Weather has sure been in the news lately – nationally, and also locally. It’s a sobering reminder of the importance of having insurance on your home and possessions – whether you are a renter or an owner. Regularly reviewing your coverage, probably with your insurance agent, is a key to ensuring you have the coverage you need.
Some questions to consider:
- Homeowners: is your coverage high enough to replace your buildings? Building costs increase, and inadequate coverage can be a rude awakening following a disaster.
- Owners and renters: is your personal property coverage adequate? Look at your total coverage limit and compare that realistically to what it would cost to replace everything you own. In addition, consider whether you own any uniquely valuable items or collections. Standard policies have a maximum limit for certain categories, such as jewelry, antiques, electronics, musical instruments or tools, but additional coverage can be added at your request.
- Liability coverage protects you in case you are at fault for an injury or other loss. Do you have enough coverage to protect your assets in case of a lawsuit? If not, you may be able to increase your liability coverage on your home insurance and/or purchase an additional umbrella liability policy.
- Review which perils are covered by your policy and which are excluded. No policy covers everything (for example, acts of war are not covered), but it’s important to make sure you are aware of and comfortable with any exclusions. If not, you may be able to expand your coverage. See our post for information about flood insurance.
After reviewing your coverage, another key step in protecting yourself in case of disaster is to update your home inventory; photos or video recordings are generally recommended. A good inventory equips you to identify what was lost, so that your insurance can replace it.
Check out our Money Mechanics: Home Insurance publication for more information.
As I paid bills that first month after my son had graduated, landed a job and left home, I had an uneasy feeling I had forgot to pay a bill…I had money left at the end of the month. It was almost like having a pay raise. It takes a lot of money to raise a family, and helping low-wage earners hang on to that much-needed income is exactly what the Earned Income Tax Credit (EITC) is all about.
EITC is one of the principal anti-poverty programs for working families in the federal budget. EITC is for working people with low and moderate incomes, including families with incomes up to $53,267. The credit ranges from minimal (as low as $2) to life-changing (up to $6,143). The amount a family receives is based on:
- If you are single or married
- If you have no children or the number of children you have
- The amount you earn.
To be eligible to claim this refundable credit, you must have worked and have earned income; have a Social Security number; be a U.S. citizen or resident alien all year; cannot file married filing separately; cannot be a qualifying child of another person and must have investment income less than $3350.
You have to file a federal tax return to get EITC even if you owe no tax or are not required to file. Free tax preparations volunteers work hard to ensure low to moderate income earners take advantage of the Earned Income Tax Credit. To find a free tax prep sites near you, visit www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers
At my house it’s time to round up all the necessary records for a February tax appointment. It involves records for a farming operation, so the return has an earlier deadline, February 29th, for filing. The early filing deadline means some forms I need for the appointment may not arrive before we sit down with the CPA to prepare the return.
The 1095 form is one I expect to be delayed. The form verifies that you have had health insurance for the year. Note: if you were uninsured, you might have to make a shared responsibility payment. There are three versions: form 1095-B comes from the insurance company if you had a private plan, 1095-C is issued by your employer if you were enrolled in group coverage, and 1095-A is issued by the Marketplace.
Some employers (1095-C) and insurance companies (1095-B) are having trouble getting the forms issued by the end of January, so the IRS has granted them an extension. The new deadline will be March 31, 2016, which is well past my February 29th deadline.
The 1095-A issued by the Marketplace is different. It was issued last year, and has had some of the challenges worked out, so it should arrive by the end of January. If you have Marketplace coverage, you will need it to file a return. Form 1095-A includes information about Premium Tax Credits, so don’t schedule a tax appointment without it.
What will I do this year? Last year my CPA frowned when I didn’t have an insurance card for proof of coverage, so I pointed out that the W-2’s indicated withholding for Medical coverage for both myself and my husband. (code DD, box 12). The IRS allowed that kind of verification last year, stating that you didn’t need actual proof of coverage if there wasn’t a reason to suspect otherwise. It’s a year later however, and I expect the smart thing will be to take our insurance cards to the appointment to provide proof .
Four years ago, I moved to Iowa. At that time I had an investment account that was located in Indiana. I wanted my investment account a little closer to where I lived. So in the process, I needed to interview current financial advisors to select the best person for my investments.
I went in with a handful of questions to ask each person. Here are few of the things I wanted to know:
Find out the educational background and current certificates and licenses the financial advisor holds, and his/her on-going educational experiences. During this conversation, you will hear clues to whether the person is genuinely qualified or boasting. Yes, the prospective advisor needs to be educated. Financial planning is a very broad discipline – including investments, insurance, cash flow, taxes, estate planning and retirement planning — and there is a lot to learn.
Credentials are important too. The Certified Financial Planner – CFP — designation is a good indication that an advisor knows what he or she is doing. To earn the certification they must have at least five years’ experience – meaning you are not their “guinea pig” client. With more experience comes the ability to work through multiple serious financial issues.
Understand if the advisor operates under a “fiduciary” standard. This has a legal and regulatory obligation to act in a client’s best interest at all times. Not all advisors have made that commitment.
By doing your homework, including interviewing at least three people, you can help make sure that you find the right financial advisor for you. For details see unit 10 of Investing For Your Future, a top-notch national Extension resource.
As my children have grown up, I’ve been pleased to see that they generally think things through – they consider various options fairly thoroughly, especially when it’s an important decision. I don’t take full credit for that, but I like to think I contributed. Thoughtful decision-making (about finances and other issues) is not an inborn capacity – it needs to be taught. So how do we help our children build that skill?
One habit I developed with my kids was to never say “I can’t afford that.”
Why? Because it was usually a lie – I could afford a certain toy, or a certain pair of shoes, or… whatever. Instead, I got in the habit of saying something like this: “I choose not to buy that $5 box of cereal, because I want to use my money to buy fruits and vegetables, which are more important.” I didn’t necessarily use that exact phrase, but I worked to convey that I had thought about the trade-offs and was trying to spend my money on the things that were most important. And sometimes I said “yes I will pay for that,” because it was important or valuable.
It was kind of like thinking out loud – sharing with my daughters the reasons why I made certain choices; even sometimes letting them hear the argument going on inside my head (“should I or shouldn’t I?”). I think that was helpful to my children. I kept it age appropriate – for example, I didn’t share with a 10-year-old child my uncertainty about which health insurance plan to sign up for. But I did let them in on my thinking about daily spending decisions, and about larger decisions as they grew older.
What steps do you take to help your children learn to make thoughtful decisions?
P.S.1 – Looking for ideas to help you build children’s money skills? Check out Money as You Grow!
P.S. 2 – Here’s s link to a worksheet to help folks think through the pros and cons of decisions http://www.apsu.edu/sites/apsu.edu/files/counseling/Decisional_Balance_Worksheet.pdf
In a few months my daughter will start a new job in another state. As she looks for a place to live, she’s being very cautious about what she can afford. She wasn’t sure how social security, income taxes, insurance and retirement contributions would affect her income. She needed a realistic idea of take home pay before her first paycheck.
She could have generally estimated that tax withholdings would be about 25-30%, but that’s not very precise. Instead she asked Mom, who happens to teach finance! I pointed her in the direction of NEFE’s (the National Endowment for Financial Education) ”Smart About Money” website. It is non-commercial and very trustworthy. One of the site’s features is a set of calculators, including a take-home pay calculator.
A take-home pay calculator is useful to someone like my daughter, starting a whole new career. But it’s also useful to people who are expecting other changes:
- Income amount (getting a raise? moving from full-time to part-time?)
- Marital status
- Number of dependents
- Contributions to retirement plan
- Other changes in withholdings.
If you’re anticipating a change in your situation, remember that you don’t have to guess. The take-home pay calculator from Smart About Money can give you a fairly reliable estimate of what to expect.
P.S. this calculator is not state-specific; it appears to use an average or typical state income tax rate. So if you’re moving to a state with very low or very high income tax rates, the results may be a little off.
I’m enjoying all the new “first day” photos being shared on social media. From backpacks to shots of roommates in a new apartment, the transitions are great to celebrate. No doubt parents everywhere are feeling relief that the school supply list and registration fees are out of the way for another year.
It isn’t always easy to meet those initial costs of sending your children to school. It’s been my experience, as a former high school teacher, that getting a graduating senior enrolled in their school of choice can be costly. Financial aid and scholarships often arrive after a student is enrolled. Registration fees, deposits for rooms/apartments, and upfront costs of supplies have to be covered from your own resources.
Parents can plan ahead by considering the purchase of savings bonds, starting a 529 College Savings Plan, or establishing a Cloverdell Savings Account. The funds have tax advantages and create accessible dollars for the first financial hurdles of enrolling in post-secondary education. Encouraging a teen who has employment to think ahead and plan for those costs, as well as having your own “think ahead” plan can lessen some of the stress of celebrating a “first day.”
We have all heard it from our children, “I need this item.” As a parent, you may or may not see it as a need – you may see it as a want. One good strategy for dealing with children’s “wants” is to have them save some of their own money to purchase the item.
This strategy teaches children an important skill: Paying Yourself First, by saving some of their money for later needs. Short-term savings teaches your children that by waiting a little longer they are able to buy something they really want. Learning to save teaches children to appreciate delayed gratification. NOTE: Long term goals like saving for a car or college education can be difficult for small children.
Borrowing can be used when children run short of money; they can borrow from parents or siblings. Parents can help children learn how to borrow wisely by never loaning more money than the child can realistically repay (with interest if appropriate), and/or setting up a grace period in which there will be no interest. When children borrow, it is important that they repay the money in a timely manner; they learn the responsibility they take on when they borrow. Borrowing money can teach children the real cost of money.
Sharing money is a good lifetime habit. It teaches children that there are good feelings for both the giver and the receiver when they use their money to help others. Having money brings obligations such as taxes and charity donations. Be sure to encourage children to give other resources (such as their time and skills) as well as money.
Over 40 million Americans are paying back student loans. Owing money is frustrating enough, but it’s even worse when the loan company makes things more complicated.
Have you run into obstacles trying to pay back your student loans? The Consumer Financial Protection Bureau (CFPB) wants to hear from you if you’ve experienced:
- Surprise fees
- Lost payments
- Difficulty getting information from your loan servicer
- Other roadblocks to repaying your loans
Submit your comments and tell your story today to help the CFPB improve student loan servicing for borrowers. (comments can be submitted through July 13, 2015). NOTE: your story will become part of public record, so tell your story without including any sensitive information such as your Social Security number or other information that identifies you.
BONUS: to learn about options for paying back your student loans, check out the CFPB’s Repay Student Debt section.
Money Smart Week, started 13 years ago by the Federal Reserve Bank of Chicago, is designed as a public awareness campaign to help consumers better manage their personal finances. Here in Iowa, more than 200 partner organizations have joined in the fun, promoting financial education with many interesting opportunities to learn. All Money Smart Week programs are free, and strictly educational (no marketing allowed).
ISU Extension and Outreach has been a MSW partner for many years. Programs are offered for audiences from preschoolers to seniors. From scout nights to shred days, essay and poster contests, geocache for college cash, piggy banks, books, and kites – in many cases, a chance to win a prize makes the learning even more fun. Educational program topics include: establishing a budget, protecting financial information, raising money-smart kids, and more.
Go to www.MoneySmartWeek.org for more details about activities in your area. Check out your local libraries for a display as well as programming. Spread the knowledge!