of selling their product, but a sales goal can also be somewhat hidden. An “informational” website or article might actually be owned by a company that sells investments, for example. In general, you can trust information from websites with a “.gov” or “.edu” URL (including Iowa State University Extension and Outreach). When it comes to “.org” sites, it can be more difficult to discern whether the organization is a credible source. A couple of reliable non-profit organizations are:
  • In many cases, commercial sources of information are a necessary part of your information-gathering. This includes articles in commercial magazines and commercial websites, because there is always a possibility that the information provided may be influenced by their advertisers. When using a commercial source, be sure to seek out multiple sources to see if the information is corroborated elsewhere.
  •  Taking enough time to gather information from a variety of sources. Avoid succumbing to sales pressure suggesting that a decision must be made now.

Just as with measles vaccinations, relying on unbiased, accurate and complete information about consumer decisions will have a positive impact on your well-being!

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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Shopping for People

It’s a rare person who buys a car or a refrigerator without comparing several different options, probably from several different sellers. Yet we humans have a lot of trouble shopping around and comparing our options before we hire a professional. That doesn’t make sense when you think about it — our professional advisers may have a much greater impact on our well-being than our refrigerator!

I’m guessing that maybe there are two reasons we don’t shop around for professional advisers: a) we didn’t learn how from our parents (who may have taught us how to shop around for products from groceries to vacuum cleaners); and b) we feel awkward asking a lot of questions and interviewing professionals, especially when they are the experts and we may not know very much about the topic for which we are seeking an adviser.  This applies to attorneys, tax preparers, investment advisers and a wide range of other professionals. It probably applies to experts like plumbers and electricians, too.

I’m going to focus here on financial advisers, but the principles are the same for all professionals. Our financial advisers have a huge impact on our lives, so we need to get over our discomfort, and “just do it.” (forgive me for relying on a phrase made famous in commercials back in the 1970’s or 80’s).  Really. This is a time to suck it up and force ourselves to take on something even if we’re nervous about it.

Here’s some good news: reputable financial professionals will understand and support our desire to choose an adviser that fits our needs. They will generally be happy to schedule an appointment (maybe 30 minutes) so we can learn more about them – how they do their work, how they are compensated, what experience they have, and how they stay current in their field. Our job will be to go in prepared with questions we want to ask.  (Don’t worry — some resources are identified below!). And then our job is to finish the interview, thank them, and leave without making any decisions. That allows us to interview other individuals, check references, consider what we have learned, and follow up with additional questions before choosing the professional we trust to guide our financial future.

For ideas on what to look for and what kinds of questions to ask, I suggest you begin with information at the following links: FINRA (the Financial Industry Regulatory Authority); Investing for Your Future (national Extension system); Investor Bulletin (from the Securities and Exchange Commission).

Add  your ideas here — what are YOU looking for in a financial 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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Goal Check-up

We’re two months past new years… how are you doing with your goals or resolutions?

No, I’m not here to nag you! It’s your life and your money, and you should use it as you see fit. But … if there is something you really wanted to accomplish, and you haven’t made progress yet, then now is a great time to revisit the goal and come up with a strategy that will help you move forward!

One great starting place is to break down your goal into small steps so that you have something concrete you can accomplish each day or each week. An example:

Suppose your goal is to pay off an $800 hospital bill. You don’t have $800 sitting around, so it seems impossible.

To break it into small steps, you might decide to pay $100/month.

  • You could break that down even further by saying that you will take $25 from each weekly paycheck.
  • Or you might decide to take $70 from your paycheck the third week of the month (because you don’t have many bills due that week), and $10 from all the other paychecks.
  • You might go a step further and say that the way your going to come up with $10/week is by staying away from the vending machines at work. Or perhaps you’re going to save $25/week by taking your lunch to work.

Another key to reaching a goal is to be convinced of its importance. Reaching any financial goal requires making some type of change. We humans are generally unwilling to change unless it is for a really good reason. So spend some time focusing on WHY you set that goal. Are you truly “sold” on the goal? If yes, that will make it much easier to accomplish; any time you’re inclined to stray from your plan, you can remind yourself of the “why” behind your goal.

If, on the other hand, you are not fully “sold” on the importance of the goal, you may have difficulty accomplishing it. Perhaps it is not the right goal for you. Or … if you know in your head that it’s a valuable goal, you may want to spend some time convincing your heart of its importance — outline all the reasons why your brain knows this is important, or make a list of all the good things that will result from it.

These are not the only ways to be successful in reaching a goal, but in my experience they help a lot. Set goals that are important to you, and identify small steps that will move you closer to the goal!

Best wishes with your new New Year’s resolutions!

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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Winter Weather: Time to organize!

In much of Iowa, our recent winter weeks have held lots of days suitable only for staying indoors. We’ve canceled or postponed many plans, and some of our dogs have missed lots of walks because some days were just too cold or windy.

So what can we do with those snow days?  I have an idea!
No, it’s not binge-watching your favorite shows or movies, nor does it involve baking. You don’t need ME to suggest those!

My idea is less recreational, but much more valuable in the long term: go through your files!

Cleaning and organizing files is a task we tend to procrastinate. But in an emergency, and even in many non-emergency situations, we sure would like to turn to our files and immediately put our hands on the document(s) we need. When need arises, we’ll be glad we invested some time in getting organized.

Here’s the good news: it’s a task that can be broken up into small doses.

  • If you already have a filing system, you can just go through one or two files a day, to pull out old materials that are no longer needed, and make sure the most current information is in front.
  • If you do not have a filing system in place, start with a small stack of papers from wherever you’ve been storing them. Create file folders or envelopes for each category of papers you run across. For example, if the first paper you come to is about your car insurance, then create a car insurance file. Perhaps the next item will be college transcript – if so, create an education file.

Well-organized files have three characteristics:  1) they are clearly labeled; 2) the newest and most important information is in front; and 3) out-of-date and unimportant documents are removed. Determining what is important can be a challenge. Some tips for starters: 

  • Insurance – keep the most recent summary of coverage (declarations page). In addition, keep the full policy booklet if you have one, and any updates you receive about coverage details.
  • Mutual fund accounts – keep your quarterly statements until the year-end statement arrives; that should include all activity for the year, so you can discard the quarterly statements. Keep all year-end statements, with the most recent in front. Keep the most recent prospectus. There is no need to keep annual reports.
  • Monthly bills – once you get the next statement showing that your payment was received, you can safely discard the previous statement, unless you need it for tax purposes.
  • Warranties and purchase records for warrantied items – keep as long as you own the item. Keep the purchase information longer if the item affects your taxes.
  • Taxes – after six years, they can be discarded.

Personally, my biggest filing problem is old folders with labels that have fallen off – I need to go through and re-label files. Which filing task most needs your attention?

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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It May Be a Rough Ride: Prepare for Tax Filing

Form 1040

Filing our 2018 income tax returns may be rougher than normal, because much has changed. Why? Three big reasons:
• There are significant changes in tax law, which affect deductions, exemptions and credits used by virtually all Americans;
• The Federal government dramatically revised Form 1040, the form used by everyone when filing individual income tax, and forms 1040EZ and 1040A have been eliminated; in addition, there are minor changes to the Iowa 1040;
• The partial shutdown of the Federal government creates many unknowns with regard to transmitting returns electronically.

Imagine being a tax software developer. They’ve known all year that the law had changed and the forms were going to change, and they received draft copies of what the forms might look like, but the final forms weren’t released until the second week of December. Just imagine how people have been scrambling to make all the needed adjustments and test all the functions. In addition, it seems likely that the federal shutdown has affected their ability to get technical assistance and to test the compatibility of their software with the IRS system. It almost sounds like a horror story! (That’s a joke, but not really)

What does this mean for us taxpayers? Above all, I think it means we need to be cautious about our expectations. I’m thinking of expectations about the timing and the size of our refunds.
• The changes in the law (and the changes made to year-round tax withholding) will affect us all, and until we calculate our returns we won’t really know if our refunds will be similar to past years’, or higher or lower.
• As far as timing, the IRS won’t even be accepting returns electronically until January 28 – about ten days later than normal; that’s a delay for some folks right from the start. And of course we always need to be cautious about timing expectations – it is never smart to spend money before you have it, OR to make promises that you can pay by a certain date “because surely I’ll have my tax refund by then.” The IRS recently announced that it would be processing refunds even if the government shutdown continues; that’s reassuring, but it is certainly not a guarantee that they’ll be able to do it in a timely manner. Note: also keep in mind that since the passage of the PATH Act in 2015, the IRS delays all refunds that include the Earned Income Tax Credit or the Additional Child Tax Credit until at least February 15. This delay may affect more people this year, because more people may be receiving the Additional Child Tax Credit.

What are your questions about your 2018 tax return?

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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Holiday Wishes

Revisiting a holiday post from a previous year, and renewing happy holiday wishes for all!

For all you readers who celebrate ANY of the December holidays, today is probably NOT a day when you’re looking for a message or tip about wise use of money.  In my experience, by this point in the holiday season the die is cast — the money is pretty much all spent, or at least the decisions are made and the funds are committed. There’s not much I can say that will matter for now. (In a week or two it may be time for a clear money message — time to start new habits and/or address existing problems – but not now).

For now, in the midst of celebration and family time, now is simply the time to enjoy what life brings. To me, the key is to recognize that the most important gift you or anyone else can bring to holiday festivities is a gift of good cheer.

  • That means not comparing how much you spent with how much someone else spent on a gift. Instead, simply trust that you and everyone else gave with good intentions; this will bring the most joy to your celebrations.
    Note: this includes not judging yourself, as well as not judging others.
  • It means giving the best possible interpretation to the contributions and comments of others. Holiday festivities can bring stressful situations and poorly-thought-out comments; for everyone’s sake, this is a time to tune in to the positive to keep celebrations bright.
  • It means that maintaining and building relationships is more important than any detail that is amiss or any aspect of the feast that is less or more than past celebrations.
  • There is always something to enjoy or be grateful for. Bring a grateful or joyful attitude to celebrations, meals, and to giving and receiving.

No matter how much money you spend on holidays, it is gifts of good cheer, kindness, friendship and joy that will mean the most to you and all those in your world.

We at MoneyTip$ wish you very happy holidays!

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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