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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Charitable Giving and Taxes

We’re entering a busy time of year for charitable donations, perhaps because the winter holiday season brings a sense of gratitude followed by a desire to share our abundance. The availability of tax deductions for charitable giving may also contribute to the concentration of donations near year-end.

According to Giving USA, Americans donated a record $410 billion to charities in 2017. What’s more, over 70% of that giving came from individuals, rather than foundations, corporations, or bequests.  However, tax law changes this year mean that for many people there will no longer be an advantage in itemizing deductions; many taxpayers will get better results using a standard deduction. For those households, the tax benefit of charitable donations will be reduced or eliminated.

Will Americans still give?  I have always hoped that the main reason most Americans give is that they care about the organizations they are giving to, and that the tax benefits are just an incidental benefit.

If you are wondering whether you should continue making charitable donations even without the tax deductions, I offer two thoughts:

  • If your standard deduction under the new tax law is larger than your itemized deductions would have been, then you are still coming out ahead. You can give, and still have more available funds than you would have had under the old tax law.
  • There are other strategies that can enable some taxpayers to get tax advantages for charitable donations.
    Clustering donations. Some taxpayers may be able to hold back all their 2018 donations until the beginning of 2019; if they then donate a “normal” amount throughout 2019, they will have twice as many donations as usual to report for the 2019 tax year, which may make itemizing worthwhile in 2019. Following this pattern of no contributions one year and double-contributions the next may enable you to donate the same total amounts as normal, and gain tax benefits by alternating years between itemized and standard deductions.
    Qualified Charitable Distributions (QCD) from an IRA.  If you are at least 70-1/2, you can transfer funds directly from your traditional IRA to a charitable organization; the distribution will not be taxable income to you, AND it can satisfy your required minimum distribution. If your RMD for the year is $5,000, and you are interested in donating $5,000 to a particular organization, then making the contribution through a QCD has the same ultimate impact on your taxes as a tax deduction would have had. IRS Publication 590-B provides details.
    Donating as a business expense.  If you are self-employed or own a business, you may be able to make charitable contributions as a business expense.  For example, farmers can give commodities (e.g. 500 bushels of corn) to a charity. This reduces your business income, and therefore has impact similar to the impact of a tax deduction. Consult with your tax adviser for details.

As always, the best decisions about how to use your money are based on your personal goals and priorities. As you consider your charitable giving decisions, 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.org, www.charitywatch.org, www.charitynavigator.org, or www.givewell.org.

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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Cost-Cutting vs. Saving: Not the same thing!

Most of us have dozens of ways we “save money:”

  • We “save” by using coupons and shopping sales.
  • We “save” by saying NO to ourselves and others when temptation arises.
  • We “save” by cooking at home instead of eating out.

Are you wondering why I put the word “save” in quotation marks in all those examples? Here’s why: even if we did all those things every single week, there is no certainty that our savings account balance will increase.

All those steps are ways we reduce costs, but do they automatically lead to deposits to savings accounts? No. Take me, for example: I have never once taken the money I did not spend at a restaurant or grocery store and deposited it into a savings account as a direct result of the decision not to spend. Instead, the money I “saved” would usually just get spent on something else!

A decision not to spend is a key step in saving. But by itself, that decision is not enough; it only turns into saving when we actually move the money into a savings account (or to a dedicated savings location such as a piggy bank).  When I come to a coffee shop or an ice cream store and I go on by without stopping because I want to save that money, I should probably just stop right there and transfer money from one account to another. Or I could carry a “saving” envelope in my purse and move cash into the envelope every time I resist temptation. That would be the way to make sure the actual saving occurred.

Saving is a two-step process. It involves deciding not to spend and  putting money in a designated location. Either step can come first. I can decide not to buy something and then save the money; OR I can put the money away first and then (out of necessity) spend less than I otherwise would have spent.
Note: many of us do better if we put the money in savings first!.When there’s no money in your billfold or your account, it’s easier to resist temptation to spend! 

Do you sometimes wonder why you aren’t getting ahead, despite your efforts? It may be because you’re skipping one of the steps.  How can you turn your cost-cutting into true savings progress?

 

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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Confirmation Bias? Dangerous

I heard a speaker yesterday refer to “confirmation bias.” It’s an idea I know well, but it had been a while since I heard the actual phrase, so it caused me to think. The idea behind confirmation bias is that if you believe something to be true (or if you even want something to be true), you will be able to find facts you can interpret in such a way that they will seem to support the belief you want to be true.

For consumers, confirmation bias can be a dangerous thing. Here are some hypothetical (but realistic) examples of how that could work.

  • Several friends have purchased a very-expensive brand of Widgets, and they all swear by the benefits of the brand. Undoubtedly, a search will lead to other positive reviews of the widget that persuade you that your friends are right; this may leave you feeling justified in spending much more money than planned on your new widget.
  • You hear a rumor that now is a great time to invest in Company X. You do an on-line search and you find several articles that support your desire to jump into the investment, so you move forward with the idea.

In both of these examples, the fact that you knew in advance what answer you wanted to find made you much more likely to find it.

There has been much discussion in recent months about facts and what to believe. Sadly, the abundance of information available on the internet includes “sources” that claim opposing facts: one source shows how “Fact A” is definitely true, while another source cites information which “prove” the false-ness of “Fact A.”

This simply reminds me how critical it is for consumers to protect against confirmation bias, as well as against unreliable information in any situation. The best decisions are based on research conducted by well-respected scientists. Three tips to protect yourself:

  • Always shop around (at least 3 sellers) before making any significant purchase or consumer decision.
  • Always seek information from multiple sources; ideally, those multiple sources would not be connected to each other. (For example, if you read an article in 3 different publications, but all those publications are operated by the same umbrella company, it’s really not equal to three different sources).
  • The most reliable on-line sources on most topics are sites whose URLs carry a “.gov” or a “.edu” extension. Some “.org” sites are reliable, but use caution because they may have an agenda. Two reliable “.org” sites are www.consumerreports.org and www.nefe.org.
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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Prescription Costs: Cash vs Co-Pay

Prescription drug costs are getting a lot of media attention these days, sometimes leaving consumers unsure who to trust.  One question raised by news coverage is the question of how much we should trust our insurance plans to get us the best deal. According to a recent study, nearly one-fourth of all prescription purchases would be less costly to consumers if they paid cash rather than having their insurance cover the purchase. In other words, their co-payments were more than the actual cash cost of the medication.

The report said it is common for this overpayment to occur with generics. A news report gave an example where the difference was dramatic — a $285 copay compared to a $40 cash price. It seems unthinkable, yet it happens!

Consumers have told stories about this problem for years, but the recent paper from the Schaeffer Health Policy Center at USC was the first known systematic study, so only now are we learning how widespread the problem was; the study, which examined 2013 data, indicated that 23% of all prescriptions involved this kind of overpayment. A few states (not yet Iowa) have passed laws against this practice, but anecdotal reports suggest that it is still widespread.

I’m reminded of the classic consumer advice: “Let the buyer beware;” when in doubt, we need to check things out carefully, gathering information on our own rather than trusting an outsider’s guidance. In fact, the report mentioned that pharmacists’ contracts often include gag rules which prevent them from telling patients about this, unless they ask.

SO – next time I fill a prescription, I’m going to ask: how much would this cost if I just paid cash? If it’s cheaper to pay for it outright, then I’m happy to leave my insurance out of the equation.

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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