Being Thankful

Thanksgiving – this season when we pause to be grateful – can become so much more than a day in which we gather with loved ones to enjoy each other’s company and share a wonderful feast. If we take it further, thanksgiving, or gratitude, can become an underlying attitude that helps us see our options and opportunities all year ‘round. That can have a big impact on our finances.

Feeling gratitude causes us to focus on what we have, rather than what we don’t have. As we deal with our finances and try to make choices about the best uses of our money, being mindful of and grateful for what we already have makes it easier to:

  • Say “no” to impulse or unnecessary purchases
  • Set money aside for future needs (including college, retirement, or other long-term goals)
  • Build an emergency fund
  • Give to worthwhile charities

Pausing and reflecting with gratitude on our possessions, and on the people and experiences in our lives, makes it easier to be satisfied.  Being satisfied makes it easier to put our money toward important uses rather than being distracted by spending opportunities with only short-lived value.

Gratitude helps us see ways in which we have more than a “bare minimum” existence – having freedom to choose how to use our money is definitely something to be grateful for. That includes small freedoms, like being able to add ice cream to our grocery cart, and bigger freedoms, like the ability to travel to see loved ones, or to provide music lessons for our child.

If you’re interested in taking your gratitude to a next level by sharing your abundance with causes important to you, stay tuned for next week’s post related to “Giving Tuesday.”

Note: freedom of choice is an essential element of financial well-being – learn more about financial wellbeing here or take the financial wellbeing quiz.

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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Rising Interest Rates and Your Spending Plan

In its ongoing fight against inflation, the Federal Reserve again hiked interest rates earlier this month to a range of 3.75 – 4.00%. This widely anticipated move continues the year-long trend of rate hikes, and it is important to understand how these moves affect your household spending plan.

The specific rate mentioned above – the Federal Funds rate – technically does not affect consumers directly. When the target range is increased, the costs for banks participating in overnight market activities increases, which will then likely be passed along in the form of higher rates on consumer debt products.

These behind-the-scenes transactions are ultimately responsible for the rising costs of credit cards, mortgages, and other loans. On a positive note, consumers can also take advantage of higher rates on treasuries, money market funds, CDs, and other short-term saving instruments. For the sake of space, I will go over two of the most common consumer rates: credit cards and mortgages.

  1. Credit Cards – most credit cards utilize an adjustable rate, which is more susceptible to immediate changes in the market. Individuals carrying a balance from month-to-month will experience higher borrowing costs, and extend their payoff timeline, especially if they are making the same monthly payment. You can likely find your current rate on a monthly statement.
  2. Mortgages – on the flip side, most mortgages fall under the fixed-rate category. While new homebuyers, and those with adjustable-rate mortgages (ARMs), are facing higher borrowing costs, those with an existing fixed-rate mortgage are not impacted.

Unfortunately, consumers cannot control effective interest rates; however, you can at least minimize the impact on your spending plan. Forgoing a major purchase, shopping around for the best rates, improving your credit, and making extra debt payments are all potential strategies for protecting your personal finances during a rising interest rate environment. Human Sciences Specialists, with a focus in Financial Health and Wellbeing, are also here to help if you find yourself in a tight spot with your spending plan!

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.

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Just Around the Corner – 2022 Tax Filing

While tax filing season is still three months away, this is the time to start thinking about your 2022 return. There are several tax-law changes and updates taxpayers need to be aware of. Many big federal tax breaks enacted as part of the COVID response expired at the end of 2021, and are unlikely to be extended.  The temporary improvements made to the child tax credit, child and dependent care credit, and earned income credit returned to their pre-2021 rules at the end of December 2021.

The 2021 changes to the child tax credit included an increase that was made fully refundable, applied to children up to 17 years of age, and half the credit amount was paid in advance through monthly payments from July to December last year. Again, those changes will applied to 2021.  For the 2022 tax return, the credit returns to a non-refundable status.

In 2021, the credit for dependent care expenses (day care costs) allowed up to $8000 in eligible expenses for one qualifying child/dependent ($16,000 for two or more). The maximum tax credit available was 50% of your eligible expenses, if your income was $125,000 or below. Note: people with higher incomes still received some credit, just not the maximum amount. As you prepare your 2022 return, the allowable expenses will drop back to only $3000 for 1 child or $6,000 for more than one child.  The full credit, equal to 35% of eligible expenses, will only be allowed for families making less than $15,000 a year in 2022; again, though, families with incomes above that threshold can still receive a tax credit of 20% of eligible expenses.

The “childless” Earned Income Tax Credit enhancements also expired at the end of 2021. To qualify, childless workers must again be between 25 – 64 years old (in 2021 the minimum age was generally 19, and there was no maximum age). In addition, the rule allowing you to use your 2019 earned income to calculate your EITC if it boosted your credit amount no longer applies.

The standard deduction amounts were increased for 2022 to account for inflation.

  • Married couples get $25,900 ($25,100 for 2021), plus $1,400 for each spouse age 65 or older ($1,350 for 2021).
  • Singles can claim a $12,950 standard deduction ($12,550 for 2021) — $14,700 if they’re at least 65 years old ($14,250 for 2021).
  • Head-of-household filers get $19,400 for their standard deduction ($18,800 for 2021), plus an additional $1,750 once they reach age 65 ($1,700 for 2021).
  • Blind individuals will have an extra $1,400 to their standard deduction ($1,350 for 2021). That grew to $1,750 if they’re unmarried and not a surviving spouse ($1,700 for 2021).

Avoid being caught by surprise. For 2021, many saw a nice bump in their tax refund check because of the tax breaks created for that year only, and also due to the addition of any stimulus payments that had been missed during the year.  Refunds for the 2022 tax year will likely be smaller. Now would be a good time to analyze how the sunsetting of those tax laws will affect your 2022 return.  It is not too late to have additional withholdings pulled from your pay checks to ensure you will not owe a great deal when your 2022 return is prepared and filed. To check to see if your withholdings are adequate, use the IRS withholding estimator.

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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Some Things Never Change

I have three grown children: each with two kids of their own. They once shared (with an eyeroll) how they always knew when mom was learning a new parenting curriculum because I would implement the strategies and techniques on them. It is now a privilege and a joy to watch my kids as parents and occasionally I will see one of those strategies from their past emerge in their home.

I really liked those parenting programs and the lessons that they reinforced in my kids (showing love while setting limits, using natural consequences, Savings/Spending/Credit, etc.). But as you would expect, there is now an app for SOME of that.  One that caught my eye allows a parent to pay their child an allowance or for extra chores. The money accumulates on a debit card which they can use to purchase the things they want or need.

The latest app being used with a couple of my grandkids is quite amazing. It teaches the Time Value of Money, Smart Spending through Rewards and the power of delayed gratification using Savings Goals.  The free version allows you to assign points to chores the child can earn and points for rewards the child can save for. For example…if a child wants a sleep over, the child will need to earn 1000 points.  Cleaning the toy room (a weekly chore) may be worth 5 points while emptying the dishwasher (a daily chore) may be worth only 1 point. The points can be assigned a dollar value as well.  So, if the child wants a $5 stuffed animal and it takes 10 points to equal $1, the child will need 50 points to buy the stuffed animal….I think there is also a math lesson in there.

What keeps it interesting is the fact that no two kids are alike, so what works for one child may not work for the next. I see that with my grandkids: one is highly motivated by rewards and has a long list of wants, while the other just loves to help and has no wish list.

By searching for “Child Chore Apps” on the web, you will find lists of apps that could be useful to parents trying to raise responsible young people and provide kids an opportunity to experience, practice and apply life skills, including money management.

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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Savings Strategies

Note: this post builds on yesterday’s post about having a meaningful reason to save.

Once you have a reason why you want to save, or save more, the next step is to “find” money to save. That generally means either increasing income or reducing expenses, which means something will need to change. Change can be hard, but most of us can succeed if we have a good enough reason.

To reduce expenses, you can make several small changes; for example, eat out one less time per week, drink one less can of pop each day, or stop buying magazines and read them at the library instead. OR, you could make one big change that saves money; for example, you could find a roommate to share housing expenses or move to a smaller (less expensive) apartment. To increase income, you could ask for more hours at work, get an extra part-time job, collect cans and bottles for the 5-cent deposit, or have a garage sale.

Once you have “found” some money by reducing expenses, increasing income, or both, the next key is to MOVE that money to a savings account or to some location where you are unlikely to touch it.

This seems like an obvious step, but it can be overlooked.

Imagine a scenario where you exercised self-discipline by skipping your morning coffee shop stop, bringing your lunch to work, and stuck to a limit at the grocery store! You’re proud of yourself! But if you don’t actually MOVE the money to your savings account, it will just end up getting spent on something else.

To make sure the money gets moved to savings, one helpful strategy is to treat savings like a bill you pay each month. If you’ve decided you can save $50/month by making some changes in spending, then “pay” that saving bill just like you pay your utility bill and your car payment. That approach increases your chance to be successful with saving. Even if you are saving small amounts, building the habit of saving each month is a way to reach your goals, whatever they may be.

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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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.

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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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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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Thanks Giving: Give Wisely and Deduct

The Thanksgiving holiday is a time to stop and really notice how much we have to be thankful for. Many people take that gratitude a step further by sharing from what we have; they take their “thanks” and turn it toward “giving” to worthy charities this time of year. The arrival of “Giving Tuesday” next week also prompts people to give.

An article from the Iowa Attorney General’s office this week (see item 5 in the article) reminds us of steps to ensure we give wisely. Careless gifts may end up in the hands of criminals OR of organizations that do not use funds wisely. One way to make sure your money is used well for the cause you care about is to give to a local organization that has a good reputation. When giving to national organizations, you can make sure they are well-managed by checking one or more of these reputable charity rating sites: BBB Wise Giving AllianceCharity NavigatorCharityWatch, and GuideStar. The article offers more suggestions as well.

Another way to give wisely is to take the tax deduction for which you are eligible! Some people may say, “I don’t give to charity just for tax purposes – I give because I care!” That’s great. But if you take the tax deduction, and it reduces your tax bill (or increases your refund), then you have MORE money to give! Now that is wise giving!

The tax code allows us to deduct (subtract) our charitable gifts from our income before the tax is calculated. The government created that deduction to encourage us to give. By taking the deduction, and potentially having more to give, we are contributing to the valuable American habit of supporting worthwhile causes. There are two ways to deduct your charitable contributions:

  1. By “Itemizing” your deductions on Schedule A of your tax return. This is great for people who have enough deductions to be higher than the “standard” deduction allowed according to family type. For a single individual, that standard deduction is $12,550; for a married couple, it’s $25,100. Your tax preparer can help you know if this is advantageous for you.
    Good news! Even if you are better off with the standard deduction, a new law lets you deduct some 2021 giving anyway!
  2. Thanks to some of the COVID-relief legislation passed in 2020 and 2021, taxpayers can take a deduction for charitable contributions in 2021 even if they don’t itemize deductions! An individual tax filer can deduct up to $300 of monetary contributions to qualifying charities; for married couples filing jointly, that figure is $600.

In the midst of your Thanksgiving celebration, I encourage you to think about any charitable giving you might want to do, and then when you make the gift(s), be sure to keep the receipt for tax purposes! Plan now for #GivingTuesday and beyond!

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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