Juggle—Stop—and Slide Expenses

Juggle—Stop—and Slide your personal expenses throughthis COVID-19 global pandemic using tools, actions and strategies to protect your family.

Juggle– Put money you would have normally spent for things (e.g., personal care, commuting costs and child care) toward other essential bills. Rework your budget and reallocate money you are not currently spending.  We shifted money not spent on gas and eating out. Those dollars are now budgeted for extra costs for an unplanned internet upgrade. Consider online budget tools like this one from the University of Wisconsin.

Stop- Take immediate action to stop all excess spending. Ask: “How can we reduce spending?”

  • Substitute a less costly item
  • Conserve resources and avoid waste
  • Cooperate with others by trading or sharing resources
  • Save money if we do it ourselves
  • Do without

These ideas and more are available at the University of Minnesota’s “Strategies for Spending Less” page. You’ll find other resources on ISU Extension’s Finding Answers Now page

Slide- Take advantage of Covid19 Special offers and slide a portion of the bill forward.

Our mobile phone carrier will not charge a late fee or terminate service through June 30. To qualify due to hardship a short online form is required.   Iowa utility providers (i.e. energy and water) may provide relief payment options, assistance programs, and low-cost steps for customers according to the Iowa Utility Board.  https://coronavirus.iowa.gov/pages/faqs#Utilities

Free and confidential consultations with ISU Extension financial educators are available to all Iowa residents. We can provide tools and information to help you revise budgets, prioritize spending and link to community resources. 

Find your local Extension educator or contact Iowa Concern 800-447-1985 for information. Consider our free booklet: “Planning to $tay Ahead”  English and Spanish https://store.extension.iastate.edu/Product/5523

Carol Ehlers

Guest Blogger: Carol Ehlers,
Human Sciences Specialist in Family Finance

Brenda Schmitt

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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When Income Goes Down…

bar graph showing 7 months income and expenses; first month income and expenses equal, then income suddenly drops, while expenses decline slowly, until in the seventh month they are in line with lower income.

When income goes down, it often goes down suddenly – one month it is normal, and the next month it is suddenly much less. People may be much slower to reduce their expenses, often taking many months until their expenses are finally in line with their new (lower) income. Why? Denial, unwillingness to modify their lifestyle, lack of needed skills, or other reasons.

That slow response will, unfortunately, delay their recovery and increase their financial problems. The graph (above) depicts a family whose income declined by $800/month. It shows five months where the family’s expenses continued to exceed their new income. During those five months, their spending exceeded their income by a total of $2,000.

Where did that $2,000 come from? Perhaps they had an emergency savings account – if so, the balance in that account is now depleted. If they, like many Americans, had no savings, then they had no choice but to go in debt — they may have made partial payments on some bills, or built up the balance on their credit cards. They are $2,000 in the hole. And while it only took a few months to get into that hole, it may take years to repay that $2,000! (or to rebuild their savings)

The second graph depicts the same situation, but in this case the family rapidly reduced their spending to match their new income. This family also spent more than they earned, but only in the first two months, and only by about $500. They will recover much more quickly from this financial setback.

Reducing expenses isn’t easy. But in the long run, people who quickly adjust to the new situation are more satisfied with the outcome. Even in situations where the income reduction is expected to be temporary, people who adjust quickly come out of the situation in a stronger financial position.

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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Flexible Thinking

We have all had an overload of opportunities to exercise flexible thinking in the past few weeks. Some individuals shifted the workplace from the office to their home. The normal routines are not working. A number of workers lost all income security. School-age children are on an extended holiday in March!

Most of us are comfortable following routines; we don’t like to change our habits. In “normal” times, when nothing else in our life is changing, any suggestions for financial changes tend to be ignored. A time like this, when so much in our lives is being upended, can be an opportunity to make positive changes in our financial habits! Why not take advantage of the chance to change and grow? 

  • Think about others. There are many who don’t have the luxury of working at home or the security of a steady paycheck. If you can, let family and friends know you are willing to help if finances get strained. Sometimes a message of support can lessen stress and prevent someone from feeling they don’t have options.
  • Challenge your current spending habits. If you have survived a week or two without eating out, recreational shopping, or going to the movies; can you feel better about using a part of those funds to repay a debt or add to savings and not feel deprived?
  • Define some of your benefits in a different way. Hard earned vacation pay reserved for “fun”, might be easier to use now if you think of it as “paid time off.” A restricted definition of how available funds should be used can be a deficit when there are essential bills to pay.
  • Measure your workplace adaptability. It’s a great time to be an amateur, many individuals are being thrown into an online work environment or being asked to take on new responsibilities. Some new ways of working may become standard procedures and you can be the expert from all the practice!
  • Share what you are learning, especially if it pertains to alternatives for toilet paper!!!

I wish you all the best during these challenging times, we’ll learn some things about ourselves and have some new skills when it’s over.

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Secure Act: Part 1

The Secure Act was originally written to make changes to retirement laws. The act passed through the House last May and was held by the Senate until November when it was added to the Appropriations Bill and signed into law in December.

The law change catching attention is the starting age for required minimum distributions (RMDs). If you are retired and reached 70 1/2 before the end of 2019 you are required to take distributions. Everyone else can wait until the year they reach age 72. The annual RMD amount continues to be based on life expectancy tables published by the IRS.

The other change attracting attention relates to distribution rules for inherited retirement accounts. These accounts, including IRAs, 401(k)s and other similar qualified accounts, generally have named beneficiaries. When there is just one beneficiary and it is the spouse, then the withdrawal rules are the same as if the account originally belonged to the spouse. The SECURE Act did not change this.

However, when the account beneficiary is not the spouse, the rules for taking distributions have changed. In general, the beneficiary must take distributions on a schedule that will liquidate the account within ten years. Stretch IRAs, which set up for distributions over the beneficiary’s life expectancy, are no longer an option. Beneficiaries will want to plan for the tax implications of those distributions.

Exceptions to the ten year distribution schedule include: disabled beneficiary, chronically ill beneficiary, beneficiaries not more than ten years younger than the deceased, and children that have not reached the age of majority. Separate rules apply to these individuals, and also to situations where multiple beneficiaries are named, so professional guidance is recommended.

More about the Secure Act will follow in subsequent posts……

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Secure Act : Part II

Welcome to part two of our review of the the Secure Act! We’ll introduce you to some of the other retirement plan changes employees can expect to hear about as new rules and options are added to their plans.

A part-time employee who has worked a minimum of 500 hours each year for three continuous years can now begin making retirement savings contributions to an employer’s retirement plan. This change expands eligibility beyond the old rules that allowed an employer to use a 1,000-hours-worked rule before full time employees are allowed to participate in a retirement plan.

New tax credits are available for small business owners who start a retirement plan for their employees. Additional credit is given if the plan uses an automatic enrollment structure. The additional business tax credit is also available if an existing plan is converted to automatic enrollment. The business tax credits range from $500 to $5000 and can be claimed for three years. Small employers can also participate in multiple-employer plans that allow many unrelated businesses to join together to share costs of plan administration.

Old rules allowed employers to include annuity options in their 401K plans, but if the insurance company selling the annuity contract failed, the employer was required to guarantee the continuation of the contract payments. The Secure Act removed the employer’s responsibility to protect retirees. The inclusion of annuities in retirement plan menus is expected to increase.

The cap for auto enrollment contributions to an employer’s retirement plan was 10% of employee pay; the amount has been raised to 15%. Employers must continue to give employees the option, once a year, to change their contribution.

The Secure Act also removes the restriction that prohibited individuals age 70 1/2 or older, who are still working, from making contributions to an IRA.

In our next post we will visit some of the non-retirement changes included in the new Secure Act.

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Secure Act: Part III

Eligibility for participation in retirement savings plans, incentives for small businesses to establish retirement plans, and rules for contributions and distributions are the main focus of the Secure Act, but there are other changes worth understanding in the new law.

  • Loans allowed by an employer from retirement funds can no longer be distributed through a credit card account or similar arrangements. If received through a credit card, the funds must be claimed as income and are subject to taxes and penalties.
  • Withdrawals from retirement accounts can now be made for the birth or adoption of a child within one year of the event. The limit is $5000 per account owner and it has to be claimed as income, but there will be no penalty tax added.
  • At least once a year, your retirement account report must include a statement of monthly benefits the owner can expect in retirement. The amount will be based on a single lifetime or joint lifetime annuity.
  • 403B and 457 plans have new rules for transferring account funds to a new employer’s plan or to a qualified plan distribution annuity.

And in areas unrelated to retirement accounts:

  • 529 plans can now be used to cover the costs of registered apprenticeships, homeschooling costs, private elementary, secondary and religious schooling. Up to $10,000 can be used to repay student loan debt. (State alignment is necessary so check your state rules.)
  • The Kiddie Tax on unearned income is being reset to rules in place before the 2017 TCJA law. Under TCJA, unearned income was subject to the Estate or Trust tax rates. Amended returns can be filed for 2018.
  • The penalty for failing to file a tax return is a maximum of $400 or 100% of the tax due.

Rules and implementation guidelines will further define these changes, so check with financial professionals and your employer’s HR departments for more details.

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Goals That Work

As we wrap up 2019, are you thinking of ways to try to “do better” or “be better” in the new year?  The idea of a fresh start is appealing, but if you’re like me, you may be hesitant to set goals, based on a track record of not following through in the past.

That leads me to one key to success: we should only set goals that are truly important to us. We have to really want the goal. To put it another way: there’s no point in setting a goal because you think you should. If you’re going to set a goal, only do it because the result matters to you.

Once you have a goal you can fully commit to, a next step is to plan how you will get the money – how much will you save each week or month? That will mean reducing some of your other expenses so that you can put money toward your goal. Think specifically about what changes you will make in order to save; deciding in advance that you will not go to the coffee shop, or not buy any clothing, or… (whatever) will make it easier to steer clear of tempting situations.

My final tip for now is to keep your goal on your radar. For example, if your goal is a new computer, then keep a picture of the type of computer you want in a location where you’ll see it regularly – on your refrigerator, at your computer desk, and/or in the section of your wallet where you keep your money and credit/debit cards. That will help you stay motivated; it’s easier to say no to extra purchases when you have a reminder in front of you of why you are making a sacrifice.

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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Trends in Saying, “Good Bye”

Dad's Urn
My Dad’s Urn

My brother and I had what I would consider “a lot” of time to prepare for the passing of our father, since Alzheimer’s is a slow-progressing disease. We had time to talk, ask questions, research and make decisions. This was especially helpful since we knew that Dad would most likely pass in Indiana; the funeral would be in Iowa at my church; and the burial would be next to our mom in Minnesota. As we liquidated his Minnesota assets, we consulted our lawyers in Indiana, Iowa and Minnesota as we made decisions about where the estate’s bank account should be located and in which state to file probate. The choice of cremation made for less paperwork and expense when it came to transporting his remains from Indiana to Iowa and then on to Minnesota.

The funeral home director in Indiana made everything very easy and advised us on issues we had not considered like the purchase of a vault for the urn holding dad’s ashes. Not all cemeteries require urn vaults, but Dad’s did. For being nothing more than a small plastic box that is sealed with rubber cement, it came with a hefty price tag. The funeral director suggested finding one online, which was about a fourth the price.

It is interesting the things that are said during the time of grief. Old feelings bubble up. Emotions are raw and run deep. Two of our family members were struggling with the fact that they had not attended my mom’s funeral 30 years ago, and had not even known where she was buried; in some ways they were burying two family members that day. It became apparent to me the important role the graveside service played for these two family members. Interestingly though, the one struggling most had made the decision to donate her body to science. In this way, her body would then be cremated (at no cost to her) and the remains returned to her family. She intends to have no grave, no funeral…no final expenses. Her decision was purely a financial decision. I wonder if she will think differently now that she has experienced the effects of 30 years of deeply buried grief, magnified because she had experienced all the traditional rituals that come with the passing of a loved one.

A financially secure and elderly friend passed away recently. She was devout in a faith which we shared. Her children lived far away and I was eager and willing to help them make all the funeral arrangements through our church. It caught me completely by surprise that they decided that there would be NO funeral. She had the means to pay for such things. She was a long-time member of our church and community, so there were a lot of people planning to say “good bye” in a public way AND a lot of people trying to make sense of this decision. She had donated her body to science and the remains were returned to her children…end of story.

With increased access to information, survivors as consumers are seeking more alternatives to the conventional funeral. Funerals are among the most expensive purchases made in a lifetime. The national median cost of an adult funeral is $7,360. The time to make these decisions is now…not during a period of duress, grief, and guilt. Funeral Directors are excellent sources of information and you may want to check out this document by the University of Florida Extension – The Art of Goodbye; A Closer Look at Emerging Trends in End-of-Life-Rituals.

Brenda Schmitt

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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Who needs an emergency fund?

jar of coins

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

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

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

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

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

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

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

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

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

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Peak Alert

Peak Energy Alert

I love the fact that our home has hot-water heat. As a person with allergies, I am not overwhelmed in the summer or winter when the central-air or furnace blows the collected dust out of the vents. But with hot water heat, there’s no option for central air conditioning; I would have to say that this week I would give almost anything to have central air! As I write this during a heatwave, it is expected to hit 95 degrees today with a feel-like temperature of 103 degrees. I can only imagine how widespread the brown-outs will be with everyone retreating to their air-conditioned homes and places of employment.

So, what about those brown-outs? In visiting with my co-worker (who has central-air) I have learned that our local energy-provider has a program called Appliance Cycling. This program will not only reduce the amount of energy used by the homeowner, which will reduce their cost…but the homeowner will also be compensated with a credit of $8/month for participating in the program.

When you sign up for the program, a technician will come to your home and install a small radio-control switch on or near your outdoor central air conditioner at no cost to the homeowner. 

If the demand for electricity escalates to a critical point, a “system emergency” or “peak alert” is announced, and a radio signal is sent to activate the switch on your air conditioner. Your outdoor cooling unit will then cycle off while the furnace fans continue to circulate the cooler, drier air already in your home. 

The program runs from May to September and the cycling events typically occur Monday through Friday from 1 PM – 7 PM…never on weekends or holidays.

My co-worker says she notices a slight difference in the temperature and humidity in their home during peak alerts but nothing that a box fan or ceiling fan can’t make up for. Do you have a similar program in your area?  What has been your experience? As for me…I think I will plan on supper at a restaurant!

Brenda Schmitt

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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