Spending Habits

Plan Ahead For Retirement

May 21, 2016 By Twila Van Leer

What you should already be doing in planning for your retirement. — What you should already be doing in planning for retirement.

The decisions you make early in life can make a huge difference in what your retirement cushion will look like. Waiting until you are about to head out the door of your employment is way too late to start thinking about it.

Stay Married

It’s common to hear from both parties to a divorce that he /she “lost everything” in the process. That isn’t mathematically possible, but it’s safe to say that it’s rare that either partner benefits financially when there is a split. If you fall into the divorce pit (and some 50 percent of American couples do) remember to calculate the future needs of retirement as you divvy up the goods. Applying some sound common sense in the relocation process will help. Wiping out the entire proceeds from a divorce while setting up independently may leave little for the retirement years. A smaller living space, fewer immediate “wants,” a more economical car may be good alternatives.

Spend Less Than You Make

This bit of wisdom has been bandied about forever, but not enough Americans pay attention. Debt is simply impatience expressed through money. If you save the amount of a monthly payment for as many months as the purchase takes, you can pay cash and avoid interest.

Live Frugally

Used vehicles serve well for every day getting where you’re going. Mow your own lawn, make your own repairs when possible, make eating out a rare option. Just keep thinking about how good life will be when you are retired if you don’t spend it all when you aren’t.

Invest

Take what is left when you have lived frugally and put it into a savings plan that will offer some tax advantages. An investment counselor is a good idea if you aren’t really savvy about the market. Making changes in your savings program just for the sake of change may be counter-productive. It can be tricky. Before you sign up for something new, think first if it will fit into the long-standing plans you have been pursuing.

Giving Money to Relatives Or Friends Common

April 26, 2016 By Twila Van Leer

Many households give or lend money to help others out. — Many people give or lend money to help family and friends out.

Opening one’s wallet to help a family member or friend is “a hidden dimension of the financial system,” according to a study from the Pew Charitable Trust. “Transfers of money across household lines are really important for keeping families afloat.”

25% Of Households Lent to Friends Or Family.

About 25 percent of American households gave or lent a median of $1,000 to friends or family in the past year, the study showed. More than 7,800 households were included in the survey. Black households are most likely to give or receive such help, but the practice is spread among all demographics.

Burden Created.

It isn’t always easy. One in five of the respondents said the “gift money” creates a burden on the giver. Not unexpectedly, the households with the least income saw their donations as a difficulty. But even those making $85,500 per year reported that their generosity was a burden.

Single Mothers Receive And Give The Most.

Single mothers are among the most common recipients, but they also are more likely to give when necessary. Half of all the single-mother households either received or gave help, compared with 30 percent of two-parent households. Some 75 percent of the single parents said it was hard to give, but they also are the group that recognizes it may need a boost at some time. They are, in essence, investing against future need, creating a safety net that they can use to tide them over emergencies.

More Common For Parents To Help Adult Children.

The study showed that adult children in the period from 2005 to 2013 were more likely to draw on cash from their wealthy parents than was common in the 1980s. About 10 percent of those in the more recent group received help with a home purchase, Pew found. Slightly more than 30 percent were given money to help with education costs, enhancing their ability to become more wealthy in the future.

The bottom line of the Pew Study: Poor people tend to help each other out so they can get through tough times. Wealthy families benefit financially when they donate to kin.

Make The Tax Return Count: Save It

April 24, 2016 By Twila Van Leer

A higher percentage of people are choosing to put their refund into savings.

For a short time each spring, millions of Americans have a fleeting sensation of being rich. They have their tax return in hand and must decide how best to use it. More than ever, according to Prosper Insights, they are opting to put it in the bank.

Refunds Used To Improve Financial Health

“Americans this year see refund season as a time to improve their financial health. Money saved is spending potential down the road,” said Matthew Shay, president of the National Retail Federation, which sponsors the survey.

Plans For Return

The NRF’s annual Tax Returns Survey indicated that 65.5 percent of those contacted expected a return and some 49.2 percent of those had plans to tuck the return into their savings as a means to improve their overall financial health. That is the highest percentage who are of that mindset since the NRF began conducting the survey. Other options include paying down debt or making large necessary purchases. Some 22.4 percent said they would use the return for everyday expenses and 8.3 percent looked forward to an annual splurge that they have had to bypass for the major part of the year.

Young Adults More Likely To Save

In the 18-24-year age group, the percentage of those wanting to save the return is even higher at 57.3 percent. The percentage dips to 52.3 percent in the 25-34-year age group, but that’s still more than half. These younger workers apparently see the tax windfall as a chance to build savings without diminishing their usual income.

Plans For Filing

With the mid-April deadline fast approaching, it is evident that the majority of Americans, 66.9 percent, are filing online. Almost 40 percent are preparing their own with the help of computer software. Only 14.2 percent said they have filed manually or plan to do so. Only 21.4 percent have hired or will hire a professional to get the job done, while 16.1 percent have called on a friend or relative to help with the job.

Paying Too Much For Mobile Phone Service?

April 13, 2016 By Twila Van Leer

Those staying current with the market find lower prices.

Consumer Reports estimates that 50 to 70 percent of wireless customers pay too much for the service. There are better options, the price oversight publication says.

Check For Promotions

They give the example of Michael McCormack, who has followed the wireless industry for years as part of his job. Since he also is a customer, he was able recently to take advantage of a T-Mobile US Inc. promotion offering four lines for $150 per month.

Make Changes In Service According To Needs

Yeah, but what if your job doesn’t include up-to-the-minute info on such things? The great majority of consumers don’t pay much attention, so they go on paying too much. Some of them are “loyal to a fault,” failing to make changes in their service because they’ve been with provider for a time.

But some 6 percent of the 90,000 responders to a recent Consumer Reports survey said they had changed service in the past year. The savings amounted to about $20 per month, the survey found.

Compare Prices With Other Carriers

The Consumer Reports experts said users should be paying no more than $50 per line, instead of about $100. The carriers aren’t prone to let consumers know how they can save money, said Michael Gikas, senior editor for electronics and technology. T-Mobile started a price war in 2013 and the effects are still being felt. But it’s up to the customer to check on the prices being offered by various carriers and switch when it’s to their advantage. The carriers often offer special prices to customers threatening to make a change.

Customer Satisfaction

Those who are happy with their service are the least likely to change. Others don’t want to go through the hassle of swapping providers, even if they pay more to stay put.

Verizon Communications Inc. has the lowest rate of “churn” or customer defection, in the industry. Company officials say that is because of their focus on quality service and working with customers to guarantee satisfaction. Spokespersons for other carriers emphasized their features, which they believe to be as much as factor in retaining customers. The competition is fierce. T-Mobile has moved customers to lower-priced plans and AT&T has responded to industry price cuts by not only reducing their prices but increasing data allotments.

With this kind of competition, consumers who are willing to stay current with the market are likely to find lower prices.

Are You Spending Too Much?

April 1, 2016 By Twila Van Leer

There’s nothing left of the holidays except the memories. And the bills. And if that has been painful, it may be time to take another good look at your long-term goals and make adjustments as necessary.

Studies show that Americans are spending more than ever. The average credit card debt is $5,000 to $7,700, depending on the source of your information. Student loans, mortgage or rent payments, cars, cell phones and other electronics and other recurring debts add to the pressure.

How do you know if you are spending too much? Here’s a list of guidelines that may help you decide.

Credit Card Debt

If you carry more credit card debt than you can pay off monthly, you may be on the brink. The interest is gobbling up money that you could be using for other things.

Retirement

If you are making no provision for retirement, that’s another red flag. Though you have plenty of company – a third of working age Americans are in the same leaky boat – you may be asking for a longer working time in the future. Most experts say you need to start saving 10 to 20 percent of your income starting in your 20s to meet retirement needs.

Housing

If your housing, rent or mortgage, is absorbing more than 28 percent of your income, that’s a danger sign. And your transportation costs should not exceed 15 percent. Vehicles depreciate fast. If you are over this limit, it could be time to go shopping for less car.

Children’s Education

The working years are the time to save money for your children’s education. Higher education debt has become a major stumbling block for many young (and not so young) adults. The average student will face a $33,000 debt load when he receives his degree. Being able to take care of some of the costs up front could make the transition into a career easier.

Health Insurance

Financial disaster is fairly predictable if you don’t have health insurance. A coronary bypass can cost more than $38,500. Just thinking about this and other medical emergencies that are part of life could give you a heart attack. With new government provisions, you could be paying penalties for not having health insurance, unless you qualify for an exemption. Better the cost of insurance than the cost of the penalties.

Eating Out

If your family has become addicted to eating out, you are paying more for food than you need to. A home-prepared lunch costs about a third what they will charge you in a restaurant. Ditto coffee. Some studies have indicated 60 percent savings when you eat foods you fixed yourself.

Emergency Fund

Not having an emergency fund is asking for trouble. The experts don’t all agree on how much a cushion is enough, but the recommendations range from three to 12 months of your income total. Don’t worry so much about the total you need as the need to get started. In a pinch, anything is a whole lot better than nothing.

As a rule of thumb, financial advisors say you should spend half your income on essentials, 20 percent for debt payment, retirement and savings and 30 percent on lifestyle choices. The guideline can have some flex, but is a good gauge to whether you are making good use of your financial resources.

Bottom line: Overspending and under-saving can be disastrous. Starting early to address budget concerns may allow for a more secure and trouble-free future. If you aren’t paying attention, now is the time to start.