Thursday, 22 June 2017 19:48

Financial Tips For Single Parents

Smart money management is always important, but it can take on more urgency for those who are without a partner. Whether you're divorced, widowed, or single by choice, single parenting brings unique budgeting challenges.

Marilyn Timbers, a Connecticut-based financial advisor, says of having to raise a child on one income: "Children are a joy, but they do not come cheap." The U.S. Department of Agriculture notes in a report that it costs an estimated $241,080 for a middle-income couple to raise a child to age 18, and some single parents have to shoulder that responsibility alone. Even if child support is adequate - unfortunately nearly 50% of that support is never paid - you'll do yourself a favor if you think ahead about financial matters as a single mom or dad.

Estate planning is your first priority, according to Lisa Hay of Ascend Financial. It's essential to make arrangements for your children should you become incapacitated, and this means spending time on two documents that no one enjoys thinking about: a will, which specifies a guardian for your children and how you'll pass assets down to them; and a "power of attorney," which gives someone the legal right to make decisions on your behalf if you're unable to do so.

You may also want to set up a trust. A trust is a legal structure in which your assets can be held for the children. It is overseen by a trustee. And check with your employer to see if it offers a disability benefit. Generally, you will get a reduced income amount when you claim disability - anywhere from 50% to 70% of your salary. "Your income is your most important asset," says Tom Morrill, owner of Morrill Insurance Group. Insuring it can be especially crucial for single parents who don't have a second income to cover a gap.

Hay also says be sure to have life insurance. What you purchase will depend on your finances, but a term policy is most economical because it's a straightforward death benefit. A healthy 33-year-old woman, for example, would pay roughly $240 a year for a 20-year term, $500,000 life insurance policy. This would get your child through college should something happen to you.

Health insurance is "the number one insurance need for a single parent," according to Morrill, who considers life insurance a close second. People often complain about the cost, but if you're uninsured, a serious medical procedure or hospital stay can be disastrous to your finances. And, of course, losing a job or becoming ill is still more catastrophic as a single parent than as part of a two-income couple. A recent Harvard study revealed that 62 percent of bankruptcies were caused by medical debt. You can comparison-shop for policies at your state's marketplace or at HealthCare.gov.

Along with the rest of your boring-but-necessary financial thinking, don't forget about tax breaks. If you're a single parent, you should probably file as head of household (not as single) because you'll often pay less and get to claim a higher standard deduction. You can also claim exemptions for yourself and each qualifying child. You also might qualify for the earned income tax credit, the child and dependent care credit (if you pay someone to care for your kids), and the child tax credit.

As far as day-to-day household operations, here are a few more things to keep in mind:

  • Credit cards - In The Financial Guide for Single Parents Workbook, Larry Burkett warns single parents that, while credit cards may seem like an easy way to fill in the gaps of a decreased income, it's wise to avoid using them as much as possible.
  • Shopping in general - Many single parents have to make lifestyle adjustments after a divorce or the death of a spouse. You may need to consider moving or changing your spending habits. Burkett notes that lots of people like to go shopping to cheer themselves up, but the added debt you'll incur will only make you feel worse. This even applies to groceries, which are an expensive part of the budget. Plan that trip carefully, too, so you can better avoid impulse buying.
  • Holidays - Guilt causes many single parents to overindulge their children, even if they can't afford it. This is especially true during holidays and birthdays. Be sure to set designated amounts for gifts, and stay within the budget.
  • Ask for help - Check with your credit union for financial advice. And there are many nonprofit organizations with programs specifically designed for single parents.

Whatever your income, it's important to give yourself a safety net, because emergencies happen. Put aside a little bit of money from each paycheck to set up an emergency fund for car repairs, broken refrigerators and other realities of life. As a general rule, experts recommend having six months' worth of non-discretionary expenses in an account that is separate from the one you use for daily expenses. That could be a savings account or possibly a low-risk investment account.

Bucket budgeting can help, says Jan Cullinane, author of AARP's The Single Woman's Guide to Retirement. That means creating four different accounts: one for fixed monthly expenses such as food and bills, another for long-term expenses like retirement or replacing appliances, a third for emergencies and a fourth for discretionary spending.

"Put the appropriate amount of money into the first three, and whatever is left is your discretionary or 'fun' spending," says Cullinane. "If there is nothing left for that month in the 'fun' bucket, you simply go without - you don't dip into the other buckets. Harsh, but necessary."

And it's more doable than you'd think. One study asked people if they could save 20 percent of their income. Most respondents said no. But, when asked if they could live on 80 percent of their income, most said yes. "Be aware of how you frame questions to yourself," Cullinane says. "You might be surprised."

Have you faced tough questions and financial circumstances as a single parent? What were the most useful solutions you found?

SOURCES:
Published in Blog

Tomorrow is officially the first day of summer! A few years ago, our family decided to explore Utah. Even though Ty and I have lived here for almost 4 decades, there are so many places that we had hadn’t visited. Just last week we went to Bountiful Lake and the Jordan River OHV Recreation Area, which were both new to us. My husband gets a lot of ideas for these adventures online. Utah's Adventure Family is a great resource for finding activities. Here are some factors to consider while making your summer plans:

Costs for equipment

We participated in Free Fishing Day and had so much fun that we’ll probably make it a yearly tradition. However, “free fishing” day cost us about $100 in order to gear up: tackle box, poles, bait etc. What gear are you going to need? Include that in your budget. Plan ahead. You might be able to borrow the equipment to try out something new. Afterwards, my father-in-law told us that he had five fishing poles just sitting around that we could have used. My neighbor said that a few years ago when he stopped fishing that he gave away $500 worth of fishing equipment. So, borrowing equipment could be a great way to try an activity out.

Cost of travel and food

Summer activities can increase your food and fuel cost. These costs can add up. Are you going to have enough money in your transportation budget, or do you need to plan to spend more for these activities? One time we went to a free entrance day at Hogle Zoo in Salt Lake. Even though the entrance was free, there was the cost of food and travel. What are you going to eat? Are you going to bring a picnic or buy food at your destination? How much will that cost?

On another outing, we went to Wasatch Mountain State Park and packed a picnic, but left our cooler bag sitting in the kitchen. So, if you pack a lunch, don’t leave it on your kitchen floor! If food and fuel costs are substantial, I budget it as part of a vacation or recreation. If these costs are minimal, I pay for them out of my groceries and transportation budget categories. What do you do?

Entrance Fees

Triathlons, Marathons, and Ragnar races are popular summer activities in Utah. Most of them cost a fee, but you can watch the races and cheer on the runners for free. We have gone to the finish line of the Ogden Marathon and the Top of Utah Marathon to cheer on friends and family. This was a really inspiring activity. It’s a fun atmosphere with music and crowds. Our city always holds a 5K as one of the activities for Cherry Days celebration. I signed the kids up for Clearfield’s kids triathlon. Plan for these fees. They can cost hundreds of dollars, but if that’s what you want, budget them in.

Seasons

Some events are free or cheap in the wintertime and others are free or cheap in the summertime. For example, the free day we attended at the Hogle Zoo was held during the winter. My daughter’s 2nd Birthday fell on a free day, so we took Grandma and enjoyed the day at the zoo. The weather was perfect, and it was a great time.

Other places offer summer deals for the family like bowling and summer movies. We have done both of these and had a great time. Some days are too hot, rainy, or windy for outdoor activities. These are great options for those days.

Is it indoor or outdoor? Will it be crowded?

I don’t like to go to crowded places. We’ve done several RAMP Summer Saturdays. It’s a great way to try out some of these activities. Nature Center was not busy because it was an outdoor activity. If it’s an outside activity, the crowds are not as big of an issue as it is for an inside activity, but large crowds do create longer wait times, and it is never fun to wait for a long time.

Free events in Utah

There are so many free events in Utah that I can’t list them all, but here are a few!

• This Is The Place — We haven’t done this one yet, but it sounds neat.

Free Entrance Days to Utah National Parks — We love the National Parks in Utah!

4th Grade Free Pass — As part of the Every Kid in the Park initiative, families with 4th graders are offered a free Annual Pass to the National Parks. This is awesome! We didn’t know about this and had already purchased a National Parks Annual Pass when my oldest entered 4th grade, but this fall my son will be a 4th Grader, and we are planning on signing up for this pass! These passes are available on September 1st. Seniors can buy a LIFETIME SENIOR PASS for $20. I tell this great deal to everyone I meet who is in 62+.

Science in the Parks & Arts in the Park — Weber State University teams up with many community organizations to provide these two activities. I found out about these last year, and I wish I would have found out about them sooner. My kids made music, and explored science activities. Each week these are held at a different park, so we also got to try out new parks. It is a great program.

Water Play Dates — Some of the best summer activities are simple ones like running in the sprinklers and going on picnics to the park. For younger kids, splash pads are great. We met friends for a picnic at the Harrisville City Splash Pad.

Movies in the Park — North Ogden holds free summer movies in Barker Park. They post them on North Ogden Recreation Facebook Page. My oldest kids went with Ty to see Harry Potter last week. Check with your cities. Many are listed on Coupons for Utah website. We have several neighbors who set up movies in their backyard. One of them bought an inexpensive screen and projector. The other one uses a sheet to project the movie. This is such a fun activity for the neighborhood.

Reading Programs — We’ve been library shopping since our city library is under construction for at least a year. I’m so impressed with the free activities offered by the library. They have a reading program for kids, another one of teens, and a reading challenge for adults. There is story time for English Speakers and Spanish Speakers. We need a little quiet time every day, and kids need to keep learning in the summer. Utah's Adventure Family suggests several summer reading programs. Even some school libraries have summer activities.

RAMP Summer Saturdays — We’ve tried the BSA Ropes course through this program. It was cool!

Utah State Parks — They are celebrating their 60th Anniversary and has done some great events for free. We went to a winter festival at Wasatch State Park. They provided snowshoeing, snow biking, and cross-country skiing for free. Plus, they fed us lunch. We went to the winter festival at Bear Lake State Park and watched a polar bear plunge. There was a raffle, and my husband won a free snowmobile rental. That was great! Recently we went to the opening of the OHV park and watched the motorcyclists ride and do jumps. You can find out about these on the Events Calendar. Check back often for updates. It seems like a month at a time is posted. There is an event the end of this month at Goblin Valley State Park. If you haven’t been there, I highly recommend it! This is one of our favorite state park campgrounds. It’s clean and nice and is tucked in the middle of the rock formations.

Hikes — Utah is a goldmine for hiking trails. I won’t even try to name them all here, but Jump Off Canyon, Waterfall Canyon, Adams Canyon and Lake Blanche are a few of my favorites. You will never run out of hiking trails in Utah!

Mark your calendar for these entrance fee–free dates in 2017:

• August 25: National Park Service Birthday
• September 30: National Public Lands Day
• November 11-12: Veterans Day Weekend

If you are camping, reserve your site early! Tourists come from all over the world to see our National Parks.

I offset some of the free activities with some that cost. I’ve spent most of our summer activities budget (some was to pay for activities later in the summer though).

Camps

There are so many camps offered in the summer time. There seems to be one for almost every activity.

I heard about the Ogden School District Summer Programs for the first time this year. The cost is very reasonable. My kids are doing a theater camp, which is incredible. There are camps for every interest. I just heard about a Patriotic Camp. Many cities and schools offer camp and summer programs, so you can check with your local areas. My kids have done a sport’s camp through our city. Boy scout & girl’s camps are also a lot of fun for teenagers. What have been some of your family’s favorite summer camps?

Utah State Parks

Junior Ranger Programs are free and available at many state & national parks. It’s a great program for families to learn about nature. Some of these can even be done at home! It does cost to enter the state parks. We bought a year pass, and we sure got our money’s worth.

Bike Rides

Several friends have recommended I ride the trails at Snowbasin. That sounds like a lot of fun.

What are some of your favorite summer activities? Which activities do you plan to try for the first time this year?

When was the last time that you felt like quitting? It was a couple of weeks ago for me. I was writing my post for the week, which talked about de-cluttering our finances. The post was turning into a guilt-inducing post, which I did not want, but I couldn’t figure out why it wasn’t coming together. I had worked on it, and I woke up early in the morning unable to sleep and worked on it. I started to wonder if these posts had helped anyone. I felt like quitting. As these negative thoughts bombarded me, I started remembering the reasons why I am so passionate about helping others learn to manage their personal finances. The reason has to do with grief, pain, and peace.

A couple of years before my Dad died, he went through financial stress. My parents owned many assets, but all of their wealth was tied into the real estate market. Dad worked as a realtor and a landlord. He also ran a construction crew, and he owned his home. During the recession of 2006, home prices plummeted, building of new homes decreased, and lending practices tightened. As his income decreased, he borrowed against some of the properties.

After Dad died in 2009, I prepared the accounting reports for the rental units and realized that there wasn’t enough cash coming in to pay the expenses of all of the rentals. One morning I woke up at 4 am to work on his business accounting. As I realized how much pain he experienced during the last few years of his life due to financial stress, my chest hurt! It was one of the most painful times of my life! I remembered these lines from Emily Dickinson's book, The Complete Poems, which I had memorized in my youth: “If I can stop one heart from breaking, I shall not live in vain. If I can ease one life the aching or cool one pain…. I shall not live in vain.”

At that point, I decided to direct my pain outwards by serving others. If I could help one family, even if it was my own family, then it was worth my effort.

I contacted my family finance professor from college and thanked her for encouraging me to live what she taught. I will never forget when Professor Lown told our class that if we earned an “A” grade in her class, but we didn’t live what she taught us, that the “A grade” wouldn’t mean a thing. I started volunteering at a financial counseling nonprofit agency. When I could no longer work in the office, I wrote a blog for them. I taught a class in my church about financial principles and then wrote a book about those principles. I was later asked to write for Wasatch Peaks Credit Union, which I felt grateful to be able to do.

Although the pain surrounding my father’s death has subsided a lot, grief does resurface. Sometimes grief is almost predictable: holidays, my dad’s birthday, Father’s Day, and family events. Other times grief hits me unexpectedly, like snow hits in May.

That’s what happened the night before I finished the post about decluttering finances. I had a bad dream and woke up in the middle of the night crying for my daddy. I was missing him. No wonder the post would not come together! Finally, I ran out of time and had to pause work on my post so I could wake up my kids and help them get ready for school.

My husband Ty came home from the gym that morning and said, “I wasn’t feeling it. I couldn’t get into a rhythm while I was swimming. My arms felt dead tired.” Then my son threw tantrums after he woke up. He and I got into the car 3 minutes before school started. Several kids were already in the car, and the emergency lights were flashing. I turned the key, and nothing happened. My five-year-old was innocently sitting in her pajamas. The neighbor’s cat pooped in our sandbox. Then, the internet stopped working on my Chromebook, losing half of my work. It was my version of a Terrible, Horrible, No Good, Very Bad Day. After a good cry, I got back to work.

Even though I felt like quitting, I remembered the quote, “We are not our feelings.” It came from Steven Covey’s book, 7 Habits of Highly Effective People. He taught that no matter what happens to us, we can choose how we respond to it. I teach this saying to my kids, but that day I applied it to my situation. The sun was shining! Friends and family came to help me work on the car and take the kids to school. I finished the post late, but it wasn’t a big deal. The credit union staff treated me graciously.

I’ve been thinking about what I learned from my dad’s passing. With Father’s Day coming this week, I want to share some financial lessons I learned from my Dad’s death. I hope that they can help you and your family.

Life insurance IS a necessity!

While planning my dad’s funeral, I searched through mom’s piano books for the right song to play. When I flipped to Bridge Over Troubled waters I knew that it was the song Dad wanted. I wasn’t very familiar with it at the time, and the music was too difficult for me to learn to play in that short period of time. Obstacles kept coming. Our family friend told me that he was just getting his voice back from laryngitis and didn’t think he could sing because he could barely speak. He also did not know the song, and we only had a couple of days to prepare. I almost gave up, but we found a way to perform it: my sister played the left hand while I played the right hand, and our friend was able to sing.

Here are a few of Simon & Garfunkel’s lyrics that I felt were like messages from my dad to my mom. Even though it isn’t the typical song I’ve heard at funerals, my dad wasn’t the typical person.

“When tears are in your eyes
I will dry them all
I'm on your side
When times get rough
And friends just can't be found
Like a bridge over troubled water
I will lay me down….

When darkness comes
And pain is all around
Like a bridge over troubled water
I will lay me down

Sail on, silvergirl
Sail on by
Your time has come to shine
All your dreams are on their way
See how they shine
If you need a friend
I'm sailing right behind
Like a bridge over troubled water
I will ease your mind.”

Because my dad had life insurance, my mom didn’t have to worry about finances at the time of his death. Our lives stopped. There was so much grief, sorrow, and adjustment to having him gone from our lives. Mom had to get used to daily life without him and had to do many of the tasks that he used to do. His life insurance policy provided the “bridge” to help us get through this troubled time. What a relief that my mom was able to pay any bills. Even the mortuary bill was paid directly from the life insurance so that we didn’t have to pay money upfront. That period of time was rough enough without the financial stress!

When I refer to life insurance, this includes being self-insured. If you have enough assets, you can get to the point where you can self-insure if you choose, but I still consider that life insurance. Life insurance enables your family to continue on paying for their financial expenses after you and the income you provide are gone.

Over-leveraging increases risk of financial failures

Last Saturday, we saw a lot of dads teaching their kids how to fish as part of Free Fishing Day. Picture this: A man was walking with his fishing pole in his left hand and his daughter’s hand in his right hand. It reminded me of fishing and camping trips with my dad. He taught me to ride a horse. He taught me to love being outside in the mountains. Dad also taught me to help others.

Dad taught me to pay off debt. He paid off cars as fast as he could, and he refinanced his home into a fifteen-year mortgage. But in 2006, when his income decreased, he overleveraged, and this taught me that financial storms will come to everyone. I learned that we can lower our risk by decreasing our debt and saving for emergencies. Because of what my parents went through, I have spent the last 8 years working on paying off our debt and “saving for a rainy day.”

When we had a income crisis two years ago, we were prepared and we worked through it together. We had a lot of peace during that turbulent time. We experienced peace knowing that we both had marketable degrees with experience. We had peace knowing we could pay for six months of expenses. Emotionally, this was one of the hardest times of our marriage, but it strengthened our marriage. I was Ty’s cheerleader to help him recover his lost confidence. Within a few months, he realized that his employer did him a favor by releasing him. He felt very fortunate. Our story could have ended in bankruptcy, foreclosure, or divorce. I’m thankful that we were spared all of those.

The housing market is really good where I live right now. Homes are selling within a few hours in some cases. I considered selling our home this year, but I realized that to upgrade our home, we would increase our debt, which will increase our risk. We didn’t feel comfortable doing that.

I feel thankful for the lessons grief has taught me. They are gifts that have helped me so much. I’m thankful for my dad. He is my hero! I’m celebrating his life and celebrating dads! What’s one thing you have learned from your dad?

We recently had our piano tuned, and our tuner shared part of his life story with me. He told me that he is “retired” from his job that he worked for over 40 years. He doesn’t “have to work” because he needs to earn money, but he enjoys tuning pianos, so he works part-time. Through his story, I picked out several keys for staying motivated to invest — no pun intended.

First Key: Personalize Retirement

Our piano tuner told me that he worked because he wanted to work. He loves music, enjoys working on pianos, and he likes to visit with people. He still has plenty of time to spend with his family and on other hobbies. This works well for him.

In contrast, I know retirees who like to travel. Others like to watch their grandchildren. Some like to garden. Not everyone would enjoy working as a piano tuner. We all have our own interests.

I had a college professor who wanted to volunteer at a local library by reading to children when he retired because he really enjoyed reading to his children. Another acquaintance got more involved in government and became a state senator when he retired from full-time employment. The options are endless!

I’ve been thinking about what my family wants to do in retirement. Whenever I try to do what someone else is doing, I lose motivation. I have to do what’s right for me and for my family. What does YOUR custom retirement plan look like?

Second Key: Prepare for Decades

He and his wife worked 40 years in their careers and saved for retirement. I’m not even 40 years old yet, so it impressed me that they had prepared for this stage of their life for longer than I had been alive. Even though I know how important it is to save for retirement throughout our working career, meeting someone who did it makes me feel like I can do it too.

I have had other friends and family members who have also retired, and their examples have helped motivate me to invest for retirement. They have me given me hope that my personalized retirement plan is possible — especially when we were unemployed and had to stop retirement savings. Their examples motivated me to start again when we were able.

Having mentors who are in retirement is very helpful because they have already done it and can guide us. Both sets of our parents are in retirement and we see what costs they face and how they differ from costs in our stage of life. Preparing for retirement throughout life gives you freedom to do what you would like to do.

Third Key: Enjoy Your Work

Our piano tuner can make the piano sound amazing when he plays it and tune it. He is a pianist, and his love for the piano shows. He has a good sense of humor and makes piano jokes. I can tell that he completely enjoys piano tuning and interacting with his customers.

His story was a great example of working during retirement. He does something that he enjoys. He makes a good amount per hour, but it really didn’t seem like “work” to him. He is his own boss. He schedules as many jobs a week as he would like to work, and he schedules those jobs around his life. Seeing him enjoying retirement so much motivated me to work towards it.

I have another acquaintance who “retired” from his job of 30 years to serve a volunteer mission for his church with his wife. He had always wanted to do this and was still young, so after he finished that, he worked for a friend doing something else. He has freedom to work how he would like to work. Both are enjoying their work.

Statistics show that so many people are not saving enough to retire the way they want to retire, but it's really so simple. Meeting people like our piano tuner help me to realize this. Why aren't most people saving then? Well, it’s so easy for me to get caught up in the immediate expenses and put off saving for retirement.

Hearing his story helped spark my imagination to think about what job would be good for me at that stage of life. What did you learn from this piano tuner’s story? Who do you know who is retired? How has his or her story influenced you?

Although I write about personal finance, no financial topic is independent. So, I am really writing about life, death, and everything in between through a financial perspective. Memorial Day includes all of these. My husband and I have birthdays near Memorial Day, and we celebrate our lives. We also celebrate the lives of those ones who have died. My grandpa passed away on May 31st ten years ago. We visit his grave and my dad’s grave and remember them. I’ve been told that life is short and passes quickly, but the last few years I’ve actually experienced that: my babies aren’t babies anymore, my grandmas are some of the last ones living in their families, our parents retired, and kids I babysat have their own children. Now, I realize that life goes quickly.

What does the Memorial Day holiday include for you?

Memorial Day Vacations

Our entire married life, we have had a tradition to go to Bear Lake over Memorial Day weekend. This is how we celebrate our birthdays. My husband doesn’t ask for much for his birthday, but he does ask to go to Bear Lake every year. We have made so many memories on these trips. We look forward to this trip every year. This year, we really need a vacation at the end of the school year.

How do you celebrate life on Memorial Day?

Memorial Day Traditions

When I was a child, we spent Memorial Day with my Grandma and Grandpa. I remember sleeping over at their house. Then we would take flowers to the gravesites of our deceased family members. It was a simple and meaningful holiday tradition.

Memorial Day Sales

Many stores have sales on Memorial Day weekends. I’ve already received a dozen emails notifying me of sales this week. Holidays can be popular for yard sales (when the weather is good). I’ve noticed that the Memorial and Labor Day Sales often extend several days past the actual holiday. If you are planning to purchase anyway, you many want to include this into your holiday budget.

For example, a couple of our kids need new mattresses soon. Also, we are looking for a propane fire-pit. I’m hoping that we find a good deal around this holiday. Sometimes I can find sales by shopping around holidays. Last year, there was a baby shower held in December for my sister-in-law. I was able to shop the Black Friday Sales to find a gift for my nephew. Items from his baby registry were on sale, and free shipping was offered, so I was able to get her a lot more with the money I wanted to spend than I would have been able to buy shopping regular prices. I want to do this more often.

If you have the storage space, you can buy clearance items for next year’s holiday. I personally don’t have the storage space to do this, but my mom does and I have benefited from her purchases. Last year she found some Easter decorations on sale at the end of the season. She saved them, gave them to me, and I appreciated them. If it wasn’t for her, I wouldn’t decorate for any season, but the kids really enjoy having decorations. They think it’s fun.

Celebrating

Since life gives us plenty of unexpected expenses (like a new starter for our car this week), I try to plan the expected ones.

Holidays, including the summer holiday, can break our plan if we don’t include them. What are your traditions for Memorial Day? How much does each of these activities cost? Answering those questions will help you enjoy your holiday and summer- especially if you are new to budgeting. These events have "broken my budget" because I didn't prepare for their cost.

I hope that you have a fun relaxing hoiday that comes from following your holiday plan.

Wednesday, 24 May 2017 15:13

Step #5: Learn The Costs Of Investing

You've learned to invest 15% of your household income into retirement. Now what? The ultimate goal of investing is to let your money work for you and provide you with stable, passive income.

But getting there is going to cost a pretty penny.

This month, take the time to learn the dollars and cents of investing. Of course, you knew that investing was going to mean coming up with the actual money you’re putting into the market, which always holds the possibility of being lost forever. But did you know there are going to be various fees, commissions, and taxes you’ll have to pay, too?

Let’s take a peek at an actual investment to illustrate this. The company and amounts have been changed, but they’ve been accurately scaled down to size.

Suppose that, on Aug. 13, 2015, a share of stock in Apple closed at $43.26. During the next few months, Apple issues four dividends of $0.55 per share. On Aug. 25. 2016, a share of stock in Apple closed at $51.23.

Let’s say you chose to invest $1,000 in Apple on Aug. 13, 2015 and you withdrew it on Aug. 25, 2016.

At the time of your investment, $1,000 would buy you 23.25 shares of Apple. Over the year, you would have received $51.16 in dividend payouts. When you withdrew from the company a bit over a year after your initial investment, you’d sell that stock for $1,191.09.

It seems like your gain from this stock is $242.25, broken down into $51.16 in dividends and another $191.09 from selling the stock. Simple, right?

The problem is, though, you haven’t exactly earned that much. Here’s where the costs of investments come into play.

First, the dividends would be subject to income tax. In this case, the dividends are considered qualified dividends, and would therefore be taxed at a rate of 15% by the federal government and possibly more by state and local sources. As a result, $7.67 of that dividend gain is eaten up by these taxes.

Second, you’re going to have to pay your broker for the cost of buying and selling the stock. Let’s say, hypothetically, you’ve used an online discount stock brokerage firm. The buy and the sell would each cost $9.99. That’s another $19.98 dropped from your gain – although this fee is tax deductible.

Third, the gain on the sale would be a long-term capital gain, so 15% of that gain goes to the federal government. Since your gain was $191.09, you’d be paying an additional $28.66 in taxes on the sale.

In total, your expenses for your gain add up to $56.31. Just like that, nearly 30% of your gain is gone!

Even if your investment is a loser, you’re still paying the brokerage fees and will earn less in dividends.

The moral of the story? Investing costs. You’re taxed if you gain, and you’ll get hit with brokerage fees whether you win or lose.

Some forms of investing have lower costs than others. If you invest directly with an investing house, you can bypass the investing fees and only pay the taxes on your gains. However, you’re limited to the offerings that the investing house has available, and you’ll be subject to their often inflexible minimums for investing.

You could also simply invest in a money market account or other savings option at Wasatch Peaks Credit Union. Your returns will come with fewer or no costs. Plus, your balance isn’t at risk. Yes, you might “lose” some gains by only having the cash in a savings account, but your money is earning a steady return. If you invest elsewhere, it’s possible that the costs, the fees and the taxes can easily eat up a substantial amount of whatever you gain or make an already painful loss even harder.

It’s important to note that the bigger your investment, the smaller the impact such costs have. At the $1,000 level, the investment fees in the above scenario typically eat up about 2% of your balance. If you’re investing $10,000, the fees will only eat up 0.2% of your balance, and if you invest $100,000, the fees eat up only 0.02% of your balance.

Thus, as a beginning investor, it’s crucial to know the total cost of ownership of an investment as you consider it. Even a small fee can significantly lower your total return when you’re starting out with small investments.

That’s why it’s best to take it slowly at first and continue learning about the market and stocks you’re interested in. Know exactly what you’re going to invest in – and what all of the costs of that investment are – before you put down any of your money. After working out the math, you may find you’d rather wait until you have a substantial amount saved up for investing, as these fees don’t make such a big dent when the gains are larger.

So, before you make that first investment, learn the costs and be sure it’s worth the price!

Did you get hit with any surprise costs on your first investment? Share your experience with us!

Published in Blog
Wednesday, 17 May 2017 17:18

Shop Smart At Target!

Are you a regular at Target? If you love the store’s wide layout and great discounts, you’ll want to know this money hack! Target has a simple system for all markdowns. When the last number of a price is an eight, that item’s price may later be reduced further. If the last digit of the price is a four, that’s the lowest it’ll go. So, if you see a must-have sweater on sale for $19.88, don’t throw it in your cart just yet! Hold off a little bit and maybe you’ll get an even better deal.

Target also has a weekly system to determine which categories of items go on sale, as follows:

Monday: electronics, accessories, kids’ clothing, books, baby, stationery

Tuesday: women’s clothing, pets, food items

Wednesday: men’s clothing, health, beauty, diapers, lawn and garden, furniture

Thursday: housewares, lingerie, shoes, toys, sporting goods, décor, luggage

Friday: auto, cosmetics, hardware, jewelry

What was the best deal you ever found at Target or any other retail store? Share your story with us in the comments!

Published in Blog

A couple of weeks ago the weather was very rainy, and we stayed inside a lot. I started noticing how filthy the walls in my house were. They had layers of dirt, dust, handprints, marker, pen, crayon, boogers, and mold. I hadn’t noticed them gradually get so dirty. Have you had an experience like that? I decided to wash the walls and the windows of our house. As I’ve scrubbed boogers and crayon off the walls this past week, I have had a lot of time to think. As I felt the sun’s warmth coming through the windows, my thinking drifted to summer.

I’ve had a few summer plans fall through already. We were planning to host a foreign exchange student, but we were not picked. We signed Jackie (11) up for a camp, which ended up being full. I like to have plans. My friends tease me about it. I’ve had plenty of summers where the spending plan failed. I’ve come to the conclusion that budgeting for summer is different than budgeting for the rest of the year. Trying to budget for summer in the same way that I budget for the rest of the year doesn’t work.

Although we don’t have school lunch or school expenses, there are other expenses that can make school expenses seem cheap. My kids brought home fliers for a dozen different summer camps. There is a camp for almost everything. We also have summer vacations, pool passes, drive-in movies, memberships, and holiday parties available to spend our money. With the warm weather, we may want to buy gear for our outdoor hobbies. It’s also a time to work on outside projects. Ty’s trip to Lowe’s last week caused a budgeting challenge this month.

Summer expenses are harder for us to predict than expenses during the other seasons of the year.

They just are! Has this been true for your family? I have accepted this, but this year I am going to embrace the unpredictability. I’m going to plan on it! I’m not going to fight it. That doesn’t mean that our budgets have to fail, but it does mean that I need to budget differently.

What unexpected events have you experienced in past summers? We have family visit during the summer. I didn’t expect to spend much money because I wasn’t on vacation, but we did activities with them. This year, I need to plan on spending money on those activities. One of my friends told me that she had family come for several months and the activities started to cost too much, so they had to say no to some of the activities, which is okay too. Just like the rest of the year, we have to say no to some of the summer opportunities.

Budgeting requires flexibility. Summer budgeting requires more flexibility!

I briefly mentioned the trip to Lowe’s. My husband is finishing the garden fence and backyard patio. The supplies cost $320. That amount of money could really break a rigid budget, and honestly, I started to wig out. Before I approached my husband about the expense, I took some deep breaths. The deep breathing made me realize that I needed to allow more flexibility. I wasn’t able to predict this expense, but that is okay. It opened up a conversation with my husband. We discussed what budget category it would come from since we didn’t have that much money in our repairs fund. Should we use our emergency fund? It wasn’t an emergency. Were there other categories with money that we could move to the repairs fund? We had saved to replace an engine in our 1975 Volkswagen thing, which has been sitting in our garage for years. We discussed using that money for the outside repairs, but Ty is planning on getting it running.. Thankfully, we were a month ahead (using last month’s income to pay this month’s expense). We decided to use that money. It wasn’t the ideal, but budgeting isn’t a perfect process, and if I try to make it perfect, it will fail. Embrace imperfect budgeting. Budgets will work if we embrace it.

Summer income.

Summer expenses aren’t the only thing that can fluctuate. Income can too. Summer may give more time to earn extra income. My darling nieces and their family bought a shave ice shack last year and sold shaved ice. My cousin photographs families. My neighbor teaches classes online. Another neighbor lifeguards in the summer. My cousin-in-law prints logos on shirts. These friends inspire me to use the flexibility of summer to create income.

Summer is right around the corner. What are your plans to make sure your budget doesn’t go on summer vacation?

Thursday, 11 May 2017 17:05

Mother’s Day On A Budget

Along with the blossoming flowers, the blazing sunshine and the tinkling bell of the ice cream truck come ideas and plans for celebrating Mother’s Day.

Our moms are always there for us, as a sounding board, a virtual treasure trove of advice and to dote on us when we need a little pampering. Mother’s Day, then, is when we show them how much we appreciate all they do for us throughout the year.

However, between purchasing the perfect gift, buying mom flowers and dining out, Mother’s Day costs can quickly add up to a small fortune. How do you keep within a reasonable budget while still showing mom how much she means to you?

Fortunately, with just a bit of forethought and careful planning, you can save big while still celebrating Mother’s Day in style. Here’s how:

1.) Frugal flowers

Nothing says “I love you” quite like a vibrantly colored bouquet, but those beautiful blossoms can cost a bundle. Start your savings on mom’s flowers by doing some of the work yourself. Instead of relying on the florist to provide the perfect base for the bouquet, bring your own basket from home. Alternatively, you can pick up a cheap but pretty vase at a craft or thrift store, adding a strand of ribbon to customize it to mom’s style.

Also, consider shopping your local grocery store or sidewalk stand before visiting a florist. You might find significant savings – such as a bouquet for as little as $10 – by cutting out the middleman.

Lastly, if you’re shopping at a floral shop, be sure to call first to find out when their flowers are delivered so you get the freshest of the bunch.

2.) Gift it right

More difficult than dreaming up the perfect gift for mom is scraping together the money for it. Solve both problems by getting creative. Mom would love something you personally crafted, like a decorated framed photo of a shared memorable moment, or a scrapbook of your best childhood memories. You can even make your mom a playlist of songs that both of you love.

If you’d rather purchase a gift than create one yourself, remember to shop early so you don’t feel pressured into buying something you can’t afford. Also, don’t forget to carefully mine coupon sites like RetailMeNot, Coupons.com and Couponcabin to see if you can snag a deal.

Remember, gifts that show effort and thought matter a lot more than how much you spend.

3.) Dining out (or in) for less

Of course, celebrating Mom’s special day won’t be complete without sharing a wonderful meal together. But restaurants can be expensive, so don’t book reservations without carefully considering if they’re absolutely necessary.

Maybe Mom would enjoy a home-cooked meal more than an evening out. You can whip up her favorite foods, set the table with long candlesticks, your finest dishes and best silverware, and enjoy a deluxe, sumptuous dinner at home.

Or throw together a family barbecue. Load the car with Frisbees, balls and kites, pack up a cooler and stake out a corner at the local park. Then, get the grill fired up for a delectable dinner that’s fun to prepare and even more fun to eat!

If you’ve got your heart set on taking mom out to a restaurant, shop around for the best Mother’s Day deals. It’s worth making a few phone calls and checking out sites like Groupon or LivingSocial before making reservations.

Once you’re at the restaurant, save money by checking the left side of the menu first. Restaurants usually put their pricier dishes on the right side of the menu since that’s where most people’s gazes automatically land. Also, consider sharing a few bigger portions instead of ordering individual plates for every diner. Lastly, be sure to wait a bit between courses so you don’t end up with a table full of leftovers that you’re too stuffed to eat.

4.) Plan ahead

It’s never too early to start saving, and it’s not too early to start thinking about next year’s Mother’s Day. While you obviously can’t buy mom flowers that far ahead of time, shop the post-Mother’s-Day sales for fantastic deals on greeting cards, wrapping paper and gifts for mom.

It isn’t that hard to save on Mother’s Day expenses. And it’s worth it. After all, no one will be happier to see you saving money than dear sweet mom!

How do you show your mom how much she means to you while sticking to a budget? Share your best tips with us in the comments!

SOURCES:
http://www.grandparents.com/money-and-work/saving-and-investing/monday-money-savers-mothers-day
https://www.google.com/amp/www.abcmoney.co.uk/2017/03/15/how-to-save-money-on-mothers-day/amp/
https://www.google.com/amp/s/www.thepennyhoarder.com/smart-money/mothers-day-flowers/amp/

Published in Blog

Growing up, my family loved watching sports together. My younger brother wrote down all of the players' names and kept track of their stats as the games were played. I hadn't seen a Jazz game for a decade until Ty's boss gave us tickets earlier this year. We sat on the fourth row and were so completely entertained that my kids didn't fight or complain at all! It's exciting for our Utah Jazz to advance in the playoffs and play the Golden State Warriors! But, the most important statistics to us individually don't have much to do with the NBA playoffs.

Have you seen the classic game of Family Feud? Why do the family teams care what the “survey said.” Because, if the families guess the responses that were the most common answers, they can win the prize money. In a personal finance class I just taught, we took a financial quiz. I read a lot of financial surveys to prepare for this class. Three of the statistics from these surveys impacted me the most. More importantly than finding out what the surveys said, is to find out what you think about these statistics!

Survey #1 says ... “About half of Americans could pay for an unexpected expense that cost $500-$1,000.”

Could you cover an unexpected expense that cost $1,000? We’ve had a whole lot of rainy days here in Northern Utah the past couple of weeks. We don’t know when, but we know that it will rain. I don’t mind being wet, but I don’t like feeling cold, which always follows my getting wet. We have regular financial storms too. We don’t know when they will hit, but we know that they will hit. An emergency fund protects my family from getting rained on and being left in the cold financially. There are different opinions on how much an emergency fund should be. Because of the emergencies my family has experienced, I wouldn’t feel comfortable with an $1,000 emergency fund, but it’s a great place to start. Do you agree with having an emergency fund? If you were surveyed about having an emergency fund, what would you say? Has an emergency fund ever helped you work through changes in your life? Does an emergency fund matter to you?

I am a fan of having an emergency fund for many reasons, but I’ll share the most recent experience with our emergency fund. My husband Ty changed jobs 6 months ago, and we had a two month waiting period to enroll in the new employer’s health insurance plan. Ty’s employer generously offered to reimburse us for the cost of the COBRA health insurance coverage for the two month waiting period. However, we had to pay for the insurance first before it could be reimbursed. Our emergency fund allowed us to pay for that insurance coverage. When we were reimbursed, we deposited the money back into the emergency fund so that it will be there the next time that we need it. The emergency fund relieved and prevented a lot of stress for us. I recommend an emergency fund to you because it has helped my family adjust to life's changes.

Survey #2 says ... "About half of Americans have retirement savings."

Again, it doesn’t matter whether this survey is accurate, it matters what is true for you. Do you have a retirement savings account? Are you saving regularly for retirement? Just like the rain is sure to come in springtime in Utah, retirement is going to happen as we age. If you don’t have retirement savings, or if you haven't saved as much as you wished you had, it’s not too late to make a plan and work towards retirement.

Am I saving for retirement? Yes! Have I saved enough for retirement? No, but we are making progress. With so many financial emergencies and financial pressures, I understand how retirement can slip into the background of your finances. My husband and I try to keep them in the forefront and make retirement a priority for our family, but to be honest, sometimes we have to cut back our retirement savings. Our retirement contributions increased when our income increased and decreased when our income decreased. Although I’m not retired, I have mentors and friends who are retired. They advise me to save for retirement throughout my working life, and I trust them. I believe in saving for retirement!

Survey #3 says ... ”Nearly half of [parents] admit to not talking about money and finances with their kids on a regular basis.”

Do you talk about money with your friends and family? If you have children, do you give them opportunities to save, share, and spend money? Do they understand that a $20 bill is worth much more than a $1 bill? My kids may think that I talk with them too much about money. I talk about it all the time because we use money all of the time.

My 5 year old daughter and I ran a lot of errands this past week. I told her we were going shopping and encouraged her to bring her Hello Kitty purse and five dollars. On the way to the store, she told me that she wanted a ball. I let her spend her money as she wanted. At the first store, she bought some cotton candy. The price rang up higher than the price listed. It turns out that the cotton candy was in the wrong spot on the shelf. I asked her if she still wanted it. She bought the overpriced cotton candy, and she was excited that she still had money left. At the next store, she saw the bulk bins of salt water taffy in the middle of the isle and bought that. She used her last few quarters to ride the Clifford ride at the front of the store. Although it was hard for me to watch her spend money on candy, I let her experience spending her own money.

I think she learned a lot that day. By going on the Clifford ride, she learned what a quarter looks like. (The machine only took quarters.) Even though I didn’t agree with her spending choices, I felt proud of her for learning what a quarter was and being able to spend money on her own. At the last store, she saw a tiara that she wanted badly, and I explained that she had enough money at the beginning of the day to buy the tiara, but she didn’t any left. She replied, "But I didn’t know they would have this.” We talked about figuring out what she wanted and then not getting distracted by other items.

Surveys are just one tool to find out how our personal finances are going. Are the statistics from these surveys true for you?

As you cheer for your favorite NBA team, I hope you think about the most important financial statistics for your life.

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