Got insurance? Open the mail.

September 15, 2014 by

Did you select a health care plan through the Federal Marketplace? Opening your mail can save you money. Centers for Medicare and Medicaid Services (CMS) is working to resolve data matches issues before the next open enrollment period starts on November 15th.

When a consumer enrolls in a Qualified Healthcare Plan (QHP) on the Federal Marketplace, it uses the information the consumer provides to check eligibility for various types of financial assistance. The cost of the healthcare plan may be reduced through advance premium tax credits that lower the monthly premium payment and lower co-pays and deductibles that reduce out-of-pocket costs when visiting the doctor. These features make healthcare insurance more affordable.

For some consumers, the Federal Marketplace was not able to use automated processes during open enrollment to verify their income or citizenship status. To date, CMS has verified the information of nearly 1 million people. CMS is reaching out to the 115,000 people who have not yet responded to numerous requests for information. These 115,000 will lose their Federal Marketplace coverage on September 30, 2014. Check your mail. If you have a letter from CMS, open it and find out what you need to do stay covered.

For more information, visit https://www.healthcare.gov/blog/
Need local help? visit https://localhelp.healthcare.gov/

Good health is important and healthcare coverage is key for a healthy life. Take Action – Be Insured.

Healthy Doesn’t Have to Cost More

April 12, 2013 by

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Written by Sarah Mammarella, MS, RD, LDN, Family & Consumer Sciences Agent, Richmond County, North Carolina Cooperative Extension, North Carolina State University

As a Registered Dietitian and a community educator people often tell me they believe it costs more to eat healthy. But does it? In order to answer this question we must first attempt to understand what “healthy” means. Currently there is no specific and direct definition of “healthy”. However, we do know that eating foods that are low-sodium, low-sugar and low fat are better for us than their full-sodium, full-sugar and full-fat counterparts. In addition, research shows that eating whole grains, lean proteins, low-fat dairy and fruits and vegetables decrease our risk for many chronic diseases (i.e. diabetes, heart disease etc.). So, do these foods described cost more than their less healthy counterparts? The simple answer is not always. Research has shown that many foods that meet the above criteria, for example, skim milk, low sodium soup, sugar free canned fruit, etc. can be purchased without spending more money. However, there are other “healthier” foods that consumers must spend more to purchase. These include, lean ground beef, whole-wheat products and some low fat dairy etc.).

Although some “healthier” foods do cost more to purchase, there are some key tips that educators can share with the community to help consumers keep more money in their pockets.

1. Plan!
As educators we should urge all consumers to plan their meals for the week. Planning not only gives a guide to what we are going to eat, but it also decreases the likelihood that we will have to grab something from the nearest fast food or quick service restaurant. Planning foods to purchase from the grocery store also helps to keep us out of the “junk” food aisles and makes our grocery trip more effective and time efficient.

2. Get the most bang for your buck!
I always urge consumers to plan their meals according to what is on sale at their local grocery store that week. When we plan our meals around sales it is easier to look for the absolute best price in every food item that we purchase. We can also try to match up as many coupons as possible to the sales – which will help us get a better price. Coupons can be found on the Internet, in the newspaper and at the grocery store itself.. Some stores even double or triple coupons up to a certain amount – inform your community about this and have them check their store’s coupon policies. And do not forget about store loyalty cards. The cards are available at no cost to the consumer and offer real savings at the register on various food and non-food items that are on “special.” Loyalty cards offer savings on everything from fresh fruit and vegetables to cereals to meats.

3. Compare and contrast prices!
By observing the unit price, usually found on the shelf pricing tag below a specific food item, we can help the consumer become better informed. Basically, a unit price tells an item’s price per unit weight (i.e. price per pound etc.). By comparing unit prices people are better able to compare prices between different name brands as well as prices between different sizes of the same brand.

4. Buy in bulk!
Most of us know that we can normally buy food in bulk for cheaper than regularly sized food items. Buying bulk meats can especially help consumers to save money-as long as they know how to safely freeze these items in smaller packages. There are exceptions to this rule, which is when understanding unit pricing come in handy.

5. Buy Produce that is in season!
Buying fresh produce in season almost always decreases cost. This is a good way to increase fruit and vegetable consumption without also increasing cost. Although, frozen and canned fruits and vegetables are also good options. Other produce that is generally cheap all year round includes onions, potatoes, bananas, apples, carrots, celery and cabbage.

6. Make your own meals!
Many times when we try to cut time and effort by purchasing prepackaged meals, like frozen dinners, we spend more money. If we make our meals from scratch (or at least partially from scratch) we save a lot of money. Furthermore, foods made from scratch are often lower in sodium and fat!

7. Waste not!
As Americans, we often seem to waste food. But, wasting food wastes money. I encourage people I speak with to only buy foods that they know they will eat and not have to throw out. I also encourage people to always eat leftovers. Many people don’t like leftovers, but encourage them to be creative with using their leftovers. Leftovers can often be made in to different meals – for example, use left over chicken for a stir-fry or chicken salad, or use left over vegetables for a big pot of vegetable soup!

Eating healthy doesn’t have to cost more.

National Financial Management Core Competencies: Spending

How to cite this article: Mammarella, S. (2013, MONTH). Healthy Doesn’t Have to Cost More. Available at: https://dollardecisions.wordpress.com/2013/04/12/healthy-doesnt-have-to-cost-more

Planning for Tax Preparation

February 7, 2013 by

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Written by: Jayne McBurney, Family and Consumer Sciences Extension Agent, Johnston County, North Carolina Cooperative Extension, North Carolina State University.

It’s that time again!
It is inevitable; we must file our tax returns. But it need not be a taxing experience! By getting organized ahead of time, filing taxes can be done efficiently and accurately. The first steps are easy: Who, What, When and How.

WHO?
Who will be counted on your tax return as a dependent? Make sure that you have a social security number or tax identification number for each person that will be listed as a dependent. If you share custody of minor children, make sure there is complete agreement upon and understanding of who will claim these children. This conversation may need to take place each year even for established co-parents. It is particularly important for new co-parents and when there has been a recent change in status; such as, when a non-resident parent first begins making child support payments or for newly separated/divorced parents.

WHAT?
Employers will provide an earnings statement commonly referred to as a “W-2 form.” You will need to collect W-2s for each person, typically spouses on a joint income tax return. Employers are required to provide W-2s no later than January 31 each year. Find out if your employer will be mailing the W-2 or if you should look it up online. Collect all other earnings statements as well, 1099 forms show earned income from interest, investments and independent contractor work. If your spouse is retired, be sure to collect the 1099-R which reports retirement income paid to the retiree in your household.

WHEN?
The sooner you file, the sooner you know how much you owe, or the amount of your anticipated refund. It is best to start soon in preparing your taxes so you have time to be sure you have all the supporting documents, such as receipts for deductible expenses and to have to time to double-check calculations. Planning ahead significantly reduces stress.

HOW?
Many taxpayers are eligible to file online. The IRS provides the fillable forms option for people who are comfortable filling out tax forms and schedules without software help. It provides “do-it-yourself” tax filers with an experience similar to filling out paper forms (except you can type numbers into spaces on the form and print out the form instead of writing everything out). Fillable forms can be printed out and submitted by mail, or they can be filed electronically. For tax filers with an income less than $57,000 (2012 figure), there is also an option to access free tax preparation software.

To use Free File Fillable Forms and submit your tax return electronically, you create an account and input and submit your information as directed. Here is an IRS FAQ with additional information: www.irs.gov/efile/article/0,,id=226829,00.html.
If you are not sure how to file your taxes or you do not have Internet access, you can go to your local State Employees Credit Union, and ask if they are providing Voluntary Income Tax Assistance (VITA) Program. You can receive your refund in about 10 days if you file your return online and opt for direct deposit.

Those are the EASY questions. The harder questions and answers are those that relate to deductions?
A tax deduction is subtracted from the amount of income that is taxed, your tax liability. After income is determined, tax filers must consider if they wish to take the Standard Deduction or itemize deductible items. Itemized deductions can include medical and dental expenses, taxes, charitable contributions, home mortgage interest, casualty losses, and miscellaneous; some of these deductions apply also as part of the Alternative Minimum Tax (AMT) calculation. So, some calculations might be in order to determine if it is better to take the Standard deduction or to itemize. For a married couple filing a joint return the standard deduction is $11,900 (2012 figure). Many of the computer-based tax filing programs will help you determine what is best for you, and they will do the math!

Once it is determined whether to itemize deductible expenses or to take the standard deduction, then tax credits can be figured. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes; and act as incentives to promote decisions that benefit families, the environment, and/or society. Tax credits include child and dependent care, educational credits, residential energy credits, and retirement savings contribution credit; these are non-refundable credits. Non-refundable credits can be used in amounts up to the total of your tax liability. Excess non-refundable credits either must be carried forward to another tax year or be lost; they cannot result in an income tax refund.

When refundable tax credits exceed your tax liability the credit results in an income tax refund. Refundable tax credits include Earned Income Credit, which is probably the least used credit available. Couples earning less than $49,000 should review their eligibility for this credit that is based on the number of children in your home. You must have earned income to be eligible for this credit!

What do I do with my Tax Refund?

First, avoid the urge to get a cash advance on your refund! The amount of money charged to receive an early refund far exceeds the benefit! Complete and correct returns filed online are often directly deposited into bank accounts within ten days.

When you receive your refund, payoff debt that you have, avoid the temptation to buy something new. A credit card debt of $3000 at 12% interest will take more than 17 months to pay off when making payments of $200 each month. By putting just $500 of a tax refund towards that debt, the remaining $2500 could be paid off in just 14 months. This is the easiest way to pay down these type of debts. If you have a bit more self-control, keep your refund in a bank account and earn interest on it. Then, each month add just $50 to the monthly payment, increasing it to $250; in just 13 months the debt will be paid off.

If you have no debt, invest in your future. Why not open a Roth IRA account? If you start an account with a modest $400, then add a bit each month; you could have a nest egg at retirement. For example, if a 29 year old starts an IRA with just $400, earning 8% interest, then adds $50 each month, by age 65 there will be $127,629 to enjoy. Increase that monthly amount to $100 and you will have $248, 872!

With a little planning, you are sure to find a good use for your tax refund, rather than just buying something new. Why not invest in your future financial security by paying down debt and investing in your retirement.

National Financial Management Core Competencies in this blog: Earning, Saving.

How to cite this article:
McBurney, J. (2013, February). Planning for tax preparation. Available at: https://dollardecisions.wordpress.com/2013/02/07/planning-for-tax-preparation/

References:
Bird, C. (2009). Smart money tips: Getting the most from your tax refund (FCS-528-01). Available at: http://www.ces.ncsu.edu/depts/fcs/pdfs/FCS528-01forWeb.pdf

Bird, C. (2009). Smart money tips: Smart uses for your tax refund (FCS-528-02). Available at: http://www.ces.ncsu.edu/depts/fcs/pdfs/FCS528-02forWeb.pdf

Bankrate Monitor (2013, month). http://www.bankrate.com

Internal Revenue Service (2012, December). EITC Income limits, maximum credit amounts and tax law updates. Available at: http://www.irs.gov/Individuals/EITC-Income-Limits,-Maximum-Credit–Amounts-and-Tax-Law-Updates

Internal Revenue Service (2012, January). Top 10 Helpful Features on the IRS Website. Available at: http://www.irs.gov/uac/Top-10-Helpful-Features-on-the-IRS-Website

Goal Setting: Ending up where you want to go

January 18, 2013 by

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Written by: Joan Reid, Family & Consumer Sciences Extension Agent, Granville County, North Carolina Cooperative Extension, North Carolina State University

Do you remember the following passage from Lewis Carroll ‘s “Alice in Wonderland”?  Alice came to the fork in the road. “Which road do I take?”, she asked.  “Where do you want to go?”, responded the Cheshire cat. “I don’t know” Alice answered.  “Then,” said the cat, “it doesn’t matter”.

forkintheroad

What do you dream of having and doing? People of all ages dream about how they would like to live, what they’d like to buy and what they will do when they are retired. Smaller, near-term wants are often easier to attain, while, somehow, it seems more difficult to do the planning to reach long-term goals. If we remember that a goal is a dream with a deadline, we might be more inclined to invest the time needed to plan how we will realize at least some of those dreams.

Getting Financially Fit Is A Journey
Being financially fit is a complex process. It’s a journey that takes twists and turns. It takes constant attention to the road, making course corrections, as needed. Think of Dorothy’s goal to see the Wizard of Oz. Oz was her destination, but she didn’t take a magic carpet to immediately arrive. She was counseled to follow the yellow brick road. While following that road, she met with unexpected experiences and derailments. However, she stayed the course, learning along the way, on her journey to her final destination.

Getting Financially Fit Through Goal Setting
Goal setting helps individuals and families become financially fit. While goal setting is an easy enough process to understand, figuring out what stands in the way of getting it done might be the first step to successful goal setting. Of course, that is different for each one of us. How do these factors affect your ability to successfully set and monitor your goals? Are there other factors that get in the way?

• Long ago learned messages about money and spending.
• Your values about money.
• Lack of (or perceived) time.
• Not good with money.
• Don’t know how to set goals.
• Can’t stick to goals once they are set.
• Can’t resist the urge to spend.
• Just want to have some fun now.
• Don’t have enough extra money to make a difference.
• Can’t agree with others in the household.
• Will worry about it later.
• Stuff happens!

Once you have decided what you’d like to be able to do with your money and you are willing to work on it, you can use the goal-setting process to get there.

Luke Erickson, University of Idaho Extension educator, described the process of financial goal prioritization this way:   “Think of budgeting as building and maintaining a boat, something that keeps you afloat. Think of written, prioritized financial goals as a motor you add to your boat to provide motivation, direction, and ‘horsepower’ to get somewhere worthwhile.

Getting Started on Your Journey
How do you get started? You might start with your long-held dreams, like owning your own house, having children or starting a business. You might select goals around life events: children’s needs (education/expected marriages), your own further education, or retirement. Adding items from your “bucket list” (things you want to do before you ‘kick the bucket’) will give you plenty of ideas for possible inclusion.

It’s often easiest to categorize goals as short-term (within one year), intermediate (one to two years) or long-term (three to five years). Beyond financial goals you may include educational, social/relationship, health/physical, and recreational desires. Those goals may or may not require money to accomplish. Before continuing, you, likely, will want to prioritize your goals.

SMART Goals Prevent Derailment
Here’s where we distinguish goals from dreams. In order to keep it real, you’ll need to determine how your goals fit into your budget. If you don’t have a budget, you can use the “Your Financial Action Plan” fact sheet from University of Florida Extension. It contains a goal-setting page, also. Using the worksheets, you will need to identify your monthly income and all of your monthly expenses, organizing them into categories.

Now you are ready to plug some of your high priority goals into your budget. Writing SMART Goals will make them more attainable.

SMART Goals are:

S – Specific – You know exactly what you want
M – Measurable – What is the cost and how much will you need to save each month?
A – Actionable – What actions will you need to take to reach this goal?
R – Reachable/Realistic – Is this something you can realistically reach without getting frustrated and giving up?
T – Time – Achieve by what date?

For example, an ineffective goal:  I want to buy a house.
SMART Goal:  I want to buy a house in my current city with a mortgage of not more than $80,000 within 6 years. I will save $20,000 for a down payment and closing costs by saving at least $277 a month.

Now you can work the monthly amount required to save into your budget. Repeat the process with other goals. What if there isn’t enough money in your budget to set aside for your goals? If money is tight, you’ll need to identify spending leaks (unnecessary expenses). Rework your budget to find ways to reduce current spending to be redirected towards the goals. For example, if you buy lunch out everyday, you might want to carry your lunch most days instead. Calculate how much you will save and divert it to your goals.

How about:
•A cup of coffee purchased each morning on your way to work? Are you willing to make it at home instead?
•Fast food breakfast every morning? Breakfast at home is much cheaper.
•The candy bars/snack foods/soda you routinely purchase from a work vending machine? Can you bring snacks (healthy ones) from    home? Are you willing to drink water?
•Lottery tickets?
•Non-nutritious foods purchased at the grocery store?
•Your other impulse purchases? Beware of the effect of “chain purchases.”

One important goal is to save money from every paycheck, even if it is a small amount. The habit of regularly saving is more important and beneficial than the amount saved. You can always increase savings once the habit is started. Many successful savers follow the Pay Yourself First philosophy. They contribute to savings before paying the bills.

One barrier to saving is peer pressure from family, friends, and the media to spend. Remembering this quote, “If there is to be any peace, it will come through being, not having” (Henry Miller), can help us focus on what is important.

You’ll need to be vested in your goals to resist the enormous pressure from marketing messages to indulge in fleeting fancies. When you cave in to pressure to spend on items of lesser importance to you, you are giving up future needs to satisfy immediate wants. If you know what you want to achieve and treat financial goal savings as a fixed “expense,” you’ll be more likely to achieve success.

If you truly think you don’t have any money to save, try this exercise: Start with putting a penny the first day in a jar. Each day, double the amount so, the second day, you’ll put in the jar $.02, third day, $.04, fourth day, $.08, fifth day, $.16, etc. Now, if you keep doing that, do you know how long it will take to accumulate $1 million? Since most of us can’t put aside that much, stop when it gets too rich for you and start all over again with one penny. Now you have a nice emergency fund started. You can add that to a savings account or if you don’t have one, start a savings account.

It really is all about choices. We all have to make them and we all have to live with them. Not making a deliberate choice is a choice, too! So use focus and purpose to make yours count! Once you have converted your dreams into goals, all you need to do is follow your plan, like Dorothy following the yellow brick road to Oz, checking on your progress periodically.

Oh, by the way, it takes 28 days of saving as above to surpass $1 million. Can you find the National Financial Management Core Competencies in this blog? Leave a comment on the Core Competencies that you found.

National Financial Management Core Competencies in this blog: Spending, Saving

How to cite this article:

Reid, J. (2013, January). Goal setting: Ending up where you want to go. Dollardecisions blog.  Available at: https://dollardecisions.wordpress.com/2013/01/18/goal-setting-ending-up-where-you-want-to-go

References:

Taylor, D. (2012, March). Chain Purchasing: The Diderot Effect. Dollardecisions blog.  Available at: https://dollardecisions.wordpress.com/category/spending-2/

O’Neill, B. (2011, February). The Importance of Financial Goal Setting.  Available at: http://njaes.rutgers.edu/sshw/message/message.asp?p=Finance&m=174

Your Financial Action Plan: edis.ifas.ufl.edu/pdffiles/FY/FY37300.pdf, 10/09

The Folly of Holiday Stress

December 10, 2012 by

December 10, 2012

Written by: Deborah McGiffin, Durham County Extension Agent, Family & Consumer Sciences, North Carolina Cooperative Extension, North Carolina State University

No, no, no not ho, ho, ho.  Do you stress over your finances and spending during the holidays? Does holiday jolly seem like holiday folly to you?  Celebrating the holidays and other special occasions can often strain a families’ budget and cause them to expend large amounts of money and other resources. It’s no wonder that celebrating the holidays creates financial tension. Many people seriously underestimate what they will spend each year for holidays and special occasions. Spending can get drastically out of control with gifts, greeting cards, postage, gift wrap, decorations, food, drink, transportation, long distance phone calls, and other purchases during the holidays and can push a family into financial difficulty. The challenge of managing holiday spending is to enjoy the spirit of the season while avoiding the holiday financial hangover – that is, paying for it months or even years later. Keep the holiday spirit in and stay within your budget by using some of the suggestions below to help you plan, make the most of your resources, and avoid overspending.

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Look at the Big Picture  Review your current financial situation and determine a holiday spending limit that works with your family budget. The amount of money you spend should align with your family values. However, it is generally unwise to spend more than 1%-3% of your annual take home pay on holiday expenses. Once you know how much you can spend towards the holidays, develop a spending plan.

Develop a budget for gift-giving, food, travel and entertainment expenses. Additional expenses which can increase during the holidays and are often overlooked include gasoline, babysitter fees, special grocery items, and eating out more often.  Use the North Carolina Cooperative Extension’s Holiday Planner to be sure to account for these extra expenses.

Make a List and Check it Twice  Refer to your spending plan and use a planner to list all the people you wish to give gifts to, including family, teachers, babysitters, hair stylist, etc. Also, list other holiday purchases such as decorations, ingredients for holiday cooking, greeting cards, expected travel expenditures and so forth. Using your list, make entries into the planner for spending amounts allocated for each recipient, the amount you actually spend and the gift item purchased per person. Take the planner with you when you shop to help prevent impulse shopping. Save this planner in a “holiday file” for reference for future holiday budgeting and planning.  The information from this year’s planner can be useful in establishing a holiday account for next year.

Shop without Financially Dropping  Consider how you plan to pay for your holiday purchases. If you decide to pay in cash, divide the cash into amounts you plan to spend for each gift, select items within the price range, and stop shopping when all the cash is gone. If you plan to use a debit card, take your check register shopping and record each transaction in it, so you track your spending, maintain a current balance, and avoid overdrafts. Depending on your bank’s automated updates, your balance may not always be accurate and transactions may not be immediately deducted from your account. If you plan to use credit for holiday purchases, evaluate your overall credit before shopping. Charge only an amount you can safely repay in one or two months. As a general rule, never have credit payments that outlast the item bought. Limit charges to one card to facilitate easier bill paying and to have a clear picture of your total spending. Another option to consider: layaway plans. Layaway plans allow you to pay for purchases ahead of time with cash, checks or debit and then take procession of the purchase once the items are paid for.  Though layaway plans enable you to buy over time without debt, you will need to plan ahead to make purchases early enough to take advantage of this purchase method.  If you decide to use store layaway options, be certain to check their return policy and keep track of all payments. Shopping online can save time and gas. Many sites have free shipping deals. If shopping online, look for coupon codes or cash back offers.  Some sites that offer such deals are couponcabin.com, coolsavings.com, keycode.com, ebates.com and fatwallet.com. A google search for “promotional code” using a retailer’s name might also help you find deals.  Plan holiday shopping trips to stores or malls ahead of time, study store ads, and know exactly who and what you are shopping for prior to entering the store and don’t forget to take along your holiday planner. Impromptu shopping trips and meandering in stores looking for gift ideas can lead to impulse purchases and a derailed budget. Do your window shopping at home from catalogs or online, so that you know exactly what you plan to purchase. Finally, remember that holiday sales can be tempting, so once you are in the store, refer to your planner and holiday list.  Remember to account for each purchase you make in the planner so that you stick to your spending plan.

Don’t be a Scrooge, Just be Creative  The best gifts don’t have to be expensive or even be purchased. The best gifts are fun, useful and chosen with the recipient in mind. Use your talent, skill and love to create meaningful gifts from the kitchen, garden or home.  The gift of time is a precious gift. Give certificates with the promise to fulfill a personal service for special loved ones. General purpose (VISA or MASTERCARD) gift cards are good choices for out-of-town giving because they reduce packaging and shipping expenses.  Instead of buying separate gifts for members of a family, buy one family or household gift everyone will enjoy. Drawing names is a good way to celebrate the holidays while reducing the number of gifts for a large family or group of friends. Giving family treasures or heirlooms is a good way to make the holidays meaningful and institute estate planning goals. Don’t forget about giving practical gifts like smoke detectors or motion lights.  Elder relatives who have “everything” may appreciate these helpful gift choices.  Giving to a charity in someone’s name in lieu of a gift is a way to honor a special person. Pictures of past family or festive events placed in attractive frames make inexpensive yet thoughtful gifts.  Though it may be too late for 2012, shop throughout the year for gifts, as good deals for items can be found during end of season sales.  Set up a special shelf or box to collect and store gifts bought months in advance for holiday or special occasion giving, and don’t forget to write down the name of the intended recipient!

Season’s Greetings  The time and expense of sending out holiday greeting cards can add anxiety to anyone’s schedule.  Look for ways to alleviate this stressful holiday tradition.  Send out cards only to out-of-town family and friends whom you see infrequently. Send holiday postcards instead of regular cards and envelopes to save on postage.  E-cards have become a popular way to save time and money and send holiday greetings to those you care about. Consider sending out “Happy New Year” cards in early January to add more time to your holiday schedule and to accommodate for diverse faiths and beliefs among cherished family and family members.

Deck the Halls  The best time to buy holiday decorations along with wrapping paper and greeting cards is after the holiday season. Try to take advantage of the after holiday sales and store decorations until the next season. Other options include creating decorations using items from around your home, like old ribbons, buttons, and greenery from your yard.  Make children apart of the holiday planning by asking them to make decorations and display their artwork.  Make your own wrapping paper using brown parcel paper or left over paper bags, stickers, stamps, glitter, glue and your imagination.  Let decorating your home be a fun and creative event that promotes family resourcefulness and togetherness.

Home Sweet Home  Family gatherings and holiday parties can add emotional stress and a financial wrinkle to your budget if you feel compelled to host them.  Make social events fun and enjoyable for you and your guests by co-hosting an event with another friend or family member.  For special celebrations, evaluate the need for a meal.  Consider alternatives like hosting a late afternoon party and providing only appetizers or sponsor a potluck dinner that involves others and saves on time, expense and personal stress.

Over the River and Through the Woods   Traveling and visiting family and friends can be the most expensive part of holiday plans.  Shop early for the best deals on airfares and hotel stays. Try to avoid travelling during peak travel times like on weekends or the day prior to a major holiday.  Consider gathering with out-of-town family several days prior or several days after a holiday to avoid heavily congested roads and airports.  Also, think about celebrating family events during other times of the year when travel discounts are more available and traffic less hectic.

Seasonal Giving   Remembering the less fortunate is an important part of many holidays. While a contribution of money is always appreciated, a donation of time is also valuable. A realistic and affordable charitable goal should be included in your holiday spending plan or a donation of time should be part of your holiday schedule. Make your holidays a time for living, laughing, loving, sharing, caring, and learning. These are the things that money can’t buy, but they make for precious, memorable and meaningful holidays.

Remember the Spirits of Holidays Past, Present, and Future   Remember, don’t throw away your holiday budget after the holidays. Keep it along with holiday receipts and credit card statements then make it a New Year’s resolution to develop a 2013 holiday and a special occasion spending plan in January that can be followed throughout the year.  Establish a dedicated holiday or special occasion account without an ATM card at a local financial institution.  This will enable you to set aside funds that can be used not only during holidays but also for other occasions like weddings, birthdays and anniversaries.  You also will have more flexibility if you come across great gift deals that can be purchased at any time during the year and stored away until you wish to give the gift.  Avoid holiday folly.  Put jolly in the seasons to come, and “ho, ho, ho,” holiday stress away.

National Financial Management Core Competencies: Spending, Saving, Borrowing

If using this post, please cite:

Dollardecisions.wordpress.com, 

McGiffin, D. (2012, month). The Folly of Holiday Stress.  Dollardecisions. Retrieved Month, date, year, from

Dollardecisions.wordpress.com

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Planning for Retirement

October 10, 2012 by

by Jayne McBurney, North Carolina Cooperative Extension, FCS Agent Johnston County

There has been much hype and fanfare to welcome baby boomers to retirement, yet we are learning that many of these of retirement age are not happy.  According to the Pew Research Center, 76% of a group of adults (age 65 and older), polled in 2012 were dissatisfied with the direction that the country is going.  Specifically, they noted that their standard of living is lower than their parents, and they are concerned that the standard of living that their children will face will be even lower.

So what caused all this?  Didn’t they prepare for this milestone?  Won’t Social Security take care of them?   They get free health insurance through Medicare, don’t they?  Should we just blame this on the government, mortgage lenders and bad investing?

For many who are approaching retirement age, there seems to be a misconception as to what to expect.  For this reason, it is important to start talking about retirement when one begins their career, if not sooner.  Retirement saving can start as early as the first job, even if it is babysitting for a neighbor or cutting the grass of the old woman down the street.  When applying for full time jobs, prospective employees should ask about retirement plans and 401K opportunities.

The younger one starts a good habit of saving, the more likely the standard of living will be constant into their retirement years.  When I teach, I like to use the example of two women, Penny Wise and Ruby Highlife.  Penny Wise is a frugal woman who learned much from her mother about spending smart and saving.  Starting at age 25 with her first professional job, Penny began investing $2,000 a year into a retirement plan.   She did this for ten years (see chart below).  When she reached age 65, with an average rate of return of 8%, she had $545,344 in her account from just ten years of investing.

Ruby Highlife wanted to live for today and not worry about tomorrow.  She began working right after college, and didn’t start saving for retirement until she was older (see her chart below).  At age 35, Ruby started saving $2,000 a year, and kept saving until she reached age 65.  After thirty years of contributions, she still does not have as much invested as Penny.

While this illustration is very basic, it reminds us of the time value of money.  The longer money is invested; the more that money will grow.   These women were investing less than $40 a week, imagine what would happen if one invested more.  Employees should also maximize matching contributions offered by their employer to build a retirement nest egg.

The website http://www.bankrate.com provides a calculator to determine how much an individual will need to retire.  Factors included in the calculation are current income, number of years until retirement, number of years anticipated in retirement, rate of inflation and annual yield balance.  This calculator gives you an idea of what you might need to continue in retirement to live within your current means.  There is also a 401K calculator for individuals to take a look at how contributions can grow over time.  The Ballpark Estimator is another tool to help you estimate how much money you need to save to retire at various percentages of your current income.  It takes into account estimated Social Security income and any current investments you already have.

These calculators are great, if one plans to live on the same earnings as they have now.  Yet many approaching retirement consider international vacations, beach vacations, and perhaps giving back to causes.  These all cost money, as do medical issues that might require hospitalization and rehabilitation.

In addition to saving, workers near the end of their career need to consider what their health insurance needs might be.   Medicare provides for major medical insurance, but it is advisable for an additional plan to be in place for basic medical coverage.  Some might receive the opportunity to purchase insurance from their previous employer through a group plan.  Others might find that purchasing a supplemental plan from their insurance agent would better suit their needs. Many individuals also consider the purchase of a long-term health care policy that will provide the ability to access care in the case that they are unable to care for themselves.

Finally, housing must be considered.  If the 30-year mortgage has been refinanced multiple times as interest rates dropped may not be paid off completely before retirement.  Having a home equity loans may extend the mortgage beyond its original 30-year plan.  For retirees that continue to own a home with a mortgage, housing costs will include the mortgage, homeowners insurance, and maintenance.  Retirees who plan to sell their homes must consider also the cost of selling, moving, and establishing a new place to live.

The bottom line in retirement savings is to start now; it is NEVER too early to start this plan.  If you have earned income, you can open a Roth IRA.  Retirement accounts should never be considered emergency funds, for which one must also budget (link to Leigh Guth’s article on emergency savings).  Individuals should consult with an appropriate financial services provider (e.g., financial planner, tax consultant, lawyer, insurance agent) for professional and detailed advice about their individual situation. It is hoped that by starting early, like Penny Wise, an enjoyable retirement can be achieved.

National Core Competencies: Saving

Resources:

http://www.bankrate.com/calculators/retirement/retirement-calculator.aspx

http://www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx

http://www.choosetosave.org/ballpark

http://pewresearch.org/databank/dailynumber/?NumberID=1150

The Emergency Fund: Borrowing from Yourself Instead of the Bank

September 27, 2012 by

By Leith Guth, North Carolina Cooperative Extension, FCS Agent, Lincoln County

On the day my husband and I moved out of state for his graduate school, a passing truck threw a rock into our windshield and cracked it.  Thus began our love hate relationship with that car and a brilliant illustration on why everyone needs an emergency fund.

An emergency fund is an accessible account where money is saved for an emergency.   Ideally, an emergency fund would be in a savings vehicle that is earning some interest.   In the past, experts advised one to put enough money to cover three months of expenses into an emergency account.  Today, with unemployment more prevalent and most job searches taking up to six months, advisors suggest having emergency funds to cover six months of expenses.    Emergency funds are for unplanned expenses like car repairs, unemployment, illness or exploding washing machines.  Christmas comes at the same time each year and does not qualify as an emergency!  With an emergency fund, one can pay for unexpected expenses from that fund balance without taking out a loan or incurring credit card debt.  Instead of paying  principal and interest on a loan back to a creditor, one pays the money back to her emergency fund.  One should be able to access her emergency funds within one or two days.  It is not wise for the emergency fund to be accessible by ATM or to serve as the overdraft for a checking account; easy access to these emergency funds can make them disappear easily if you get the spending bug.

Our graduate school car saga demonstrates why I needed an emergency fund.  In those days, we used a credit card as our emergency fund.  In our haste to pay off the credit card, we would pay too much on our credit card, depleting our cash on hand.  Then, another emergency expense would occur, a trip home for a funeral for example.  With no emergency fund and little cash on hand, we would charge tickets on our credit card; it was a vicious circle where interest charges mounted.  With a proper emergency fund of even $500, we would have paid for our car repair from our fund without incurring interest charges.  Then, we would pay back our emergency fund instead of the credit card company.

Nationally known financial gurus insist that everyone make an emergency account a priority in their financial life, before other savings or investments.  Even a small monthly amount deposited into an accessible account that earns interest is a step in the right direction.

National Competencies: Saving, Borrowing

I’m Buying a Home, What Do I look For?

September 19, 2012 by

By Robin Landsman, Wake County Extension Agent

This is the third installment in three-part series about homeownership and will cover successful strategies for purchasing a home that will meet a family’s needs.

“I’m buying a home; what should I look for?”  This is a question many Agents have probably heard over the years.  Determining housing needs and wants according to affordability before shopping, can help homebuyers avoid the disappointment of looking at houses they can’t afford or don’t need.  The homebuyer’s lifestyle, and any special circumstances, should factor into the selection.  As the homebuyer begins this process, he or she may find the assistance of a realtor to be very valuable.  The help of a good agent will save time, allowing the homebuyer to take notes and ask questions while sorting through the hundreds of homes currently on the market.  Here are some tips to share with potential homebuyers.

First, determine what you can afford.  Lenders determine mortgage qualification by assessing one’s credit report.  If you know that you have had some late payments and a history of high consumer debt, it is best to postpone looking for a mortgage until you have a satisfactory credit record.

A home is more than the bricks and mortar that make up the square footage and rooms.  There are several concerns that must be taken into consideration before you select your future home: price, location, size, and amenities.  Taking time to proactively examine what you want in a home will save you lots of effort when it is time to actually see potential homes.

Your price range depends on the amount of down payment you have saved and mortgage amount that the lender is willing to loan.  Remember, just because the lender approves you for a loan amount, doesn’t mean you can afford the mortgage.  There are lots of considerations, including other financial obligations that could impact your housing budget.

Location is crucial in your decision to purchase a home.  Schools, shopping, services and commuting distance are all fundamental elements that will require your consideration and prioritization.

The size of your family and what home features and benefits you seek are the criteria that you will need to use to determine your wish list for today as well as anticipated changes in the future.  The needs of a married couple with no children will be different from a bachelor looking to enjoy the single life, or the single mom with three teenagers.  A son caring for his disabled father may need to think about spacing for wheelchair access, the ability to add a ramp to the front entrance, or having a bedroom on the first level.  In thinking about your needs, you will need to make allowances for any special circumstances that may exist.

Many experts recommend making a list of what you and your family must have, would like to have, as well as what you don’t want and prefer not to have.  It is important to find a home that fits with your particular lifestyle.  The responsibility of yard maintenance may not work well for the businessman who spends 50 percent of his time traveling.  The convenience of a townhouse or condo with a small patch of green grass at the entrance may work better.  If you are environmentally conscious, finding a home with energy efficient features and appliances is a must.  Or as a parent who enjoys spending time outdoors with your children, a home in a neighborhood with a playground, walking trails or a community pool would be very desirable.

Your list of “wants” in your new home can be endless.  It will help to do a bit of research so you can identify some of the amenities that you prefer.  For example, you may prefer hardwood floors versus carpeting or vinyl siding versus brick.  Note that certain features may be standard in certain price ranges of homes.  Some of your desired amenities can be added, such as new appliances and cosmetic upgrades after you purchase the house; whereas location and lot size are fixed assets.  Thinking about all the dimensions to a home will provide greater understanding of the purchase.  Again, a realtor can be quite valuable in providing you with this information.

As you create the profile of the place you will eventually call home, remember, you are about to make a big investment in your future and that of your family.  Take time to think about those things that are important to you and that add to the quality of your life.  To ensure your overall satisfaction of your home purchase, look for homes that address your needs, accommodate your wants and complement your life style within a comfortable price.

Resources:

http://rebac.net/homebuyer_resources.cfm

www.nchfa.com  North Carolina Housing Finance Agency

National Core Competencies discussed in this post:
Borrowing, spending

Home Ownership – What Are The Costs?

September 12, 2012 by

By Robin Landsman, Wake County Extension Agent

This is the second is a series about homeownership and covers the costs associated with homeownership.   The next and final installment in the  series will provide tips for making a smart purchase.

Buying a home is the biggest investment that most consumers will make and is a major achievement.  Home ownership is also a major financial responsibility.  Proper planning and money management are key to making wise choices when it comes to buying a home. Understanding the upfront and ongoing costs of homeownership is a critical part of the decision process.

There are significant expenditures to be anticipated before and after home purchase.  The upfront costs of purchase include closing costs, which are the out-of-pocket expenses comprising the appraisal, survey, loan application, home inspection, legal fees, title insurance, title or deed registration fees to record your ownership, and any other payments to professionals assisting with a home purchase.  These fees are in addition to the cash required for down payment.  The total upfront costs associated with a home purchase will depend on the type of loan and whether the purchaser qualifies for any special programs, of which are available in North Carolina.  The availability of programs to assist with the costs of owning a home can greatly reduce out of pocket expenses.  On average, total closing costs can range from two to seven percent of the purchase price of the home.

The minimum amount needed for a down payment is determined by the lender and represents the buyer’s first investment in a home.  Closing costs are often paid in advance of closing or payable at the time of closing.  Escrow, is an account established by the lender to hold funds to pay on the homeowner’s behalf, the homeowners annual insurance premium and periodic property taxes.   An escrow account is typically funded at closing in an amount equal to the initial two or three month payments of taxes and insurance.  However, as much as six months might be required, ask your lender about their procedures.  Be sure you know the tax rate in the area where you plan to purchase.  Homeowners’ insurance cost can vary from insurer to insurer, call a few insurance companies and ask for an estimate based on the type of property you plan to purchase.  Knowing your costs and the lender’s escrow account rules will assist you in estimating how much money you will need at closing to fund the escrow account.  A lender may require mortgage insurance, hazard insurance (typically for rental property) and/or flood insurance (be aware of the flood zone rating for the property you are considering).  Additional insurance requirements increase the monthly costs to the new homeowner since these are in addition to the mortgage (principal and interest) and taxes.

After signing on the dotted line and receiving the keys, the ongoing costs of home ownership begin with moving in.  Whether hiring a moving company or fitting all of one’s belongings into a car, it costs money to move.  Additionally, some utility companies require a deposit to open an account.  It is a good practice to request a history of expenses from the previous owner to estimate the total monthly cost of living in the home, including water, energy bills, garbage removal, etc. to better estimate monthly out-of-pocket expenses.  As a new homeowner, estimating the monthly costs, including mortgage payments, insurance and increased utilities payments, is only one piece of the budgeting process.

New homeowners also need to save for those unexpected repairs. When the first day of summer brings 90-degree heat and a broken air conditioner, a new homeowner learns the first lesson of homeownership.  Prepare for those expected and unexpected expenses by having a reserve fund. It is a good idea to have a ballpark estimate of what it will cost to maintain the home.  Housemaster.com estimates that homeowners should spend between 1 and 3 percent of the value of the home for maintenance and repairs.  All homes are different, and new homeowners should create their own ballpark estimate and include it in their monthly budget.

Owning a home is still the American dream, even with the changing economic factors that have added a few challenges to the process.  New homebuyers can set realistic goals by assessing their credit and getting pre-approved (not pre-qualified)  for a mortgage before seriously looking at property.  Being focused and planning carefully by understanding the costs involved lead individuals and families to successful home ownership.

There are many resources to guide consumers to make smart choices to buy, maintain and keep their homes:

http://hud.gov   US Department of Housing and Urban Development

www.homebuyinginstitute.com

www.consumer-action.org

www.money-wise.org

National Core Competencies discussed in this post:

Borrowing, spending, protecting

Is Homeownership Right For Me?

September 6, 2012 by

By Robin Landsman, Wake County Extension Agent

This first in a 3-part series on homeownership will cover the consideration of renting versus buying a home, the costs associated with homeownership, and tips for making a smart purchase.

Interest rates are at historic lows and the housing market is a veritable buyers’ smorgasbord.  So everyone who can purchase is running out to purchase, right?  Not necessarily.  Homeownership is not for everyone.   Is the “American Dream” for you?

There are several things to consider when trying to decide if buying a home is the right choice.

First, consider advantages that homeownership offers:

Stability of monthly payments:  When locking into a fixed rate mortgage for 15, 20 or 30 years, you are guaranteed that your principal and interest payments will never go up.  However, taxes and insurance, when added into your mortgage through an escrow account, may cause your house payment to fluctuate over time. By comparison, rental costs over this same 15, 20 or 30-year period will almost certainly increase.  To help in this process, Missouri Extension has a very helpful on-line calculator.  You may find this useful as you work with clients as they make this decision:  http://extension.missouri.edu/p/GH5002

Tax benefits:  The interest you pay on your mortgage, along with the property taxes you pay each year, are deductible from your taxable income. As always, it’s best to talk with a tax consultant to get your full benefits.

Home equity:  Equity represents the portion of the home that you own and increases as you make monthly payments that reduce the outstanding loan balance. Over time, the home’s appreciation can increase the home’s market value your and help to increase your equity in the home. This equity can be used to secure a loan for other purposes, or can be converted to cash if you decide to sell.

Now let’s consider the downside to homeownership:

Maintenance:   The monthly cost of maintenance and utilities are normally more costly to the homeowner than to renter.  You are now the responsible party for maintenance and repairs.  As a renter, if you awake to find that there is no hot water for your morning shower you could call the landlord.  As a homeowner, it is now your responsibility to repair or replace the hot water heater.  There are costs in both time and money to maintaining the inside and outside of the home as well as the yard.

Relocating:   You may find it more difficult to relocate with the responsibility of a home.  Renters have the luxury of giving proper notice at the end of a lease, and they’re off.  When you own a home, it takes time to sell, or even rent, your home in today’s market. Additionally, you may find it difficult to find a lender in your new area willing to extend a loan for your next home without first selling or renting your current home.

Value:   And finally, there are no guarantees when it comes to the increase in value of your home. Unstable market conditions, wear and tear on the property and other factors could contribute to a decrease in value. Remember, you are primarily making a decision to buy a home in which to live rather than making a financial investment.

Homeownership is personal choice, and it is not for everyone.  To weigh the advantages and disadvantages these questions will help you determine your next move:

  1. Do you know what you want in a home?  Have you thought about what you need?  Taking the time to learn about the steps involved in the buying process will help ensure that you purchase a quality home at a price you can afford.
  2. Have you decided where you want to live?  Will you still want to live there in three or five years?
  3. Are you ready for the financial responsibility?  Is your income secure?  Will your income change in the near future?  Consider whether your employment situation or occupation stable such that you expect steady income.
  4. Is your financial house in order?  Do you have the down payment and closing costs saved?  Do you have an emergency savings account as well?
  5. Have you done your homework in learning mortgage basics?  Do you understand the differences between fixed and variable mortgage rates and the implications of those differences?
  6. Can you afford it?  Even if you have been pre-approved for a mortgage, you may not be comfortable with monthly mortgage costs for the approved loan amount.  The rule of thumb is that your total housing costs (mortgage, insurance, taxes) should not consume more than one third of your income.  It is perfectly fine to accept a mortgage loan in an amount that is less than for what you were approved.
  7. Are you ready to take care of repairs and ongoing maintenance?

Homeownership is not a decision to make easily, even in a buyer’s market.  Being prepared by knowing what you want will help you make the decision that is right for you.

Resources:
http://www.Realtor.org / National Association of Realtors   “Field Guide to Buying vs. Renting

National Core Competencies discussed in this post:
Borrowing, spending