Personal Finance Blog — Page 65 — Tips And Stories To Help You With Managing Money

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.

How To Save More Of Your Income

August 8, 2014 By Twila Van Leer

AARP Offers Many Good Suggestions For Saving Money

The annual AARP list of 99 ways to save money is out and it offers these nine suggestions to reduce your expenditures on financial matters:

Auto Insurance

Shop around for auto insurance. Insurers use a tactic called “price optimization.” That means they raise premiums based not on risk factors, but on how much of an increase they think you will accept. When it comes time to renew your insurance, bargain with your insurer for a better rate.

Pay Raises

Before you are called into human resources to discuss your next raise, ask for a salary range that informs you of the low-to-high range the company pays for a particular job. Knowing where you are in the range can become the basis for negotiation. Perhaps understanding the range will be impetus for more training so you can move up.

Credit Scores

Don’t pay for a credit score. It can be obtained free from Creditkarma.com or Credit.com or from Sharpen Your Financial Focus through its website, Sharpen Today.org.

Delay Social Security

Plan ahead on your Social Security. If you have reason to think you will live beyond age 80, wait until you are 70 to begin collecting so you will get the maximum benefit. If you are a couple and feel it likely you will live past 80, let the partner who had greatest earnings delay collection.

Home Renovations

If you are considering house renovations, these changes are considered the most likely to enhance the value of your property: Replace the front or garage door, add a deck, turn an attic space into a bed/bath or update the kitchen. That‘s from Remodeling Magazine’s 2014 cost/value report.

Divide Payments On Credit Cards

When you have heavy credit card expenditures, consider paying the bill in two increments instead of one monthly payment. Paying on time is the most important factor in calculating your credit score. Next is the percentage of credit you have available. People with the highest scores keep utilization under 10 percent. Paying your bill in two payments in a month keeps a lid on this number.

Tax Diversification

Consider tax diversification in your 401k. Like Roth IRAs, many Roth 401k’s allow you to put in money on which you already have paid tax. Then you may withdraw it at retirement tax-free. If there is a possibility your tax bracket will go up in the future, these tax-free dollars stashed in a 401k now be even more valuable.

Look at your banking institution. Some smaller banks and credit unions offer more than the going interest rate (about 2 percent) on checking accounts, even with balances of $10,000 or more. You’ll have to make direct deposits, in all likelihood to reap this benefit.

Talk to the vet who cares for your pets and see if he offers drug discounts or will provide samples of medications free. Ask if you can fill the vet’s prescriptions at a pharmacy for humans. Walmart and some other pharmacy outlets provide a $4 prescription price for many medications, which could save you money.

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.

Who Inherits Your Digital Assets?

July 31, 2014 By Twila Van Leer

Where Will Your Digital Assets Go When You Die?

It’s a phenomenon of today’s technology-rich world. Besides the usual concrete accumulations of your life, you have such personal things as Facebook, email, blogs and other “digital assets.” So, what happens to them when you die?

The question has become a matter for the Uniform Law Commission, people selected by states to promote standardization of state laws, when possible. The commission endorses a plan to automatically give next-of-kin access to all digital accounts of a deceased person. They would not, however, have control of the accounts. An individual could specify through a will or other official document, which accounts he or she wished to die when they did.

State legislatures would have to adopt the commission’s recommendations to make them law. The provisions would be very helpful, the commission believes, in estate planning.

Those who back privacy are not supportive. They say people shouldn’t have to draft a specific will to protect private information, for instance a dating profile or emails that contain personal information that the writer would rather not share with an ex-spouse.

On the other hand, information relative to finances would be very helpful to grieving relatives. Some would value sentimental content. People often put very personal musings, photographs and videos into their computer accounts. Such things as a cooking blog or the comments of a gambling avatar or the every-day ramblings of noted celebrities could be valuable commodities after their passing.

In an Associated Press article on the topic, Ginger McCall, associate director of the Electronic Privacy Information Center, says that a judge’s approval should be requisite to delving into a deceased person’s digital assets. Such accounts today are the “filing cabinets” of the past, said an attorney who sits on the commission.

Some people assume that sharing certain passwords with those they trust is sufficient to guarantee access in the event of death. They could even make the passwords available to someone they trust through the terms of a will. But wills become public property. Also, anti-hacking laws and the “terms of service” applied by most companies prohibit anyone from accessing someone else’s accounts. Loved ones innocently trying to follow the guidelines of a will could find themselves accused of criminal activity.

Some tech providers have addressed the issue. Facebook will “memorialize” accounts, allowing confirmed friends of a client to continue to view photos and old posts. Google, YouTube and Picasa Web Albums have versions in which, if a client does not log on after a specified time, the account can be deleted or shared with a designated person. Yahoo users agree when they sign on that the account will expire when they do.

But court cases have made it clear that not everyone believes that the technology supplier should have the final word. The survivors of a Marine killed in Iraq sued Yahoo for access to his emails and won. A mother whose son was killed in an accident likewise sued and was eventually given access to her son’s Facebook account. (She complained that the communications had been edited.)

The commission’s proposed law would supersede a provider’s terms of service agreement. But other rules, such as copyright or licensing agreements, would remain intact.

Sticky issues, certainly, but obviously germane in a day in which everything we think and feel is likely to end up on the computer. Almost certainly, clarification is coming in the way of new laws and more oversight.

Budgeting Made Easy

July 29, 2014 By Twila Van Leer

There are those who know how to budget. The rest of us tend to depend on them to fill in the details where finances are concerned. But with a little bit of learning you could take your place in the ranks of those who are serious budgeters.

If it’s something you have been vowing for a long time to launch into in a serious way, now is the time. Tomorrow is never a good day to begin budgeting.

Start off with one simple rule: Spend less than you make. Then begin to investigate the shortcuts that have proven to be effective in making a budget work for your financial well-being.

The people who developed The Fool’s Lazy Budget have learned where to cut corners and simplify the steps. They offer these tips:

Analyze Your Current Spending Habits

Begin with an analysis of your current spending habits. Honestly examine your outgo on every single day for three months. If you don’t lay this foundation up front your budgeting efforts are likely to fail. There are tools to help you track spending, including a 218-category spreadsheet. Put in the data then study it carefully. But that may be the hard way. A simplified one-step approach starts with a debit card review. Look at the raw data your bank provides and create your own general spending categories. Pay particular attention to the categories in which the figures make you weep. Some banks provide a year-end spending summary, with weak spots graphed in different colors on bar charts. Pay particular attention to your spending if you use cash and project the results over four weeks. Whatever your method, identify the categories where overspending is obvious.

Peek Into the Future

Take a mental trip to “the mall of your future,” as advised by Dayana Yochim of the Fool’s Lazy Budget staff. This virtual shopping spree, sans side trips to the food court, will give you a concrete view of what you want to spend. List your needs for the next three to six months. Start with the things that are not optional, of course, such as housing, food, utilities, etc. Then realistically list such things as new car tires, family vacation costs, etc. If you have plans to pay off a credit card, max out your IRA or add to your emergency fund, list these items. Than add expected expenses for long-term items you anticipate over the next year or thin the next five years. Use the lists to plot spending to match identified needs.

You now have a written plan that, if followed faithfully, will save you from impluse spending that is a budget-buster. Share the plans with family members. If practical, provide a wallet-sized outline for each person involved in family spending. Don’t ignore the potential spending that adds to the quality of life for your family. Add some agreed-upon items that will make life better over the short term and the long term. It’s sort of the old all-work-and-no-play-makes-Jack-a-dull-boy theory. Spending is more satisfying if there is room for some outlay for what you really WANT.

Set Goals

When you have your goals firmly in mind, pencil in what you estimate the costs of achieving these goals will be, on a monthly basis. For instance, if those new tires for the car are non-negotiable, start setting aside a portion of the cost over several months so the final outlay is not so overwhelming.

Save Regularly

Start saving something each pay period. Hide some money from yourself by diverting a portion of each paycheck to an account separate from your checking account. Don’t let it be available for impulse buying or those sudden moments when you see something you “just can’t do without.” Think carefully about what you think is essential. Often it isn’t. Arrange with y our bank to transfer the excess in your checking account to savings on a regular basis.

Quit Overspending

Stop overspending. You know where your own temptations lie. Set some limits and stick with them. Start an envelope system where you put an amount sufficient to cover a necessary expenditure for a month into an envelope. Typically, the four most essential expenditures for a family are housing (34 percent); transportation (18 percent); food (13 percent); and entertainment (4 percent). If it is at all possible to cut any of these categories, do so and you’ll have money to shift to other categories. Have an envelope for each category and slip in the money to cover that expense. When it’s gone, that’s it. Economize where it’s feasible.

A budget is a personal thing and you will make your own adjustments. That’s fine as long as the basics stay in place. Don’t spend more than you make. Give yourselves a savings cushion. Look ahead to avoid, as much as possible in this uncertain world, the unexpected expenses that knock you for a financial loop. You’ll save yourself a lot of stress if you keep a handle on your money. That’s called budgeting.