Finance

Control Your Holiday Budget

November 24, 2017 By Twila Van Leer

If you are prone to go all out for Christmas and end up facing a New Year saddled with left-over debt, begin now to stay in control of your holiday spending.

Start the annual binge with a realistic view of how much you have to spend. Review your income and set expenses. What’s left over is what you can spend. (This is the time of year when too many people remember that they vowed last year to start a savings account especially for the holidays. Too late now.)

Work from a list, Write down every person to whom you want to give a Christmas remembrance. Even co-workers, the teachers and the neighbors. Remember to expect the extra expenses in foods, decorations and charitable donations you give at this time of year. If there are parties and special events that might dip into your budget, add them. If your plans include travel, that’s a big one. Start with that and build around it.

Go through the list and realistically determine how much you can spend for everyone on it. Homemade is good. Simple is easy. Trying to impress the recipient usually gets you into trouble budget-wise. This is a time when the old saying that “It’s the thought that counts” becomes operational.

Stick to the plan. It doesn’t take much of a hard left turn to put you off-track. Calendar your shopping, trying to categorize into foods and gifts. Don’t try to cram too much into a single shopping trip. When you get tired, you’ll be tempted to “buy anything” just to get the task behind you. Don’t weaken.

Keep track as you go through the process. Make adjustments if necessary, with your eye on the bottom line at all times. Keep your list up-to-date, crossing off the items as you purchase them. Once you have crossed them off, forget them. Second thoughts can be costly.

If you can wake up on Jan. 1 free of worry and ready to begin a new year with a clean slate, you’ll be glad you took the trouble to make your holidays debt-free.

Pay Equity 200 Years Away?

November 22, 2017 By Twila Van Leer

Two trends in the job market suggest that the gap in paycheck bottom lines based on gender won’t be going away any time soon.

The estimate, based on current conditions, say that it will take at least 217 years for equity to become the norm.
That outlook comes from the World Economic Forum. The forum gathers statistical data from 144 countries in the world with input from the International Labor Organization, the United Nations and World Health Organization

As one indicator that wage equity is not an immediate likelihood, the forum reports that fewer women are currently entering the workforce. That reduces the competitive pressure on employers to give male and female workers the same salaries.

Although the international agencies report that women are doing as well as men in health and education matters, the effort to promote pay equity continues to fall short. Salaries are, in fact, becoming less equal.

Women make less than men in the same field, the agencies report, but that is only one aspect of the problem overall. Women are more likely than their male counterparts to do work at home gratis. Women tend to work in fields that offer lower average pay. They are much less likely to rise to the top ranks in any of the fields.

Iceland leads the world in gender equality when it comes to pay, the forum reported. Western European countries also are making strides toward equity.

Gender equality is both a moral and economic factor, according to Saadia Zahidi, head of education, gender and work for the World Economic Forum. She said the countries that are seeing wage gaps gradually closing recognize that there are dividends for a country’s overall economy in parity policies.

The United States, although it scores high overall, still has big gaps in workforce participation and wages, the forum reported. The group estimates that the U.S. could add $1.75 trillion to its economy by promoting pay parity. Globally, the estimated economic benefit would reach $5.3 trillion by 2025 if disparity were reduced by just 25 percent.

Prenuptial Agreements On The Upswing

November 14, 2017 By Twila Van Leer

Deciding before the “I do’s” how they are going to handle their combined assets is become a more popular approach for Americans. A prenuptial agreement can prevent hassles down the road and ease out the bumps that often cause trouble, experts say.

For instance: One of the partners is a very careful budgeter and keeps close track of her assets. Her fiancé tends to be looser in his money management and doesn’t shy from a few risks. An agreement in writing may help the couple find middle ground they both can live with. If, unfortunately, the marriage doesn’t work (half of them don’t) there is more solid ground for settling things.

One couple agreed to separate her retirement savings from his business funds. She had the peace of mind that her retirement would be more secure. He was on notice that he needed to remain within his means as he undertook new ventures.

Millennials tend to put off marriage until later in life than did their parents. They are more likely to have established careers, businesses and property. They can be protective of these assets. They are more open to a prenuptial agreement. Old perceptions that such an agreement is unromantic or selfish or that it indicates a lack of trust are being set aside in favor of a practical approach.

Back in 1975, about 43 percent of women were stay-at-home mothers and housekeepers. In 2016, that figure was 14 percent. The majority of women now have assets of their own when they are ready to marry. They are not as dependent on a husband for their living.

Prenuptial agreements have gained popularity for all these reasons. The increase of divorces in America also is a factor, according to the American Academy of Matrimonial Lawyers. An academy survey said that 62 percent of the lawyer members had seen an increase in the number of couples seeking prenups in the past few years, especially among those in the Millennial age span.

The pre-marriage agreements have also changed, the academy found. Initially, they were seen as a way to protect one of the partners if he or she had more assets or appeared likely to benefit from inheritances.

Now, they focus on such things as property and dividing debt, particularly student loan debt. The agreement can forestall sticky situations in the future. One man, for instance, wanted to assure his parents, who were likely to bequeath him a considerable amount of money from their business, that his inheritance would stay in the family should his planned marriage fail.

For some couples, such an arrangement is “the first step to a divorce.” But for some couples, pre-existing situations make a prenuptial understanding a good idea — for instance, when there are children from a previous marriage.

Some couples bypass the prenuptial agreement, but make legal arrangements after their marriage to address issues that could become stumbling blocks.

The experts defend pre-marriage agreements on the basis that “marriage is a financial decision and divorce is a financial decision” and the best approach is to keep them upfront.

Ready for Retirement?

November 10, 2017 By Twila Van Leer

Saving for retirement is getting harder. Not many Americans are accumulating the amount of money the experts say they will need to tide them over the remainder of their lives, and the U.S. Congress is taking steps that complicate the process further.

The idea is circulating in D.C. that the tax breaks associated with 401(k) savings should be curtailed. As our representatives look for ways to adjust taxes, that idea is still on the table.

Most Americans facing retirement become painfully aware that they will need a substantial amount of savings as well as Social Security payments to get by. The cost of health care is a bug-a-boo for too many as they age and general inflation takes a swath out anything that is set aside for the future. Here are some things to consider:

About half of Americans have a retirement account such as a 401(k) provided by an employer or and Individual Retirement Account (IRA), according to the Federal Reserve.

Not all jobs offer the 402(k) option. Only 35 percent of low-income working households have the job savings plan or anything similar that automatically sets money aside for retirement. For high-income households, the figure is about 80 percent, according to a study by the U.S. Government Accountability Office.

The average savings of most households that have a savings account is $60,000, but there is a wide range on both sides of the average. The typical household headed by someone under 35 had savings of only $12,300 last year, if they had savings at all. The savings cushion ranges from $403,000 at the top to a median of $25,000.

Millennials have more tucked away than their parents did at the same age, Compared with 1989, when a family headed by someone under 35 had just $7,500, today’s family in the same age group has $12,300, after accounting for inflation.

The age at which individuals can qualify for Social Security is rising. Sixty-six is now the threshold for receiving full retirement benefits. The figure is slated to go up slowly until it hits age 67 for those born in 1955.

The average life span is increasing. A woman at 65 can expect, on average, to live another 20.6 years. For men, the figure is 18 years. Retirement income has to last longer for most Americans.

Projections for health care costs are scary. A 65-year-old couple will need some $275,000 to cover medical needs through retirement, according to Fidelity. That doesn’t take into account nursing home or long-term care if necessary.

Fewer companies are offering formal retirement plans for employees. Only 13 percent of private-sector workers were enrolled in such a plan in 2014, says the Employee Benefit Research Institute. In 1979, the figure was about triple that number at 38 percent.

All of these factors suggest a more careful analysis of your prospective retirement income, with adjustments if necessary.

When Do You Donate A Car?

November 8, 2017 By Twila Van Leer

Car Donation — Remember that you must itemize deductions if you want to claim a tax benefit.

There are several reasons why you want to donate a car to charity when it has outlived its usefulness to you. But to maximize the tax benefit, you need to discuss issues before calling the charity to which you intend to donate.

Remember that you must itemize deductions if you want to claim a tax benefit. You could itemize even if the donation is your only deduction, but that may not be the best choice.

Consider the math: If you are in the 28 percent tax bracket and the allowable deduction for the vehicle, you will save $280 in taxes. If you are in the 15 percent bracket, the same allowance will net you just a $150 reduction in your taxes.

If the car donation is your only deduction, you would fare better claiming the standard deduction. The only way in which a car donation improves your deductions is if you have a number and their total, including the car, exceeds the standard deduction.

The donation must be to a charity that qualifies. It must be recognized by the IRS as a 501c3 or a religious organization. To determine if the organization you want to donate to meets these specifications, call the IRS toll-free number, 877-829-5500.

Fair market value is defined by the IRS as “the price a willing buyer would pay and a willing seller accept for the vehicle.” Under current IRS rules, there are very specific conditions under which you can claim a deduction at fair market value: If the charity auctions the vehicle for $500 or less, you claim either the fair market value or $500,whichever is less; If the charity plans to make “significant intervening use of the vehicle” you can claim fair market value; If the charity says it intends to make a “material improvement,” rather than just routine maintenance before disposing of it , you can claim fair market value; or if the charity gives or sells the vehicle to a needy person at a price significantly below fair market value, you can claim the whole amount.

Automotive website Edmunds offers an “Appraise Your Car” calculator to help you determine fair market value. IRS Publication 4303 also offers a vehicle pricing guide.

Only about 5 percent of donated vehicles meet the stringent requirements for use by a charity. About a third are junked and the rest are auctioned to benefit the charity.

You may be able to give a more substantial amount to the charity if you sell the vehicle and donate the cash. The goal is to maximize your tax deduction, so consider the possibilities and then make the move.