URGENT – Mortgage Forbearance Deadlines this Week!

We mentioned Mortgage Forbearance earlier as a helpful tool for homeowners who are having trouble with their mortgage payments. Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances. The CARES Act (passed back in April of 2020) required that when a mortgage is backed by a Federal Agency, the borrower is automatically eligible for 3-6 months of forbearance if they are experiencing financial hardship resulting (directly OR indirectly) from COVID-19. Forbearance creates a helpful reprieve for struggling families.

The deadline to apply for forbearance under the CARES Act is September 30, 2021 IF your mortgage is backed by HUD/FHA, USDA, or the VA! That means NOW is the time for action. NOTE: if your loan is backed by Fannie Mae or Freddie Mac, there is not currently a deadline for requesting an initial forbearance.

Not Sure About Your Mortgage? Contact your mortgage company and ask them about your mortgage — asked if was backed by any of the agencies listed above. It that answer is “yes,” and if you are struggling with payments and bills, apply right away: ask your mortgage company to provide the needed application materials.

What does it mean to have your mortgage “backed” by a government agency? That simply means that when you bought your home, you qualified for special terms – often a lower down payment, reduced fees, or preferential interest rate thanks to a government program. I remember that when I bought my first house it was an FHA Loan; many first-time homebuyers qualify for special terms, and others do as well. If you are not sure, there is no harm in asking!

The Consumer Financial Protection Bureau provides more information about forbearance. Financial assistance for homeowners at imminent risk of foreclosure may be available as well; the Iowa Finance Authority provides more information, about help that is currently available, and notes that more assistance, authorized under the American Rescue Plan Act, will be available within the next several months.

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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Prioritizing Bills

When money is tight, we sometimes have to make VERY difficult choices. 

What do I mean by “difficult?” I’m NOT talking about “which sweater should I buy?”  That does not qualify as a difficult choice in the true sense of difficult choices. I am talking about “I have 8 bills to pay, and I can only pay 5 of them.”

When you need to consider which bills to pay, a key is to ask “what would be the consequences of not paying each bill?” With that in mind, there are three types of bills that generally need top priority. These are bills that are necessary to:

  1. Keep you safe and healthy (for example, picking up your prescription medicines)
  2. Keep you housed (for example, paying rent or mortgage)
  3. Keep your employment (for example, renewing your professional license, or keeping transportation to work)

These three priorities go beyond actual bills, too. For example, buying groceries is not a “bill,” but having healthy food is essential to keeping you and your family safe and healthy. Likewise, if driving is the only way to get to work, then your car needs gas. Applying those three priorities will help you make the difficult choices about what bills to pay and what money to spend.

Asking for help is important too. Sometimes direct help is available for your bills; for example, the Low Income Home Energy Assistance Program (LIHEAP) can help with heating/utility bills if you qualify. In other cases, getting help with something else can free up some money for your bills. For example, getting food from a food pantry would make money available to pay more of your bills.

Using these three priorities is a short-term solution. When you’re in a difficult situation, you need a short-term plan to get you through the week or the month. But when the problem continues over time, the short-term solution is no longer enough. Longer-term changes will be needed, such as increased income, or a permanent reduction in expenses.

If you face a situation where long-term changes are needed to resolve your financial challenges, it is often wise to seek help assessing your situation. ISU Extension and Outreach specialists can help you examine your options. We cannot tell you what to do – only you can make that decision – but we may be able to help you identify new options, or thoroughly assess the pros and cons of various actions. Find and contact your local educator here.

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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Aging Safely – Self or Others

While we’re all aging, some of us are further along in the process than others! But even you’re still very young, you probably have people you care about who might be labeled an “older adult.” With age comes certain privileges and freedoms, but we also have to acknowledge that aging also brings cognitive changes as well as physical changes. This is true even for those with no cognitive impairment or dementia – everyone’s brain changes as they age.

This cognitive aging can lead to “diminished financial capacity” – a term used to describe a decline in a person’s ability to manage money and financial assets to serve his or her best interests, including the inability to understand the consequences of investment decisions. Some errors that occur due to diminished financial capacity may be minor, like forgetting to pay a bill, but serious errors that threaten our financial security are possible.

Happily, there are steps we can take to protect ourselves and those we care about. These steps include:

  • keeping important documents organized and easy to find;
  • providing names of “trusted contacts” to your financial professionals;
  • creating (or updating) a power of attorney;
  • and more.

The Consumer Financial Protection Bureau (CFPB) provides a practical breakdown of steps that will protect you as you age, and also steps to help you assist an older friend or relative you are concerned about: Planning for diminished capacity and illness. None of us likes to think about possible future problems, but if something happens, we know we’ll be glad we did!

NOTE: People of all ages can be injured in accidents or suffer illness that diminishes ability to manage finances and make decisions. The steps outlined by the CFPB are appropriate for adults of all ages to consider.

For more details about cognitive aging and how it affects different types of mental functioning differently, see a trio of articles from The Center for Retirement Research at Boston College, starting with Cognitive Aging: A Primer.

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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New Option on the Advance Child Tax Credit Portal

Families can now easily update their mailing address in the IRS Child Tax Credit portal. This is very important for families who choose to receive their payments in the mail, rather than by direct deposit.

To use the portal, go to the IRS Child Tax Credit page and select “Manage Payments.” The portal now allows users to:

  • Change their mailing address;
  • Switch from receiving a paper check to direct deposit;
  • Change the account where their payment is direct deposited; or
  • Stop monthly payments for the rest of 2021.

If you run into challenges using the portal, our July 12 post offers a few tips. An earlier post explains what is different about the Child Tax Credit in 2021, including who is eligible for the expanded credit. If you previously were eligible, based on your income in prior years, but are no longer eligible now, you might consider opting out of the advance payments, which are being sent monthly on the 15th of each month through the end of 2021.

Log into the portal by midnight (Eastern Time) on August 30 if you want the changes to kick in for the September 15 payment. The IRS expects to add a few more functions to the Child Tax Credit portal in coming months, including the ability to:

  • Add or remove children in most situations;
  • Report a change in marital status; or
  • Report a significant change in income.

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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College Students and Money: A few more things

This is the fifth and final in a series this week about financial issues faced by students in college and trade school.

The list of financial topics that are important to students and other young adults is potentially endless, so please don’t assume that I’ve covered everything this week. Whether we are age 20 or age 60, we always need to keep learning about finances, because the financial world keeps changing – and our needs keep changing too. I’m wrapping up this series with brief notes about three more issues I see as critical for students.

Organizing Important Documents. Keeping important documents in a safe place where you can find them easily if needed is a critical skill to learn. And it is important for all key documents, whether they are paper documents, or electronic documents. Examples of important documents include:

  • Financial records of all types – financial aid papers, loan papers, receipts for major payments (tuition, rent),
  • Documentation of required educational costs, because you may be eligible for tax benefits,
  • Legal contracts (e.g. lease, cell phone plan contract) and documentation of pre-existing damage in a rental unit or dorm room,
  • Tax documents, including prior-year tax returns and documents, along with current-year W-2 forms and any other income records, as well as other year-end tax forms received.

I will not pretend this is a comprehensive list. General rule: if you think it might be important, keep it, at least until you can ask someone trustworthy about it. And I don’t mean just keeping it all laying around your room. We want these documents in a safe place where you can find them. That means they should be enclosed (in a box, or an envelope, or a designated drawer), and ideally they would be sorted into groups or sections or folders so you don’t need to look through all 500 documents to find the one you need. On your computer, you need a folder for important documents, probably with several sub-folders.

Protecting Personal Information. This means never giving out key personal information (social security number, birthdate, financial account numbers, and more) without making sure the person who is asking has a good legal reason to need the information. You will generally need to give your social security number for financial accounts, formal academic records, and medical records.

Additionally, only give that information to people when you know for sure they are who they say they are. That means if you receive a phone call and the caller says they are from your bank, don’t assume it is safe. When people call you, there is no way for you to know who they really are. Instead, use the number you already have on file for your bank and call them. Make caution your middle name when it comes to key personal information.

More: What to Consider When Sharing Your Data (Consumer Financial Protection Bureau)

Using Credit Cards Wisely. We could write a whole series on credit cards – and you can search the MoneyTip$ blog for other articles – but I want to focus on three main points:

  • College is an opportunity to build credit. You can do that by getting credit card and using it. College is a time when credit cards want you as a customer – later in your life, it may be more difficult to obtain credit. So go ahead and open one or two credit card accounts, avoiding cards with annual fees. Then use them. It is only by using your credit cards and paying the bills promptly that you create something extremely valuable: a solid credit history.
  • Surprise credit card bills can kick off a downward financial spiral. Therefore, keep tabs on how much you have charged to your card since the last bill. Keep a record on your phone, or on your whiteboard, or in a notebook or your checkbook – it doesn’t matter where you keep the record. Just make sure you’re prepared for the bill when it comes.
  • Credit is generally free if you pay the bill in full each month. Assuming your card has a grace period and no annual fee, you will pay no interest at all on your purchases if you pay the entire balance before the due date each month. Sure, the bill says you only need to pay $25, but as soon as you carry a balance forward to next month, you start accruing interest on every purchase you make.

An ounce of prevention is worth a pound of cure, right? These three habits – organizing documents, protecting personal information, and using credit wisely – will dramatically reduce the number of financial “bumps in the road” you’ll experience during college and throughout the rest of your life. You’ll never regret building these helpful financial habits.

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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College Students and Money: Discretionary spending adds up

This is the fourth in a series this week about financial issues faced by students in college and trade schools. Yesterday’s post discussed discretionary spending. Today we share an example that can help students as they consider how much they will spend on discretionary items.

Suppose Student A and Student B are financially identical, except Student A spends $450 a month on discretionary spending and Student B spends $150 a month. Student A spends $300/month more on discretionary expenses through four years of college (I’m including summers too, since most students continue having discretionary spending through the summer). When four years are over, suppose Student B has total student loan balance of $20,000. Since they were identical except for discretionary spending, that means Student A’s total student loan debt will be $34,400, or $14,400 more than Student B.

The current interest rate on federal student loans is 3.73% per year. Let’s suppose they repay their loans using the standard 10-year repayment plan, although there are other plans available with longer repayment terms and lower monthly payments. On the 10-year plan, Student B will pay $200/month. Student A, on the other hand, will pay $345/month. 

As fresh college graduates, will Student A be ready to deal with a monthly loan payment of $345, instead of a payment of $200? That extra $145 student loan payment is the consequence of their extra college spending; extra spending during college limits their options in the future. Understanding the consequences of their actions helps students make informed decisions they can live with in the long run.

What’s the “right” decision on discretionary spending? Only the student can decide. I have heard of college juniors and seniors who look back on their spending in their first one or two years of school and regret it. Of course there may be others who look back at how little they spent and wish they had let themselves have a little more fun.

When considering how much total educational debt you are willing to accumulate, consider two rules:

  • Borrow as little as you can. This is in bold, because I think of this as the “golden rule” about student debt. This rule applies in virtually every situation, and is above any other rules.
  • Avoid borrowing more (total) than your expected first year’s salary. This is a commonly accepted “rule of thumb.” Example: if you hope to start out as a civil engineer making $60,000, then $60,000 should be the MAXIMUM you are willing to borrow for your education.
    Notice: this doesn’t mean you should go ahead and spend extra because “you can afford” to borrow $60,000. The golden rule is above all other rules – no matter what, it is wise to borrow as little as you can.

Tomorrow – the last in our series “College Students and Money.” Do you think the subject of credit cards will come up?

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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College Students and Money: Be Smart about Student Loans

This is the second in a series. Yesterday’s post offered guidance on effective ways for parents to talk to their young adult children about school-related financial issues.

Most college students use student loans to help pay for their education. There are still some families (including moderate-income families) whose children complete college without any loans — through a combination of money saved up over the years, plus scholarships and earnings from a job — but that is not the norm. So if you are expecting to rely on student loans, you are pretty typical.

While student loans create valuable opportunities, they can contribute to problems if they feel like “easy money.” It seems easy to some students: just sign the paper, and the money is yours. It is years later (or even decades later), as they repay the loans, when some students understand that loans are far from “easy money.” Students start out a step ahead if they recognize that reality from the get-go.

Two key strategies exist for reducing the “payback pain” of student loans:

  • borrow less – as little as you can
  • Choose your loans wisely. (Yes, you have choices — shop around!)
    Here are some tips to get you started with that.

In general, Federal Student Loans are the most desirable type – low fixed interest rates, and a range of repayment options. Best of all are Federal subsidized student loans, available to some students based on need. Subsidized means the government pays the interest for you for as long as you are a student (more than half time); that’s a huge bonus. Example: a student who borrows $5,000/year for 4 years with a subsidized loan will have a starting loan balance of $20,000 when they graduate. By contrast, if that was an unsubsidized loan, interest would accrue even while they are still in school. If the interest rate is 4%, their starting loan balance when they graduate would be $22,081, because of the interest charged for those four years of borrowing.

A student’s eligibility for Federal Student Loans, and the maximum amount they can borrow, is determined by their financial aid application (FAFSA), and is part of their financial aid offer from the school, which may also include scholarships and grants. When students need to borrow more than they are eligible for in Federal loans, that is where the shopping around comes in.

Private student loans are offered by private lenders. In general, interest rates are likely to be higher than Federal loans, and the rates are usually variable. You might start out with a low interest rate, but if prevailing interest rates rise, the rate on your loan will probably go up, as well. In some cases, borrowers with excellent credit histories and ability to repay may be offered lower interest rates. A typical student, with little to no credit history, will likely need a co-signer. All of these variables point to the reasons why it is valuable to shop around for student loans. Checking a minimum of three lenders is always recommended.

A third option for families to consider is the Parent PLUS Loan. These are available only to biological or adoptive parents of dependent students; students must be enrolled in school at least half-time. The parents must be credit eligible, although there is a process through the Department of Education by which parents can be approved even with poor credit histories, depending on the reasons or extenuating circumstances contributing to that poor credit score. Parents are responsible for repayment; that means parents must consider their entire financial picture, including their age and retirement plans, the needs of other children, and their ability to maintain satisfactory lifestyle while repaying a loan. These are Federal Loans, administered through the Dept of Education.

As with any important consumer decision, it is critical to use reliable information. Many of the best sources of information are provided by the United States government, beginning with the umbrella website www.studentaid.gov. The Consumer Financial Protection Bureau (CFPB) also offers numerous resources to help with decision-making, including a simple one-page guide to student loans and a very helpful student loan web page. Additionally, another one-page tool helps students make informed choices about bank accounts.

The CFPB offers another comprehensive planning tool titled: Your Financial Path to Graduation. The tool is easy to use, and takes a student step by step through a fairly complete look at the sources of money they have available to cover their college expenses, AND a personalized look at what they can expect those expenses to be. It helps students and families consider various options, and gives them a forecast of what their situation might be by the time they graduate, including what their total debt levels might be and what starting salary they might reasonably expect. I tested it out with a hypothetical student situation, and I thought it could be very helpful – I encourage you to try it!

This is the second in a series this week on student financial readiness for college. Next up: discretionary expenses.

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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College Students and Money: What’s a Parent to Do?

This is the first of a series of posts on college students and money that will run this week – check back each day for more ideas and information.

In the next couple of weeks, thousands of American parents will be sending their young adult children off to college or other training. I remember well the combination of excitement and fear that involved.  In the midst of all that excitement, I encourage parents to have some conversations with their young adult child about money.

In those conversations, I suggest parents avoid “telling” their child what to do. Students are of age, and are testing their wings as independent adults; attempts to control them may backfire and cause them to assert their independence by going the opposite direction.  

Instead, it may be more productive to open a discussion with a question like, “What are your thoughts about how much money you’ll spend apart from tuition, books and school supplies?” That gives them a chance to share their thoughts first, before you give your opinion. In fact, it may be best if you never share your opinion. Instead, you can help them anticipate the situations they’ll face and be aware of consequences of extra spending.

Talking about money with your children early and often is an important way to prepare them for the financial decisions they will encounter as young adults. Being prepared for those practical challenges will make it easier for students to succeed academically and socially during their college years. Ideally, those financial conversations begin in grade school, but if that didn’t happen in your family, don’t fret. Now is as good a time as any. And remember – the conversation doesn’t stop when they arrive at school. You will have plenty of opportunities to discuss these issues throughout the weeks and months ahead.

As you check in with your student during their college years, I encourage you to be intentional about creating opportunities for your student to share financial questions, challenges, decisions, and successes. Note that the goal is to create opportunities for them to share, rather than to simply pry into their finances. A helpful article from the University of Minnesota Extension suggests some excellent strategies:

  • Ask “what” and “how” questions that don’t mention money at first, but lead to a discussion about budgeting, smart shopping, and planning ahead. For example, ask “What kind of meals do you eat at school?” or “How do you find time to study and still see your friends?”
  • Share a topical news story or Facebook post. For example, say “I saw a Facebook post about a college student who used Kickstarter to pay off student loans. How does that work?”
  • Teach each other. Have your child show you how to download and use a mobile banking app such as mint.com while you explain the content. Source: University of Minnesota

Watch this week for more practical posts on helping students succeed financially during college. Up next: Let’s be smart about student loans. Later this week: credit cards and more!

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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Entrepreneurial Spirit

Couple on bike trail

This past weekend, we participated in a biking event that was hosted by Hardin County, Iowa.  We covered more than 40 miles and passed through 6 different communities.  Each community eagerly awaited our arrival with venders offering water, grilled delights, ice cream and more.  We visited with the owner of a new, shiny red food truck and learned that she owned a restaurant in one of the neighboring towns. The food truck was her answer to the employee shortage that prevented her restaurant from operating full-time as it had prior to COVID. Now, during the day, she and one other employee run the food truck and her restaurant is open evenings. What a creative solution for this young entrepreneur. FYI…we really enjoyed her brisket sandwich.

When I shared the details of our weekend activities with my co-worker, nutrition and wellness educator Amy Jones, she commented, “I have seen an increase in interest in operating mobile food units otherwise known as a food trucks.  To obtain a license, Iowa Law requires each mobile unit to have a Certified Food Protection Manager on staff. This means more people are attending ServSafe Certified Food Protection Manager classes given through Iowa State University Extension and Outreach.”

Iowa Department of Inspections and Appeals has resources available for those interested in operating an mobile food truck: https://dia.iowa.gov/. More specific information is located at: https://ia.foodprotectiontaskforce.com/resources1/food-trucks-trailers-carts/#tab3

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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Weighing the Cost

Airplane and Tornado

Last week a tornado ran for a half-mile through one of our fields, flattening a 200-yard wide strip of corn. What are the chances of that happening? It is a first for us in the 45 years we have farmed. This week, aerial applicators are spraying for aphids and white mold that are threatening north central Iowa soybeans. What are the chances of that happening?  Almost every year that it is wet.

Nearly every day, my husband is inspecting crops or livestock or grain in a bin, to ensure his investment of time, labor and money is insured or protected against accidents, extreme temperatures, weather, disease, mold or pests. The decision to spray, plant, vaccinate, buy, sell or insure is not made once and forgotten about.  He is always weighing the cost of action or inaction against the return on his investment.

The same is true for me on the home front. We purchased a used camper three years ago with the expectation we would use it for five year. Our decision to NOT insure the camper was based on how much five years of insurance would cost compared to the amount we paid for the camper.  The amount we saved in NOT purchasing insurance could easily replace the camper should something happen to it.  Basically, we SELF-INSURED the camper.

The same thought process is used for our vehicles. The nice, fully insured, used car we purchase for me to drive for work will eventually becomes the “farm” vehicle which we carry minimal insurance on. There is a very little chance of my husband having an accident driving down gravel roads between fields, whereas the number of miles I drive on highways for work greatly increases the chances I may have an accident and need to replace my car.

The Money Talk workbook discusses financial basics, insurance, investing, retirement planning, and planning for life events. This practical, clearly written guidebook is available through Iowa State University Extension should you like to learn more about financial basics including Insurance.

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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