Buy Now, Pay Later?

Recently I was in the store, and while walking in the aisle, I saw a sign saying “ Buy now and pay later – see the associate for details.” I might expect to see signs like that during winter holiday shopping, but not in the spring!

First, what is Buy Now Pay Later? Basically it’s an option that lets consumers finance their purchase by making small payments each month, without paying any interest. Example: purchase an air fryer for $125 by paying $25 at the time of purchase and promising four future payments of $25 (perhaps monthly or bi-weekly).

According to a 2021 survey by the Federal Reserve Bank of St Louis, people chose Buy Now, Pay Later for five main reasons, listed below in order of preference.

  1. The largest group (78%) stated that it was more convenient for them.
  2. The second reason given was that the consumers did not want use their credit card. Even though they could have purchased the product with a credit card, they feel they were better off without charging it to their credit card.
  3. The next reason was that it was the only way they could afford the product. This is certainly understandable for consumers who are living paycheck to paycheck on a tight budget. Any large purchase would constrain their budget; small payments make the purchase possible.
  4. Some people did some analysis to compare payment options, and concluded that “buy now, pay later” was the least-costly payment option available to them.
  5. Lastly, for some consumers “buy now, pay later” was the only payment method they had – they did not have checking accounts or credit cards available, and worked strictly with cash.  

It is important to point out that even though “Buy Now, Pay Later” does not charge a fee to the consumer, it is not truly free. The retailer offers it in cooperation with an outside finance company, which charges the retailer a fee for the service. Some retailers expect to see increased sales that will make up for the added cost; other retailers may pass the cost on to the consumer in the form of higher prices.

Budgeting for large purchases requires some planning. For those who do not have savings or credit available to cover the cost of a large purchase, Buy Now Pay Later may prove to be a very helpful option, enabling them to acquire higher-cost items they would not otherwise have been able to afford.

A caution: what if I buy an air fryer today (needing $25 payments), and a bike next week (with payments of $40) and a chainsaw the next week ($20 payments)?  Next month I’ll have a bunch of unusual payments to make. If it seems “easy” to make large purchases, consumers may make several purchases within a few weeks and find themselves overcommitted. Like all tools, “Buy Now, Pay Later” can be useful, as long as we use them carefully!

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.

More Posts

Death of a Spouse: Finances amid grief

Nearly 1.5 million Americans faced the death of a their spouse in 2019 – that figure likely increased dramatically in 2020 and 2021 due to COVID-19. The majority of those surviving spouses faced genuine financial challenges, while also dealing with grief and loss. For those who were over age 60 (about 1.2 million in 2019), recently widowed older adults face higher poverty rates, greater housing cost burdens, as well as other critical financial challenges. 

A new guide, “Help for Surviving Spouses,” available from the Consumer Financial Protection Bureau, alerts newly-widowed individuals to key steps that will help them find a new financial equilibrium. The 24-page guide provides user-friendly information, checklists, and places to make notes, serving as the all-purpose workbook that can get the new widow(er) through the financial tasks and adjustments that are needed.

The first weeks and months after a death are often overwhelming, with grief making it difficult to stay organized or even remember what needs to be done. Having a workbook can help individuals keep track of what has been done and what remains to be done. If you know a new widow(er) or frequently come in contact with people in this situation, consider printing the workbook for them; if you can, offer to help them get started.

Dealing with a deceased spouse’s debts. One key tip for surviving spouses is to be cautious about paying debts belonging to your loved one. In many cases, survivors are not legally responsible for debts belonging solely to a deceased individual. Learn more, and consider seeking professional guidance if you are unsure. Even if you feel a moral obligation to pay the debt, consider first how that will impact your financial situation going forward. If paying that debt leaves you in a financially precarious situation, it may not actually be “the right thing to do.”

Another reason for caution, with debt collection and all other mail, phone calls, and emails, is that families of newly-deceased individuals can be easy targets for fraud. Before even considering any debt, ask for evidence to prove it is a legitimate debt that has not already been paid.

Take advantage of available resources. When one spouse dies, household income typically drops; as a result the surviving spouse may be newly-eligible for various forms of assistance that can make a real difference in their financial well-being.

  • In Iowa, Lifelong Links, a resource provided by the Iowa Department on Aging and the Area Agencies on Aging, is an excellent first stop for those who want to learn about available options. You can search online or call 866-468-7887; if you call, you will be connected with representatives in your part of the state.
  • BenefitsCheckUp.org is a nationwide search tool that can also help you screen for resources that could be of help to you; it is provided by the National Council on Aging.

Source: Consumer Financial Protection Bureau, which also provides more data about recently widowed adults.

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.

More Posts

Advisors, Counselors, and Planners…Oh My!

One of my least favorite tasks as a homeowner is vetting and hiring contractors for a project. Like many others, I start out by asking friends in the area. I feel pretty good when I receive consistent opinions, but when the opinions differ, I reluctantly turn to Google; hoping to find reliable and legitimate information to help with my decision.

Unfortunately, many folks face a similar dilemma when trying to choose the right financial professional. We often receive suggestions from friends and family; however, many financial professionals have specific focus areas or only offer certain services, making the decision very personal. The following will briefly summarize each type of financial professional, and hopefully, help to narrow down your options.

  • Financial Advisors – generally speaking, Financial Advisors are found locally, work at for-profit financial institutions, and are licensed to buy/sell financial products (i.e., stocks, mutual funds, insurance, etc.). Financial advisors can be an option for individuals who prefer a little extra assistance with their finances, and they can be vetted here.
  • Financial Counselors – Financial Counselors often work at universities, non-profit organizations, and/or government agencies. Financial counselors tend to focus on financial education and behavioral changes, empowering the client to make her/his own informed decisions. Accredited Financial Counselors can be found here.
  • Financial Planners – Financial Planners typically bring the highest level of experience and education to the table. They often have experience as a Financial Advisor/Counselor, may still work for a larger financial institution, or an independent firm, and typically offer the most comprehensive list of services. Certified Financial Planners can be found and vetted here.

One final note..…financial professionals can hold dual-certifications, specialize in numerous areas of personal finance, and have varying compensation structures (i.e., commission-based, fee-only, salaried, or charge asset under management [AUM] fees) – adding to the complexity – but many offer free consultations to see if the service they provide is a good fit. Our Extension Financial Educators also offer free, confidential, and unbiased consultations!

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

More Posts

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.

More Posts

Thinking About Retiring Early? Things to Consider…Part 2

Welcome back for the second part of “Thinking About Retiring Early? Things to Consider”. Last month’s post focused on what happens to your income when retiring prior to the more common retirement ages of 55, 59 ½, 62, etc. This month will focus on how expenses are impacted when you decide to retire before you reach one of the ages mentioned above.

Historically speaking, “average” retirees may need approximately 80% of their pre-retirement income to maintain their current standard of living. The rationale behind this theory is that you will no longer have to pay for things like commuting, work attire, payroll taxes, certain employer-sponsored benefits, etc. While this may seem like a plus, things get a little tricky when you are looking to retire decades earlier than normal. Many retirees already have a difficult time stretching their funds over the course of a 20-year retirement (depending on your anticipated life expectancy) and tacking on another 20 years will only add to the complexity. This is primarily due to the additional estimation required in the retirement planning process, but also because of healthcare.

Managing the cost of healthcare

According to recent statistics from the Centers for Medicare and Medicaid Services, National Health Expenditures grew nearly 10%, or approximately $12,500 per person, in 2020 (partially due to the Covid-19 pandemic), and are projected to grow at an average annual rate of 5.4%, which outpaces inflation in most years. The problem for early retirees is that some of those costs are currently subsidized through their employer and/or the federal government; they will likely lose that subsidy with an early retirement. One option is the Healthcare Marketplace; however, eligibility for subsidies is impacted by income. The Health Insurance Marketplace Subsidy Calculator from the Kaiser Family Foundation can help to estimate your premium costs.

Whether you want to retire early or not, please remember that the decision is very personal, specific to your individual needs, and should not be based upon general guidance or the decisions of others. To learn more about the basics, visit our website at https://www.extension.iastate.edu/humansciences/money.

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

More Posts

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.

More Posts

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.

More Posts

Thinking About Retiring Early? Things to Consider…Part 1

This is not a new phenomenon, but the Financial Independence, Retire Early (FIRE) Movement gained quite a bit of momentum over the past few years. As the pandemic raged on, many people started to question their quality of life, workplace satisfaction, and their connection to family, friends, and the outside world in general. For most of us, this was a normal reaction to an extremely stressful situation; however, a handful throughout society decided they had had enough and hit the road for greener pastures.

Depending on which article you read on the internet (there are hundreds!), this may sound like a reality anyone can achieve, but I noticed quite a few details were either left out or not applicable to the general population. In order to cover this topic in full, I decided to break it up into two posts – one focusing on income, and the other focusing on expenses – so if you are thinking about retiring early…read on!

Income…. Where will it come from now?

News flash – your cash flow will be significantly impacted by retiring early. Gone are the days of receiving a regular paycheck from an employer. So, how do people make it work when we think of the typical “early retirement” age as 59 ½ or 62 (for Social Security purposes)?

  1. For starters, it is a little-known fact that there are MANY ways to retire before the age of 59 ½ without being hit with the dreadful 10% tax penalty, but you must qualify for it.
  2. You may read that some FIRE-achievers received severance packages, inheritances, own rental properties, and/or save upwards of 75% of their income (primarily in taxable brokerage accounts).
  3. And most importantly, many continue to work. Unlike their previous career, however, they typically work part-time through the gig/freelance/app economy, and/or their new work finally enables them to follow a passion.

Come back next month for the discussion on expenses (hint: it has a lot to do with the cost of healthcare!).

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

More Posts

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.

More Posts

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.

More Posts

    

Subscribe to “MoneyTip$”

Enter your email address:

Delivered by FeedBurner

Archives

Categories