Money Management

Know About Your Social Security Benefits

September 1, 2014 By Twila Van Leer

FICA is an acronym known to everyone who works for pay. It’s that little bit of money that disappears from your paycheck each time. Most people have a vague sense that this money is held back by the government to aid in your retirement. But not everyone knows how it works.

Don’t expect a lot of help from the Social Security Administration. They aren’t into the nitty gritty for each beneficiary. It’s up to you to learn where your FICA dollars go and when you can expect to draw on the accumulation as you retire. There are many ways and you need to analyze these and choose what’s best for you.

Married couples have a number of options, according to a Bankrate.com article. Alicia Munnell, director of the Center for Retirement research at Boston College, advises that the ultimate option is to wait until you are 70 to begin benefits. The payment then is 76 percent higher that it would be if you start at 62 and 32 percent higher than if you chose to start withdrawing at age 66.

If this is your choice, of course, you have to accept the fact that you are gambling on living far enough beyond 70 to make it worthwhile. If you have inklings that your health is not going to be that great, you probably should opt for the earlier benefits.

Some financial experts believe that the odds are against your making money by waiting until age 70 to claim benefits. They advocate the “take the money and run” position. It’s what Verton Bernstein, retired law professor and Social Security expert, advises.

Marital status can make a difference. Divorcing before you have been married 10 years will deprive you of the ability to claim a share of the ex-spouse’s Social Security benefits. If you are ready to bail out of the marriage at nine years and 11 months, hold on a month. Then you are eligible for Social Security benefits on up to half of the ex’s earnings or on the basis of your own earnings, whichever is greater.

If the ex-spouse dies, you’ll be treated as the widow or widower in this scenario. If the ex was a big earner, it would be wise, if possible, to delay collecting on this benefit until you are 70, when you would receive the maximum benefit. If the ex continues to live a long life, encourage him/her, if possible, to delay retirement until age 70. If you both survive beyond age 66, you might choose to collect half of the ex’s benefit while leaving your own intact until you are 70.

The intricacies of the shared benefits are baffling to some, and it may be wise to hire a lawyer or tax expert to help you make decisions.

The same holds true if you are applying for SSDI benefits related to health issues. An applicant is entitled to representation from the onset of the application process, but Social Security doesn’t always make that clear. Many applicants wait until a claim has been denied, then seek help. That slows the process considerably.

When you’re thinking about retirement, remember that Social Security bases your benefit on the 35 highest earnings years. The figures are adjusted for in If you have less than 35 years of work experience, they will use zeros to make up the difference. That seriously brings down the total that is the basis for your benefit. If you are in a reasonable reach of 35 years, make an effort to stick it out for the sake of a higher benefit.

Do You Really Need A Credit Card?

August 30, 2014 By Sherry Tingley

Some folks love them. Some folks hate them. Either way, credit cards have become an almost universal financial fact of modern living in America.

Having one is probably a good idea, says Christopher Viale, board chairman of the Association of Independent Consumer Credit Counseling Agencies. They’re important in building a good credit score and many card holders judiciously cash in on the related perks – rewards programs, points, cash back or miles, to make their money go farther.

However, Viale says, there may be a downside to using your credit card as first choice in making payments. They constitute a serious temptation to overspend, which could result in excessive debt and damage to your credit score.

Experts list these warning signs that your credit is controlling you instead of the other way round:

No. 1: Pay your credit card bill on time each month. Missing payments can create chaos. Your VantageScore could drop 70 to 90 points for the first instance of missed payment. If you are able to make only minimum payments and are struggling to do that, take it as a warning sign. Stop using the card and pay with cash. Make a plan for getting the card back on an even keel. If you have multiple cards, concentrate on the one with the highest interest, while continuing to make minimum payments on the other cards. Resist the temptation to spend just to benefit from special offers or discounts from retailers. What you stand to lose is more than what you stand to gain. At least once a year, write down your expenditures and scrutinize them. If an honest analysis shows you are overspending, adjust.

No. 2: If you are using a card that carries interest rates of 18 to 20 percent, consider that a red flag. It’s important to your credit scores and competitive loans to show some smart spending habits. Cards with lower interest rates are available. If you apply for a card with lower interest and are turned down, you can be assured your credit use is out of balance and needs attention. Brand loyalty at this point is counter productive. Don’t stick with a card that doesn’t offer you the rates and rewards you deserve. Too many inquiries into credit card offerings can hurt your credit score. Don’t apply for a new card until you’ve done your homework. Closing a credit card account also can have negative connotations, so consider if it is worth keeping your current card as part of your overall assessment.

No. 3: If you have been beguiled by the lure of attractive sign-on bonuses and lucrative rewards offerings and now have a wallet full of cards, it’s time to assess and start trimming. The more credit you have in your pocket, the more likely you are to overspend. And you may find yourself confused about which payments you have made and when. Not worth the prospect of missing a payment. Viale suggests two cards that have good rewards points.

No. 4: Luxury credit cards are designed to attract attention. Flashy colors and materials heavier than plastic seem (only seem) to lend some extra legitimacy to your card. Beware such ego strokes. If you see them as status symbols, take a closer look. Luxury cards may carry high annual fees. They may have very high or even unlimited credit limits, a clear invitation to overspend, a disaster for average card holders. Be certain your credit limit is manageable. If you have one of these “status cards” in your array, consider closing it out. Look for a more reasonable card in the same issuer’s selection. Closing out a card entirely could affect your credit score, but there are times when that is the best thing to do. A temporary dip in the score is preferable to keeping a high-fee card that tempts you to overspend.

Cut Costs on College Textbooks

August 22, 2014 By Twila Van Leer

Save money on college textbooks by buying used books.

After tuition, the biggest financial challenge for many college students is the soaring cost of textbooks. On average, students pay about $1,200 per year on class texts and other materials, according to the College Board, whose members represent colleges universities and other educational institutions.

The costs rose about 6 percent a year from 2002 to 2012, about three times the rate of overall inflation, the Government Accountability Office reported. One of the reasons is the frequent issuing of new textbooks with little new material. Many texts also include workbooks and other supporting materials that boost the cost.

In 2008, the Higher Education Opportunity Act was passed, requiring publishers to inform college faculty about the content of textbooks along with pricing. Schools also are required to list a textbook’s price and the ISBN (International Standard Book Number) in course registration materials. The information is expected to help students to make decision as to whether they should buy new or used or rent a text.

There are some options that reduce the costs for students who are textbook shopping:

Armed with the ISBN, you can shop online. Punch in the numeric code and you can do some comparison shopping. One for-instance: college freshmen required to have “Campbell Biology” for their classwork will find the new copies selling at $241. But a used copy often will be available in the neighborhood of $181. Use comparison pricing websites to find even better deals – as low as $30 per copy. Remember that shipping times and fees will vary. Not all online dealers have refund policies. And not all used book have the CDs or electronic codes that access course content online. You’d have to buy them separately.

It is possible to rent textbooks, either from online retailers or college bookstores. Most of the 3,000 members of the National Association of College Stores now offer rentals. Most rental agreements are for an entire term, including the final exam period. The renter is required to keep the items in good repair and it may not be possible to jot notes in the margin as you might do with your own property. Renting has the advantage of not having to resell or store the book. The renter will tack on fees if you are late returning the text, and the supplementary materials that are assigned with many textbooks would have to be arranged for separately.

Many assignments can be read online. Consider an e-text. Digital books can also be rented at a fraction of the cost of buying a new textbook. There is no need for a dedicated reader. You can access the materials on most devices. Most have tools that assist you in highlighting and taking notes. Most young students today are comfortable with this kind of learning, but for those who didn’t grow up with computers, there may be a period of adjusting.

Back-to-School Spending? Be Wise

August 11, 2014 By Twila Van Leer

The signs are there. The ads are appearing. The merchants are gearing up for what is a shopping frenzy second only to Christmas. The excitement of starting a new school year is spreading through the K-12 set, and Mom and Dad are anticipating the annual crick in the budget as they prepare.

The National Retail Federation predicts the average family with children in K-12 will spend $669.28 on clothing, backpacks, electronic gadgets to aid classroom work and other school necessities. The figure, the federation says, is up 5 percent from last year.

Many merchants give a hand-up by offering discounts and in some states, the politicians have looked at the situation and enacted sales tax holidays for items specifically related to the back-to-school spenders. Shoppers should stay aware of sales and perks and shop when the advantages are greatest.

An Associated Press article offers five ways to ensure that you don’t go into the annual holiday spending cycle still staggering from the school expenditures:

Make a budget. Knowing what you can afford helps you approach the list of what you need realistically. Calculate the costs of school supplies, clothing, shoes and what-nots and make it match the budget. Starting off without a brake can end in disaster. Look back at the preceding year, if possible. The list of required items likely will not have changed dramatically (although you might expect a little more expense as your child moves up the education ranks.) Don’t spend money on what is nice (fancy desk sets, etc.) but not necessary.
Shop on tax holidays if they are offered in your area. A dozen-plus states offer a break from taxes on certain purchases. Times usually are limited, usually three days’ window. You can save 3 percent to 7 percent on average. Most of the state plans target items that cost less than $10. In some states, routine school supplies are on the list of tax-free items and some include computers, which have become indispensable in many schools. Remember that local sales taxes won’t be included in the break. And if you are shopping online, the good must be sent to an address within the area affected by legislative largesse. You can learn if your state is one that does offer the holiday by going to tax admin.
Be wary of over-using credit. Stores sometimes offer special deals on their own credit cards, especially during times of traditional heavy spending. But look before you leap at what looks like a good deal. Especially if you will not be able to pay down the balance before interest kicks in, you may pay more than you want to. The interest charged on these cards usually is in the 15-to-19 percent range.
Comparison shopping takes a little more time, but can save money. Be aware of the prices of clothing and school supplies such as notebooks, in particular. Most stores have them on sale. If you’re going online, remember to factor in shipping costs. Use smartphone apps that compare prices, such as PriceGrabber and RedLaser. Users scan the bar code on a product and the app lists stores where the item is available and at what price. Some online sites such as Goodshop.com, offer coupons good at more than 5,000 stores. They then donate up to 20 percent of your purchase to a school or other charitable cause.
Wait a bit. Resist the hype in the back-to-school ads. After the initial push is over, many stores begin to clear their shelves to get ready for the upcoming holidays. Unless the immediate need is urgent, buy a minimum number of supplies to get your children started and then re-supply when the clearance sales are in full swing.

Child Care Is A Huge Expense

August 6, 2014 By Twila Van Leer

You child care costs can equal a year's college tuition. Have you added this expense to your budget? — You child care costs can equal a year’s college tuition. Have you added this expense to your budget?

Many women who opt to work to supplement the family budget quickly find that child care can make a huge dent in their contribution. The annual cost of infant care can equal a year’s tuition at a community college in 31 states, according to an article in Working Mother.

The options are many and you need to choose the type of care that you want for your child, and also fits into the budget comfortably.

Here are some alternatives, including the likely cost:

NANNY: Nannies are professionals. Some will live in your home and, besides caring for your child, will do housekeeping and meal preparation. They may assist with the child’s homework, take him or her to school and other events, such as play dates. The annual cost? About $36,275 yearly average. The wages may be tax deductible and eligible for flexible spending reimbursement. Working women whose jobs require unpredictable hours or frequent travel may find this the best option, even though the cost is commensurately high. Having just one caretaker may pose problems if the nanny becomes ill or otherwise unavailable and you have to find a replacement in a hurry.

CENTER-BASED DAY CARE: Much like a school, large day care centers often accept children in different age groups and provide multiple caregivers. They may offer amenities such as kindergarten preparation and instructive field trips. The average annual cost for full-time infant care is $3,863 to $16,430. Prices generally decrease as the child becomes older and does not need the same level of care. The cost may be tax deductible and eligible for FSA reimbursement. This mode of child care is most ideal for moms who have routine hours and who want their child to mingle with peers. The centers are not usually flexible for those who work early or late and may impose an extra charge – sometimes as much as $15 for every minute you are late. Problems may arise when the child is sick or cannot attend day care for any reason.

IN-HOME CARE: Providers in this category usually have small groups of children in their own home. The home atmosphere is attractive to many working mothers, and the annual cost is lower – $3,930 to $11,046 for full-time infant care. While the least expensive of the options, and offering the chance for a child to interact with a small group, the downside is how to provide when the caretaker is unavailable for any reason. (Most states have regulations and licensing standards for those who provide in-home care. Check.)

AU PAIR: Primarily young people 18 to 25 from other countries, who provide up to 45 hours a week of child care in your home. Light housekeeping and meal preparation are often part of the arrangement. Parents pay a stipend, provide a private room and meals. The average annual cost is $18,722, regardless of the number of children. The advantage for your children is exposure to another country’s culture and language and in-home care. The fee includes $500 a year toward the au pair’s enrollment in a local post-secondary education program. A two-week paid vacation is required. Wages may be tax deductible and FSA eligible. Agencies such as Au Pair in America arrange services. On the downside, au pairs are in the country on one-year visas, with possibility for one-year extensions, so continuity is not guaranteed.