Is Your Spending Plan Working?

A spending plan (aka “budget”) is a key to taking control of your money. But it’s not enough to make a spending plan. To get results, you need to go the next step and work your plan.

Think about it: you could make a plan that works out perfectly on paper — all your bills are paid, you have enough money for needs like groceries and gas and also some fun, AND you also put some money toward your longer-term financial goals. However, if your plan calls for spending $500 a month on groceries, and you actually spend $700 on groceries, then your plan is wrecked. You’ll end up with unpaid bills, unmet needs, and/or zero progress toward your goals. Even a “perfect” plan is no good if you don’t follow it.

Following a spending plan doesn’t have to be difficult, but it does take some attention: you’ll need a strategy to help you stay within the spending limits of your plan. In other words, you’ll need some method of tracking or monitoring your spending.

Let’s stick with the grocery example above. Perhaps we go to the grocery store 6-8 times during a month. If we want to make sure we keep our grocery spending below $500, we’re going to need some type of on-going record of what we’re spending. Maybe we just keep a list of grocery spending. Maybe we use a paper ledger form, an excel spreadsheet or a purchased software program. Maybe we use an app on our phone designed for that purpose. We could even put $500 cash in an envelope and only buy groceries using that cash — that way we would be unable to spend more than we planned.

A note of realism: unexpected events can interfere with our plans. A grocery example: suppose relatives decide to come visit you for a weekend. Suddenly your original grocery allotment of $500 might no longer be sufficient. Your plan will need to change. It’s your plan – you are free to change it if you need or want to change it! And here’s the good news – that change doesn’t have to wreck your plan! By keeping track and being aware that you are spending extra on groceries, you will know that you need to reduce your spending in some other area to compensate for your extra grocery spending. You will adjust your overall plan intentionally to accommodate the change.

Finding the right tool. There are multiple tools and strategies available to help with following your plan; different tools suit different people, so consider what will be most workable for you. The ISU Extension publication “Tracking Your Spending” provides a helpful overview of basic methods. Because no publication can keep up with the ever-changing landscape of software and mobile applications, some online research will be needed if you want to explore and compare those options.

For Iowans who would like help with making and following a spending plan, Extension specialists are available for one-on-one consultations, either in person or via phone or zoom. Don’t hesitate to contact us!

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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Health Insurance Special Enrollment Period

Even though open enrollment ended months ago, health insurance for 2022 through the federal marketplace is still available to people with very low incomes! A few weeks ago, the government opened a special enrollment period for those whose incomes are below 150% of the poverty line: that’s $19,320 for a single individual: $26,130 for a household of two; and $39,750 for a household of four. I know those income limits exclude a lot of folks, but for those who are included, this can be important news. No ending date has been announced for the special enrollment period; it appears to be continuing throughout 2022.

This new special enrollment period is especially important for those whose income is near the top of the income range for their family size. Why? Because Iowa families with incomes below ~135% of poverty are eligible for free health coverage through the expanded Medicaid program. It is those who are above the Medicaid level who may especially need this opportunity. Here’s why:

During the COVID emergency, some households have been allowed to remain on the free Medicaid coverage even if their incomes grew beyond the authorized levels. When the COVID emergency designation ends, those families will likely lose that coverage. These are folks who will benefit from the new special opportunity for families with lower incomes.

Keep in mind that anyone can have a Special Enrollment Period in the health insurance Marketplace if they have a qualifying life event. The special enrollment period extends up to 60 days after the life event occurs. Examples of qualifying life events include:

  • Loss of health coverage (e.g. due to job loss, divorce, or other reason)
  • Change in household composition (e.g. birth or adoption, divorce or marriage, death of household member)
  • Change in residence
  • Other events (e.g. change in income, release from incarceration, and more)

Do you need health insurance? Find out today if you are eligible for a Special Enrollment Period! You can also inquire and apply by phone through the official Marketplace help line: 800-318-2596.

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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Shrinkflation: How to Shop Proactively

Today’s guest blogger is Carol Ehlers, ISU Extension specialist in NW Iowa.

We’re used to our favorite cereal costing $3.50 per box so when the price goes up to $4 it’s something we notice. But do we notice when the box contains only 15 ounces instead of the 18 ounces it used to hold? From fewer toilet paper sheets to less toothpaste ounces, consumers are reporting ‘Shrinkflation’ – reduced product amounts for regular purchases due to inflation.

Understand How Shrinkflation Works- Because we pay more attention to price when we shop, we don’t notice subtle changes in packaging or read details about the size or weight of a product. During periods of high inflation, companies may downsize products so they can keep prices unchanged. This strategy is known as shrinkflation.

With US inflation figures from the Bureau of Labor Statistics showing prices increased 8.5% in the last 12 months, consumers may still not realize they’re paying more for most regular purchases than in 2021 and now they may have less product in the package as well.

Shop proactively using Unit Pricing; Unit pricing is a way to compare similar products to find the best value.

For example, carrots are available in different forms: full-sized and baby carrots. They are also available in different sized bags. Figuring the unit price can help you determine which carrots are the best value.

  • One pound baby carrots, $0.99 ($0.99 per pound)
  • Two pounds baby carrots, $1.89 ($0.94 per pound)
  • One pound full-sized carrots, $0.68 ($0.68 per pound)*

*The full-sized carrots are the best buy. Consider whether you have the time to get the carrots peeled and cut up this week. If so, save money by buying the full-sized carrots.

Check out Iowa State University ‘Spend Smart, Eat Smart’s’ Unit Pricing help at: https://spendsmart.extension.iastate.edu/shop/compare-unit-prices-best-buy/

Shrinkflation will have less impact when making decisions that include unit pricing.  Save money on groceries downloading the ISU ‘Spend Smart Eat Smart’  comparison calculator to find the best bargains – https://spendsmart.wpengine.com/shop/spend-smart-eat-smart-app/

Free financial counseling is also available to all Iowa residents through ISU Extension and Outreach’s Human Sciences Specialists in Family Finance. We can help revise budgets, prioritize spending and link you to community resources. To do so, contact Iowa Concern at 800-447-1985 and ask for free financial counseling, OR find your local specialist and contact them directly.

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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Make the Most of Financial Literacy Month

April is Financial Literacy Month! This annual event reminds us ALL that we are never “done” with financial literacy. The world changes, financial products change, and our own needs change — that means we always need to keep learning about financial topics.

What do you want to learn more about when it comes to finances?

  • Is buying a home on your radar sometime in the next few years?
  • Do you need a retirement checkup to see if you are on track to meet your goals?
  • Do you want to start saving for your children’s education after high school?
  • Are you having trouble keeping up with your daily-weekly-monthly financial challenges?

Set a goal NOW to take steps toward being the informed consumer and financial manager you want to be! See below for ideas that will help you address the four questions above. And subscribe to MoneyTip$ to make sure you get ongoing reminders and updates on financial topics.

Remember that financial literacy is not just for young people, or for people who don’t know how to manage their money. Financial literacy is an ongoing topic for EVERYONE!

Ideas to help with the questions above:

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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Get More for Your Driving Dollar

Guest blogger Phyllis Zalenski, ISU Extension

With gas prices at record highs, many of us are feeling financial pain at the pump and on our household budget. Although we cannot control soaring gas prices, there are ways to improve gas mileage. The U.S. Department of Energy offers the following driving and car maintenance tips to save you money.

Driving Tips:

  • Drive sensibly and avoid aggressive driving, such as speeding, rapid acceleration, and hard braking. Aggressive driving can lower your highway gas mileage by 15% to 30% and your city mileage by 10% to 40%.
  • Avoid driving at high speeds. Above 50 mph, gas mileage drops rapidly. For every 5 mph above 50 mph, it’s like paying an additional $0.25 or more per gallon of gasoline.
  • Combine errands. Several short trips, each one taken from a cold start, can use twice as much fuel as one trip covering the same distance when the engine is warm.
  • Use cruise control on the highway to maintain a constant speed and, in most cases, save gas.

Car Maintenance Tips:

  • Use the grade of motor oil your car’s manufacturer recommends. Using a different grade of motor oil can lower your gas mileage by 1%-2%.
  • Inflate your tires to the pressure listed in your owner’s manual or on a sticker that is either in the glove box or driver’s side door jamb. This number may differ from the maximum pressure listed on your tire’s sidewall.
  • Get regular maintenance checks to avoid fuel economy problems due to worn spark plugs, dragging brakes, sagging belts, low transmission fluid, or transmission problems. Fixing a serious maintenance problem, such as a faulty oxygen sensor, can improve mileage by as much as 40%.
  • Don’t ignore the check-engine light—it can alert you to problems that affect fuel economy as well as more serious problems, even when your vehicle seems to be running fine.

Learn more fuel saving tips and other ways to save money on www.fueleconomy.gov

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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Avoid Excessive Tax Bills

In my work as a VITA volunteer, AND in my personal life, I’ve run across a larger-than-usual number of people this year whose tax returns left them with a need to pay extra to the IRS for 2021.

  • When it’s a small amount, it’s no big deal — in fact, some folks see that as the ideal situation. They’d prefer to owe Uncle Sam a little at the end of the year, rather than getting a big refund, which essentially means they have given a no-interest loan to Uncle Sam during the year.
  • But when people owe a large amount of income tax when they file, that means something has gone wrong with the system: not enough taxes have been withheld from their income throughout the year.

To AVOID owing substantial income tax at the time you file, your best step is to check the IRS Withholding Estimator. This easy-to-use tool allows you to make sure you are having an appropriate of federal income tax taken out of each paycheck. The tool asks you to enter information about your filing status and number of dependents, and then asks you to enter information from your most recent pay stubs — both year-to-date information AND information for the current pay period. Based on this information, the tool will help you see if you are having the appropriate amount of tax withheld from your paychecks.

Why does this happen and when do I especially need the withholding estimator? Checking on your tax withholding is especially helpful in certain situations:

  • When you have income from several different sources: if you have several different part-time jobs, or a mix of retirement income and employment income, OR if you have a spouse who also has income. In these situations, none of your income sources knows how much your total income for the year is likely to be. The problem with that is that they might withhold only a small amount of tax, on the assumption that this part-time job is your only income for the year. However, when you add up all those different sources, you may be in a higher tax bracket than any one of those sources would have guessed. The withholding estimator can help make up for the fact that no one income provider knows your whole income picture.
  • When your family situation changes: you get married, or are divorced or widowed, or you add new members to your tax household. In these cases, the withholdings you have had for years may now be inappropriate for your new situation. Some of the people I’ve seen this year who have gotten unexpectedly bad news with their tax return have been new widows. This was their first year filing single, and they owed more taxes than expected, due to the smaller standard deduction that applies to single people.

The IRS withholding estimator covers only federal income tax. When it comes to state income tax, Iowa has a Withholding Calculator that may be helpful. My impression is that it may not be quite as helpful, but it is worth checking out. Another option is to talk with your tax preparer or to attempt a tax calculation for 2022 using 2021 tax forms or software, since tax rates typically do not change dramatically from one year to the next.

Penalties. It is important to be aware that the United States tax code requires that taxes be paid throughout the year, not just at the end of the year. If you end up owing TOO much at the end of the year, you may be charged a penalty for not paying enough into the system throughout the year. Most people can avoid that penalty by paying in throughout the year an amount at least as much as their tax bill for the prior year. People with incomes over $150,000/year can avoid the penalty by paying in at least 110% of what their tax bill was for the prior year.

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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Your Rights: “Surprise” Medical Bills

I have been hearing over the past several months about a new law that reduces the likelihood that we consumers would get medical bills saying we owed more than our normal co-payment or deductible because a health provider was not part of our insurance plan’s network. The law is called the “No Surprises Act.” It went into effect January 1, but I haven’t had a chance to study it like I would wish.

This morning’s issue of Kaiser Health News (which is a highly-reputable source of information on health policy and the health industry) linked to a podcast where the No Surprises Act was discussed. It’s an 18-minute listen — I scanned the transcript, and pulled out a few key points. Please note that I am not including everything — just some highlights. I’d encourage you to check it out yourself to get the full story.

The No Surprises Act is good news — it is designed to protect us from the extra costs we might incur when an out-of-network provider gets involved in our care, even though our initial contact for care was with an in-network provider. Examples? It could be that our doctor sends our blood samples to an out-of-network lab for testing, or the anesthesiologist our hospital brings in to assist is an out-of-network provider — situations like that.

Of course, nothing is perfect, including this law. There are still things we need to know in order to protect ourselves.

  1. The No Surprises Bill applies mostly* to hospital care. If you are getting care at a clinic or doctor’s office, you are likely not protected from surprise out-of-network bills. That means you still need to ASK.
    *Why did I say mostly? Because there are some urgent care clinics that might be covered, but it is hard to find out. So it’s safer to assume a clinic is not covered.
  2. The law does NOT cover ground ambulance trips, so we may still get big bills for those. (Happily, it does cover air ambulance rides).
  3. When asking if a provider is in network, the correct question is: “Are you in-network for my insurance plan?” And be sure they know the detailed name of your plan.
    Note: the WRONG question to ask is “do you take my insurance?” They might accept your insurance, but still be out of network.
  4. Be cautious if a hospital asks you to sign a “Surprise Billing Protection Form.” The name makes it sound helpful, but you need to read the details. This form is used if the hospital is bringing in a provider who is not in your network. By giving you the form, they are disclosing the out-of-network provider, giving you an estimate of the extra cost you’ll incur, AND telling you the names of in-network providers you could use instead. If you sign the form, you are agreeing to pay the extra charge for an out-of-network provider.

This is a starting point for understanding your rights under the new law. Since it is new, everyone (including providers and insurance companies) will need to be learning new processes and rules. The law creates a hotline for reporting or appealing violations: 800-985-3059. The staff on this line will also be learning, but it’s still wise to report and appeal. Just recognize it may not be a fast or easy process to resolve disputes.

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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Earned Income Credit Expansion

I took a phone call this morning from an older gentleman (over 65) who had come to have his taxes done at our VITA site last year and had been told he didn’t need to file, and probably would never need to file again. He called just to double-check that he really didn’t need to file. His situation hadn’t changed from last year, but when he told me what kind of income he has, I said, “Hey, let me check something out, and I’ll call you back.”

Here are the changes that affect this gentleman:

  • In the past, people without children were only eligible for the Earned Income Credit if they were between the ages of 25 and 65. For 2021 tax returns, the older age limit is gone completely, and the younger age limit is changed. People age 19 and over who are not enrolled in school half time can receive the EIC. Note: young adults who are former foster children OR homeless may be eligible starting at age 18.
  • The AMOUNT of the EIC for people without children is also increased dramatically for 2021 tax returns.

Spread this news!! If you know any older adults or young adults without children, make sure to tell them that if they have income earned from work, they should definitely file a tax return this year, even if they are not required to file.
I quickly prepared a fake return for the man who called me, assuming his income was about the same as last year. It came out that he would be eligible for EIC of over $1,000! I’m so GLAD he called to check – if he had not called, he would have missed out!

These changes are, at this point, temporary. We’ll need to stay tuned to see if any of them are continued. The moral of the story? It never hurts to ask!

P.S. Other changes are permanent:

  • People with investment income up to $10,000 will be eligible for the EIC – that’s an increase in the limit amount.
  • In addition, there are now some situations where a person who is “Married Filing Separately” might be eligible for the EIC – they need to be legally separated from their spouse and not living together at the end of the year OR they need to have lived apart from their spouse for the last 6 months of the year. This change only applies to people with children.

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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Trials of a New Homeowner: Mail!

My daughter recently bought her first home – very exciting! I was there visiting about a week after she moved in (yes, I did miss all the hard work!), and every day I was there she asked me to look at suspicious-looking items that came in the day’s mail. She was right – they were ALL things she should ignore, even though they had language that made them sound really urgent, like there was something needed for her loan. In one case she was even worried enough that she contacted her loan officer to make sure it wasn’t real.

I’m not suggesting that you ignore mail… that can get us in trouble. But it is always important to read unsolicited mail carefully – even skeptically. And her experience reminded me that when you take a major financial action (such as buying a house, in her case), you may draw the attention of marketers and even scammers.

What did she receive?

  • Several offers of mortgage protection life insurance, which she didn’t need. In fact, extra life insurance to pay off your mortgage if something happens to you is a low or non-priority item for most families. What was especially disconcerting to her was the fact that these marketers knew who her lender was and the amount of the loan. In one case they even had the loan number in their letter.
    How could they do that? Well, property purchases are filed at the courthouse (or in her case, city hall); the new owner is shown, and it also shows that a lender has a lien on the property. That’s how they knew.
  • A more disturbing mailing was simply an “important notice” stating that “we need you to call us about an important matter regarding this loan.” That was the one that caused her to call her lender, just to be safe. She never called the marketer, of course, so we have no way of knowing what they were going to tell her.

Not all the letters she received were actually scams – in fact it’s possible that none of them were scams. But they were certainly marketing unneeded products, and they could cause some consumers to spend money on something of little or no value to them.

I suggest two take-aways from this little story: 

  1. Read your mail but do not assume everything you receive is as important as they want  you to think it is; and
  2. If you take a major financial action like buying a house, be prepared for a deluge of unwanted mail.

What other take-aways would you add?

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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Talking with Children about Money

Guest blogger Carol Ehlers is a Human Sciences Specialist with Iowa State University Extension and Outreach.

Wondering about the right time to talk to your kids about money? Children learn about money from many sources. Long before they enter school, they see adults using money and buying things. They see thousands of commercials each year. Like it or not, money is a part of your preschooler’s life.

What children witness affects their attitudes and how they value money. Some of these beliefs will help them as adult consumers and some will not. For example, they might get the message that saving is important or they might not.

As a parent or guardian, you will not be the only influence on what your child learns about using money. But when you daily reflect on basic lessons about money, you increase the chance that your child’s values will be similar to yours.

Simple activities and other resources, which are parent and child tested, can give ideas for:

  • Teaching how money works and what it can do;
  • Talking about how your family uses money; and
  • Modeling good money management.

Here are some tips and ideas for parents to use with their preschoolers to begin increasing their money management skills:

  • Encourage play that helps preschoolers think about money. This helps children learn about daily consumer choices. For example, play restaurant, supermarket, post office, bank, gas station or car wash.
  • Use games to help your child identify coins and values. Ask the preschooler to help you count out the money as you purchase items together.
  • Talk about work. Preschoolers can learn that some family members go to work to earn money for family needs such as food, clothes and the home. Preschoolers can learn that other family members work at home so that the family does not have to buy some good and services like laundry, cooking and yard work.
  • Share information. Talk with your child about how money is earned, paying for expenses and saving money. A good gift for a preschoolers to start learning this concept is a three part container with slots that are labeled SAVE, SPEND, And GIVE. There are some great examples on the internet.
Carol Ehlers

Money as You Grow, from the CFPB (Consumer Financial Protection Bureau) offers wonderful research-based guidance and financial learning activities for parents and caregivers of young children, and older children too.

The FDIC provides a range of resources for consumers, including free parent guides for four different age groups, including Pre-K through Grade 2, Grades 3-5, Grades 6-8, and Grades 9-12. Their page also features podcasts and games. (The parent guides are two-thirds of the way down the page).

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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