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.

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Summer Money Crunch

Summer can cause a financial crunch for families with children. Children who are home all day need to eat, and they want things to do; if they go to day care, the cost of full-day care instead of after school care can really stretch the wallet. This summer, with inflation already straining budgets, may be even worse than normal.

There is, of course, no magic wand that will “uncrunch” summer finances. But there are steps that can help! Not all these ideas work for everyone, but see if some of them fit your situation:

  • Take control of food costs, starting with tools from “Spend Smart. Eat Smart.” You’ll find a grocery budget calculator, meal planning tools (and a video), shopping strategies, and a whole slew of recipes that are easy, low-cost, healthy and tasty – some with video instructions. There is even an app for your phone so you can have tools available while you’re at the grocery store!
  • Ask about discounts for summer pool passes or summer recreation programs. Many communities and rec centers offer discounted rates; in some communities the Community Action Agency can provide help here, as well. 
  • When special events come around (fairs, festivals, etc), decide in advance what your spending limit will be, and stick to that limit. It’s easy to get carried away in the midst of the fun if you don’t set limits in advance. Before the events, do some research (ask around) to identify free or low-cost activities that you and your family will enjoy.
  • If your children’s wants and wishes seem never-ending, parents often get tired of saying no, which means they start saying yes too often and end up spending more than they want to.
    One way to ease that pressure is to give your children a weekly or monthly allowance, be clear about what it is for, and not “give in” when they ask you for more money after their allowance is gone. This puts the kids in control, and when they run out of money it’s because of their own choices (and NOT because you are a “mean parent”).
    Several years ago I shared my own experiences with an allowance for my children. The University of Minnesota offers a helpful fact sheet about allowances (scroll down to find it).

What tips can YOU share for tackling the summer financial crunch?

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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Is Your Spending Plan Working?

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

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

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

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

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

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

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

Barb Wollan

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

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Shrinkflation: How to Shop Proactively

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

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

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

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

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

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

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

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

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

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

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

Barb Wollan

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

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Get More for Your Driving Dollar

Guest blogger Phyllis Zalenski, ISU Extension

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

Driving Tips:

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

Car Maintenance Tips:

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

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

Barb Wollan

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

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Earned Income Credit Expansion

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

Here are the changes that affect this gentleman:

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

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

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

P.S. Other changes are permanent:

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

Barb Wollan

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

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Inflation: Choose Your Changes

Someone asked me a couple weeks ago whether I had written a blog post yet on inflation, which has certainly been in the news lately. My first thought was “Well no – there’s nothing we can do about inflation, and we can’t foresee the future… so what could I write?” It dawned on me later that in fact there ARE some points I can share to help us all deal with higher prices.

If prices go up and our income doesn’t increase enough to keep pace, it’s a lot like getting a pay cut. Our normal patterns of spending and saving no longer work – something has to change. For some people the change involves minor sacrifice – perhaps eating out fewer times a week, or at less-expensive restaurants. For other people, higher prices may mean much more challenging changes.  The good news is that at least YOU are the one who gets to decide what changes to make. Ideas for making the changes less painful:

  1. You may be able to use non-monetary resources to meet some of your needs. For example, if you usually buy birthday cakes for your family, perhaps you can make them instead. OR perhaps you have a friend who could make the cake in exchange for you watching her children one Saturday.  Think about ways in which you can use your own time and energy and skills to accomplish things that you usually pay for. And remember that your friends also have skills they may be willing to share. Common examples include: cooking from scratch rather than using convenience foods, shoveling your own snow instead of paying someone else, learning to cut family members’ hair to avoid the cost of regular haircuts, giving gift certificates for your time and talent (I’ll bake you a pie!) in place of purchased gifts.
  2. Make use of community resources that are available. Even if you have never before applied for energy assistance or used the free tax preparation available in your community, when times are tight, using these services and others can make a big difference.
  3. Careful shopping can make limited funds stretch further. Even with increased prices, retailers still have sales, and generics are still less expensive than brand names. Sometimes changing where we shop and what brand we buy makes it possible to save money even without severely cutting back our shopping list.
  4. When the reality is that we are going to need to “do without” something, we can consider our priorities and choose what to keep and what to give up. One person might “give up” their morning stop at a coffee shop, so they could continue to pay for their streaming services or premium cable; another person might make the opposite choice.
    Recognizing that we have a choice can help our attitude: we don’t “have to” give up anything; instead, we choose what to give up. For example, instead of feeling deprived about not going out for lunch every day, we can feel proud about bringing lunch to work so that we can continue to use funds for something more important.

This short list is only a starting point. We would love to have you share your strategies for dealing with inflation! Please share in the comments!

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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Money Smart Holiday Shopping

With the approach of the annual event known as Black Friday, guest blogger Carol Ehlers offers tips to help us all be smart about our holiday shopping!

This year, holiday shoppers are planning on spending more money, shopping earlier and trying new retailers. According to TransUnion’s 2021 Consumer Holiday Shopping Report more than 1 in 3 holiday shoppers (36%) plan on spending more this year. Last year’s average American ran up holiday spending debt to $1,381 with almost 8 in 10 unable to pay it off by the end of January. So, for every $5 spent trying to pay off credit card debt, consumers give away $1 to the credit card companies. https://www.consolidatedcredit.org/webinars-and-seminars/holiday-survival-guide-webinar/

Holiday spending is a common way for people to land themselves in debt and financial stress. Some find themselves in trouble by rationalizing big spending and incurring debt during the holidays. This leads to paying for holiday spending well into the next year. Money Smart Holiday Sending can give you confidence to manage your money and resources throughout the season and into the new year. Below are three key tips for being Money Smart during the holiday season:

  • Create a holiday budget. Figure out how much you can afford to spend this holiday season. Financial planners recommend spending less than 1.5 percent of your annual income on holiday expenses. An example: for someone with $35,000 gross income that amounts to a $525 limit for holiday spending. If you haven’t saved that much, look for ways to cut back.
  • Make a List-check it twice. Make a detailed gift list with a set amount to spend, keeping track of what is spent. Research indicates consumers reduce their food expense by 25-30% by using a shopping list and this principle applies to other holiday spending categories.
  • Use Cash-Not Credit.  One way to do this is the envelope method. Make one envelope for each person and only put in what you plan to spend. If credit is necessary, charge only the amount that you can safely repay in a few months. Limit your charges to one card with the lowest interest rate and fees. Keep all receipts.

Barb Wollan

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

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Health Insurance Decision Time

Once again it is time to make health insurance decisions. If you are insured through your workplace, your deadlines will be determined by your employer. If you are insured through Medicare (including Medicare Advantage plans), you have between now and December 7 to make changes; your best resource for unbiased assistance in Iowa is the Senior Health Insurance Information Program. Similar resources are available in other states, as well.

If you are not yet eligible for Medicare, and do not have affordable insurance available through an employer, then the Health Care Marketplace is the place to turn for quality health insurance plans* that do not consider pre-existing conditions. The base premium for plans in the Marketplace is affected by your location, your age, and use of tobacco. That is because health care costs vary by location, and are higher for people who are older and who use tobacco. Two other factors also affect your cost:

  • Type of plan (bronze, silver, gold, platinum) you choose. All of these plans are quality* plans, but it is valuable to understand the difference. Bronze plans have the lowest premiums, because they have higher deductibles and co-payments. Premiums increase as you go up in metal value. Platinum plans have the highest premiums, but lower deductibles and co-pays. This post from 2014, when the Health Care Marketplace was new, provides more detail.
  • Your income. That’s right. Two people might pay different premiums even if they are both 30-year-old non-smokers who live in the same county and both chose a silver plan. The Marketplace is designed to provide more help in paying for health insurance to people who need it more. So when you enroll in a Marketplace plan, you will estimate what your household’s income will be for 2022. Based on that estimate, the system determines what your share of the premium for a silver plan should be, and the remaining amount will be covered by an Advance Premium Tax Credit, which is an estimate of how much help you are eligible for. All this is based on a baseline silver plan; you will get the same amount of help toward your premiums regardless of what “metal color” plan you choose. At the end of they year, your tax return will show your actual total income for the year. The actual income will be used to determine your final Premium Tax Credit amount. If you received too much or too little in advance, the difference will be taken care of on your tax return, by either increasing or decreasing your tax refund or the amount of tax you owe when you file. The Kaiser Family Foundation offers a useful tool to give you an idea of how much help you may be able to receive.

Open enrollment for 2022 health plans in the Marketplace continues through January 15, but if you want your coverage to begin as early as possible (January 1) then you need to enroll by December 15. Enrolling between December 16 and January 15 will get you coverage that begins February 1. Enroll online at www.healthcare.gov OR call 800-318-2596. A link is also available to find local help. You have the option to choose (filter) whether you wish to find an agent/broker OR would rather get help only from an assister.

*What do I mean by “quality” plans? The biggest factor is that a quality plan covers all ten essential types of health care. By contrast there are plans (sometimes referred to as “junk plans”) that purport to provide health coverage, but exclude certain categories. I’ve heard of situations where people are excited to get health insurance, but then when need arises they discover it doesn’t cover hospitalization, or it only pays $100/day toward hospital care, or has some other substantial limitation. In addition marketplace do not have annual or lifetime limits on what they will pay for an individual’s care. Another key “quality” factor is that the plans have been actuarially evaluated as providing appropriate coverage for an appropriate cost. In other words, they are not set up to make big profits for the company.

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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Medicare Open Enrollment – So What?

Medicare’s annual open enrollment period for 2022 coverage began last Friday and continues through December 7. But why does it matter? Most people enroll in Medicare when they turn 65 — doesn’t that take care of it? The answer is: probably not.

NOTE: Even if you are too young for Medicare, this blog post may be worth your attention if there are people you care about who are enrolled in Medicare. I’d encourage you to touch base with them to make sure they understand their options, and the mailings they are receiving, and help them get help if they need it.

During open enrollment each year, consumers have options to make changes. They also may receive a small deluge of marketing mail, email, and perhaps even phone calls. It’s important that they understand what their options are, and that they pay attention to mailings — especially those from Medicare itself (CMS – The Center for Medicare and Medicaid Services) AND from their current insurance company(ies). There are generally three types of choices consumers make during Open Enrollment:

  • Prescription Drug (Part D) Plan. This may be the most common decision people make during open enrollment. Most Medicare participants also enroll in a separate insurance plan to help cover prescription costs. These plans are offered by CMS in partnership with private insurance companies, and you may literally have dozens of plans to choose from. Some people make the mistake of assuming that if they like their current plan, they should just stay with it. The reason that’s a mistake is that plans can change substantially from one year to the next. Maybe this year, your plan covered your medications nicely, with low co-pays; but next year, they could choose to drop one of your medications or attach a much higher co-pay. So even if your own medications haven’t changed, it is smart to use the Medicare on-line tool to see which plans offered in your area will cover your medications at the lowest cost to you. (SHIIP can help with this — see below)
  • Medicare Advantage Plan. Some consumers choose Medicare Part C (Advantage) plans instead of traditional Medicate Part A and B. These are managed care plans operated by private insurance companies in partnership with CMS; they generally have a defined network of participating hospitals, doctors and other medical providers. They often cover services not covered by traditional Medicare (including vision or dental care), but may also have more restrictive coverage on some services as compared to traditional Medicare. Many Advantage plans also have prescription drug coverage built in. These plans can change from year to year as well, and open enrollment is the time to make a change if you wish to.
  • Medicare Supplement Plans. Many consumers who use traditional Medicare Part A and B also enroll in a supplemental insurance plan, sometimes referred to as Medigap insurance (because it covers gaps – including deductibles and co-pays – that Medicare does not cover). These plans are offered by private insurance companies. Open enrollment is also a time to evaluate your supplement coverage.

Health insurance is complicated for people of any age. Fortunately, excellent help and information is available through the Senior Health Insurance Information Program (SHIIP). SHIIP is an office within the Iowa Insurance Division, so it is completely non-commercial and not sales-oriented. Note: similar agencies are available in other states too. The SHIIP website offers a wealth of information. In addition, they have a helpline during business hours at 800-351-4664 (TTY 800-735-2942). Most valuable of all, however, is the corps of highly-trained volunteers located in counties across the state. Find SHIIP volunteers near you! These SHIIP volunteers kick into high gear during fall open enrollment, typically offering appointments to help consumers understand their options for Part D (Prescription coverage) and other coverage.

If you, or someone you care about, need help during Medicare Open Enrollment, I urge you to connect with your local SHIIP resource today! For general information about Medicare, the annual “Medicare and You” handbook is the best starting point.

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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