Family Finance News
June 26, 2015
Home Equity Loans, Lines of Credit, and Reverse Mortgages
Home Equity Loans and Home Equity Lines of Credit (HELOC) and Reverse Mortgages allow you to borrow against your home equity.
· A home equity loan is for a fixed amount of money that is secured by your home. The lender also takes into account your income, credit history, and the market value of your home.
· A HELOC is a revolving line of credit much like a credit card and the lender takes into account your income, credit history, and the market value of your home.
· A reverse mortgage is available to those 62 years or older and allows you to convert your home equity into cash.
Your home equity is determined by the market value of your home minus any mortgages and liens. For example if your house is appraised at $150,000 and your mortgage (and any other outstanding lien) amount is $75,000 then you have $75,000 of equity in your home.
A home equity loan is a lump sum distribution that is repaid with monthly payments and usually no more than 85% of your equity in your home. So in the example above you could borrow 85% of $75,000, or $63,750. A HELOC is a little different; instead of taking one lump sum it allows you to borrow for a specified period of time known as a “draw period”, usually 3-7 years. During that time you must make monthly minimum payments and when the draw period ends you will no longer be able to borrow money from the account. A reverse mortgage is a home loan that provides cash payments based on home equity. Homeowners normally defer payment of the loan until they die, sell, or move out of the home.
Pay close attention to fees, including the application or loan processing fee, origination or underwriting fee, lender or funding fee, appraisal fee, document preparation and recording fees, broker fees, and balloon payments. Always ask for annual percentage rate (APR) and compare loans from several lenders.
Home equity loans, HELOCS, and reverse mortgages are complicated financial instruments and could put your home and equity at risk. If you miss payments the lender could foreclose on your home to recoup their costs and you could lose your home. It is important to work with a reputable lender that you know and trust.
For more information
• Consumer Financial Protection Bureau at www.consumerfinance.gov, “What You Should Know About Home Equity Lines of Credit.”, consumerfinance.gov/f/201401_cfpb_booklet_heloc.pdf.
• Federal Trade Commission at www.FTC.gov
• Iowa State University Extension and Outreach website at www.extension.iastate.edu/humansciences/
May 26 , 2015
Lending Rates (how determined/how to get lower)
The interest rate is the cost of borrowing money and is usually expressed as a percentage. Interest rates will fluctuate with market conditions and consumer interest rates are closely linked to the interest rates set by the Federal Reserve. The annual percentage rate, APR, will include the interest rate as well as points, broker fees, and certain other credit charges that you may be required to pay that will impact mortgage payments.
According to the Consumer Financial Protection Bureau there are seven factors that can influence the interest you would pay on a home loan:
1. Credit Score- If you are planning to buy a home check your credit report a year or six months prior to the purchase to correct any errors and look for ways to improve your credit score. If there is anything negative on your report, call the creditor and work out a payment plan. Also consider paying down credit card balances.
2. Home location– Mortgage interest rates can vary from state largely due to regulations that impact the cost of doing business.
3. Home Price and Loan Amount– It’s important to know how much home you can afford and to calculate the monthly payment – including taxes and insurance.
4. Down Payment and Loan Term – A twenty percent down payment will get a better interest rate than a 15% or 10% down payment. A larger deposit indicates to the lender that you are willing to take some risk yourself. Also, compare the monthly payments of a fifteen year mortgage versus a 30 year mortgage. You may have higher monthly payment but you will pay a lower APR and lower overall interest charges.
5. Loan type - There are several loan types such as conventional, Federal Housing Administration (FHA), and Veterans Administration (VA) loans. Each type carries different fees, interest, and payment structures.
6. Interest Rate Type- There are two basic interest rate types of mortgages, adjustable and fixed and a sub category of fixed is the balloon payment mortgage. You can check get a ballpark figure for your mortgage interest rates at the Consumer Financial Protection website at consumerfinance.gov/owning-a-home/check-rates/.
The mortgage you choose has a big impact on the interest—how much you’ll have to pay upfront, your monthly payment amount, and the total cost of your loan over time.
You will want to shop around and compare rates and costs. Ask whether the rate is fixed or adjustable. An adjustable rate mortgage may seem like a bargain now but monthly payments could increase considerably over the life of the loan. Some questions to ask for an adjustable rate mortgage include:
- What is the initial interest rate?
- What are the rates and payment caps each year and over the life of the loan?
- What index will the lender use to determine rate increase and what margin will be used?
- How often can the lender change the interest rate and how often is it adjusted downward?
Doing some homework will save you money in the long runand rememberfair lending is required by law. The EqualCredit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction and the basis of race, color, religion, national origin, sex, marital status, age or whether all or part of an applicant’s income comes from a public assistance program.
For more information
• Consumer Financial Protection Bureau at www.consumerfinance.gov, “Understand Loan Options”
• Iowa State University Extension and Outreach website at www.extension.iastate.edu/humansciences/
May 22, 2015
Understanding Your Paycheck
Your child’s first paycheck can provide a great opportunity to introduce the topics of taxes and withholding. This is the time to prepare your child for their first income tax return.
First, explain that they will need to complete a W-4 form when they start their job.This is the Employee's Withholding Allowance Certificate form which informs the employer how much tax to withhold from each paycheck. A high number of allowances lowers the amount withheld from your check for federal income tax; a low number, down to zero, increases the withholding. A single individual can claim allowance for themselves (one) or they can claim zero allowances. Your child can use IRS’s tax withholding calculatorto see if too much or too little is being withheld and they can update their W-4 at any time.
Next, take time to explain the difference between gross pay (before taxes are taken out) and net pay (take-home pay). Then go over the various taxes and other deductions from their check. The largest withholding is for federal income tax which is used for anything paid from the government’s general fund. This covers essential government services from military expenses to highways. Other Federal deductions include, the Federal Insurance Contributions Act (FICA) which is made up of two items, Social Security and Medicare taxes. For 2014, the Social Security tax rate is 6.2% on the first $117,000 wages paid. The Medicare tax rate is 1.45% on the first $200,000 and 2.35% above $200,000. If your child is receiving health or retirement benefits, contributions for these may be coming out too.
Help your child understand that the more money they make, the more they will likely have to pay in taxes. But not all their money is taxed at the same rate. If your child is a single and being claimed by you as a dependent, they can generally earn up to $6,200 (in 2014) before you owe federal income tax.
In the U.S. we have a progressive tax rate system. For example, for the 2014 tax year, single filers pay a 10 percent federal income tax on the first $9,075 of taxable income. The next bracket – from $9,076 to $36,900 is taxed at a 15 percent tax rate. So, if an individual had a taxable income of $30,000, the first $9,075 would be taxed at 10 percent, and the remaining $20,925 would be taxed at 15 percent under the 2014 tax rate schedule.
Who should care: Anyone who works would benefit from understanding their paycheck. Once your child understands the basics of taxes and withholdings you can begin to plan and ask questions about benefit packages. Explain that full time workers sometime collect benefits such as health, life, and disability insurance which are considered part of the total pay package along with salary. In many cases, employees pay for at least a portion of their benefits, but the employer may pay for a fairly large portion of them as well. These are important things to understand when your child begins their journey in the working world.
More information:Contact Consumer Financial Protection Bureau, IRS.gov, or visit www.extension.iastate.edu/humansciences/
May 12, 2015
A savings account provides funds for emergencies and for making specific purchases in the relatively near future (usually three years or less).
Savings accounts are ideal for individuals looking to save while earning a modest amount of interest. Savings accounts are very safe and are insured through the Federal Deposit Insurance Corporation or National Credit Union Insurance Fund. The standard insurance amount is $250,000 per depositor, per insured bank or credit union, for each account ownership category (savings, checking, or certificate of deposit). Safety of the principal and liquidity of the funds (ease of converting to cash) are important aspects of savings dollars. Because of these characteristics, savings dollars generally yield a low rate of return and often do not maintain purchasing power or outperform inflation. While there are many advantages to using these accounts, they are better used for short term savings from a few months to a few years.
Opening a savings account is often an important first financial milestone for a young person or an adult getting back on track. Savings accounts are beneficial for keeping your money safe while preparing for the future.
It is clear that Americans need to be saving more. According to the U.S. Bureau of Economic Analysis, Americans are only saving around 5 percent of their income, on average. However, financial experts recommend saving 10-20 percent to adequately prepare for retirement. Cynthia Fletcher, a professor of human development and family studies, says the America Saves program is a good opportunity for everyone to assess their financial situation.
“Inertia is a huge enemy when we’re managing our money. We get comfortable and the world changes, but we don’t make appropriate changes to our savings and investments,” Fletcher said. “This can be a time for people to do a checkup and see if it makes sense to rethink their rate of savings and if they can save more.”
More information: Contact America Saves at www.americasaves.orgor sign up for Money Tip$ at blogs.extension.iastate.edu/moneytips/tag/savings/.
May 8, 2015
Credit is the ability to obtain goods or services before payment in which the borrower often pays a fee or interest for the privilege of borrowing. The term credit also refers to the borrowing capacity of an individual or company.
Credit can be a terrific tool for the consumer. It can enhance your quality of life. On the other hand, it can create serious problems for people who use it incorrectly. Obtaining credit and having good credit is important when you are considering large tickets items such as a home, car, or business. When a lender extends credit it represents the confidence a lender has in your ability to repay a loan. Credit decisions are usually based on the amount of debt you currently have and your debt payment history.
If you’re a new user of credit, there are positive steps you can (and should) take as you establish credit. Work with a local lending institution to obtain a small loan or credit card and make consistent payments on a monthly basis. Even a small amount will help establish a lending history, but it is imperative to make consistent, timely payments and not miss any payments.
Using credit wisely will save you money in the long run. The interest rate for borrowing is determined by the risk of the transaction, so if you have a history of paying your bills on time and not being overextended then you will pay a lower interest rate than someone who has a history of not paying bills on time. The lower interest costs can add up to hundreds of thousands of dollars of savings during your lifetime.
Used responsibly, credit can help you buy big things: phone services, education, health care services, major appliances, etc. The availability of credit is also very important in emergencies. Your credit history is your financial reputation and time is the key to building credit. It does not happen overnight. A good credit history will create a good credit score, which in turn will open many future financial opportunities and save you money. Once you have established good credit, you will reap the benefits.
More information:For more information contact
· National Foundation for Credit Counseling at www.nfcc.org
· Consumer Financial Protection Bureau at http://www.consumerfinance.gov/
· Iowa State University Extension and Outreach website at www.extension.iastate.edu/humansciences/
April 24, 2015
Buying a Home
Buying a home is a big decision and makes financial sense for many families. If you are planning to live in one place for at least a few years, then owning a home could be a good way to build some equity. Property taxes and the interest portion of your mortgage payments are tax deductible. Paying off your mortgage may be a form of "forced savings," too and a portion of each mortgage payment increases your equity. On the other hand, if you are planning to move within a year or two you may end up losing money due to transaction costs.
Set a budget and start your Housing Fund. What can you realistically afford to pay toward a mortgage each month? Write down your monthly expenses – car payment, credit card bills, groceries, entertainment – everything. Total the amount up and you have your non-housing expenses. Subtract your non-housing expenses from your take-home pay. Be sure to include an amount that gives you some breathing room for financial emergencies – flat tire, medical need, or price changes. THEN: what is left?
It is important to know what you can afford before you visit a lender. Remember, also, that there are closing costs that can range from $5,000-10,000 or more, depending on the house. Be sure to visit www.annualcreditreport.comto check your credit report and fix any inaccuracies 4 to 6 months before you visit a lender. Your credit score will help determine the APR for your mortgage.
Being pre-approved before looking at homes tells the realtor that you are serious and gives you some leverage for a loan. Pre-approval means that the lender is willing to give you a loan. Knowing what you can borrow means you can start shopping for homes in your price range.
What type of loan is best for you? Do you want a fixed or adjustable loan? How long do you need to take out the loan? Is it a conventional or government-backed mortgage? How long will you stay in the home will be a factor too. If you qualify for a government-backed loan, you will have the option of making a smaller down payment. Be sure you clearly understand the terms of any loan before signing on the dotted line.
For more information
• Federal Trade Commission www.FTC.gov
• Consumer Financial Protection Bureau at www.consumerfinance.gov
• Iowa State University Extension and Outreach website at www.extension.iastate.edu/humansciences/
• Iowa State University Extension and Outreach has a fact sheet on Buying a Home PM1460.
• Iowa State University Extension and Outreach Home Buyer Education coarsewww.extension.iastate.edu/humansciences/homebuyer
January 16, 2015
I live in a food desert. That means it’s a place without ready access to fresh, healthy, and affordable food. The USDA defines a food desert in relation to household income and distance to a grocery store.
The reality of what it means to live in a food desert has been driven home on more than one occasion, but it is especially evident during the winter months when a planned trip to the grocery store may be delayed several days due to bad weather. There is no grocery store in my little town. In fact, there are no grocery stores in any of the three communities that make up my school district.
I travel extensively and can easily plan at the end of my day, a stop at a grocery store in a community 20 miles away with 3 or more grocery stores. For me, a solution is easy, but it’s not so easy for the elderly or the low income who must balance food costs with the expense of a 40 mile round trip.
I am thankful for the convenient stores that sell gas in the small communities that make up our school district. Though the staples they do carry are higher in cost than what I can buy at the super stores in the larger towns, I will gladly pay for the convenience and the savings I realize in time and gas. But, how do the elderly and low income manage that higher cost? And, what are the long-term effects of a diet without fresh fruits and vegetables or a quality sources of protein?
For more information about food deserts check out http://apps.ams.usda.gov/fooddeserts/foodDeserts.aspx
December 30, 2014
Motion Sensors Save Money
I recently walked through the airport to catch the first flight of the morning. Many of the gates were empty and dark, until…a sensor somewhere detects my motion and lights up the area.
I start down an empty freezer isle at the grocery store and the dark cases full of frozen veggies, light up as they sense my presents.
I enter the dark bathroom in my daughter’s home and the lights magically turn on before my hand can find the switch. This was installed for the benefit of a toddler who could not reach the switch.
Stairways, halls, and garages get a lot of through traffic, and people often forget to shut off lights once they’ve passed by. Motion sensors turn lights on when you walk in and off when motion is no longer detected. Indoor sensors range from $15 (with the sensor fixed in the wall switch) to $45 (a kit with a separate sensor to put where you’d like). Outdoor ones can cost $16 (for basic floodlights) to $100 (for more decorative or powerful models). Motion detectors can be used to save energy, boost your home security by turning yard lights on, and safely light the way into a room.
Motion sensing switches do have some “phantom” energy use, using about a watt of energy on standby mode (23 hours a day) and 5 watts on active mode (about an hour a day). This trims a bit off of your overall savings, but over the course of a month, the switch itself will cost about $0.09 of energy, every month.
Would a motion sensor in or around your home make a difference in your energy bill or safety and security of your home?
October 14, 2014
I often look at laws and imagine what someone did (and probably more than one someone) to make that law necessary — especially laws designed to protect us from ourselves or from each other. It came to my attention, some recent Iowa laws that regulate Payday Lending and Advance Check Cashing.
Over the years, I have worked with individuals who have had up to five Payday Loans, some of which had been rolled over two and three times in an attempt to hang onto their home. On Fridays I have observed a number of individuals standing in line at the service desk of my local grocery store waiting to cash their checks. I cringe thinking of the amount of money they are throwing away on interest and fees.
The recent changes in Iowa laws now prevent payday loan rollovers, and do not allow you to have more than two loans or advance checks being cashed at any one lender. Other rules in place include: You must be 18 and employed; No more than $500 per loan; For no longer than 31 days; No more than a $15 fee for the first $100 and $10 fee for each additional $100; A maximum APR of approximately 422%.
While I think its fine to pass laws that limit costs (though I don’t call 422% APR really “limited”), I worry more about consumers who make decisions without really thinking through the costs versus the benefits. I’d rather focus on teaching consumers to understand the decisions they’re making and consider other alternatives beyond cash advances, such as:
- Use a credit card – the APR is a lot lower
- Sell something you: a) Do not use; b) Do not need; and/or c) Can’t afford
- Ask for an extension
- Borrow from family or a friend
- Visit a food bank and shift grocery money to other needs
For more information about Credit and analyzing Your Debts, contact your local ISU Extension and Outreach office and ask for PM 1459A-B
September 5, 2014
Between Mason City and Rudd, where I live, Mercy North Iowa has a billboard that reads, “Refer a Physician Earn $5000.” Demand for primary care services is projected to increase through 2020, largely because of aging, population growth and due to the expanded health care insurance. (www.hhs.gov)
With necessity being the mother of invention…working with the laws of supply and demand, some new forms of healthcare have come on the scene.
Concierge Medicine Iowa of Des Moines (first of its kind in Iowa) is part of a growing trend that has grown from 2500 practices nationwide to more than 21,000 in the past eight years. Concierge medicine is an approach to providing primary care in which the patient submits an annual or monthly fee or retainer to the physician directly. Fees range between $1500 to $4446 per year depending on your age and if you are single or a married couple.
Women’s Wellness and West Side Family Medicine in Dubuque is one of 4400 Direct Primary Care practice in the US. In the last year, there has been a 30% increase the number of Direct Pay clinics. Instead of paying a deductible through health insurance, clients pay a monthly fee which runs between $60 and $85 a month (regardless as to whether you visited the doctor or not).
The Patient-Center Medical Home is a more common model of care in Iowa, where the patient uses a primary care physician’s practice as their center to access and coordinate their health care. This model is centered on the needs of the patient, both present and future rather than just responding to episodes.
The new health-care law allows direct-pay primary-care to count as ACA-compliant insurance as long as it is bundled with a catastrophic medical policy to cover emergencies. Some of these new forms of health care may seem expensive but worth the money if access to care is an issue. The cost is expected to drop as the availability and popularity of these models increases.
August 28, 2014
Yes, it is barely September, and yes, I am already thinking about tax season and the new forms that come with new legislation…such as those for the Afford Health Care Act. Then I stumbled on something that made me laugh.
The IRS released the Virtual Currency Guidance on March 25, requiring Bitcoin to be treated as property instead of currency. This means it is subject to capital gains tax or could count as a loss if the value dips. “Mined” Bitcoin is taxed as gross income. “Paperless” takes on a whole new meaning when you think about the taxpayer being responsible for maintaining the virtual paper trail for this virtual currency.
Lost or stolen Bitcoins can potentially be tax deductible as a casualty loss deduction though it might be a little tricky calculating the cost basis of Bitcoin.
Though I find it funny thinking of the IRS writing rules to address gains, losses, potential theft and the need to maintain a paper trail of imaginary money; it is not funny just how volatile and risky this new form of money and investments can be. More than 850,000 Bitcoins were recently lost (presumed to be stolen) from the largest Bitcoin exchange and there is no FDIC (Federal Deposit Insurance Corporation) there to recover your losses.
As with all investments, it is important to know your risks and with risky investments… invest only what you can afford to lose. If you are new to investing, you may want to contact your ISU Extension office and ask for publication PM1462, Money Mechanics: Saving and Investing.
I have a post card reminder sitting on my refrigerator for a recall on my car. I think this is the 4th or 5th recall I have had for different vehicles in the last 10 years.
As a consumer I have two concerns:
- How will I know if the car I’m driving has a recall? I might not hear it on the news and I might not receive a letter (even though they try to notify owners)…
- What if I’m buying a used vehicle – how can I know if it has had a recall, and whether the needed repairs have been done?
Fortunately, a single resource addresses both of those questions: www.SaferCar.gov . At this site, you can look up a particular model and year to find out if recalls have been issued. In addition, you can enter the vehicle identification number (VIN) of a vehicle you might want to buy, and you will be able to find out if needed recall-related repairs have been made on that vehicle.
For more information on this topic and other family financial matters, follow us at blogs.extension.iastate.edu/moneytips.
Protect Your Health Care History
August 7, 2014
Health Care is the new leading area for identity theft. It can be costly in terms of money but it can also be fatal if your medical records are changed regarding issues such as medication allergies or life threatening conditions.
Checking the data collected and stored about your medical history and habits may seem like a lot of work and time spent. But, an ounce of prevention is worth a pound of cure. The average time and cost of repairing identity theft is 500 hours and $2000-$3000. Spending a couple of hours on the phone or online requesting reports is well worth it!
A coded listings of your reported medical conditions and tests can be obtained from the Medial Information Bureau. This information can be obtained by calling 866-692-6901 or by going online at mib.com. Be sure to also check with your insurance company for an annual statement of your health claims and treatments if you do not already have access to this online.
Your prescription history, a list of all prescriptions listed under your name, can be obtained at rxhistories.com or by calling 877-211-4816. Optum MedPoint can also provide you with a list of your prescription history. Just call them at 888-206-0335.
You can order a free report listing all your insurance claims at Verisk A-Plus Report by calling 800-627-3487 or by visiting online at verisk.com and type “order free report” in the search box.
For more information about protecting your information in regards to Health Care History and Habits, follow us at blogs.extension.iastate.edu/moneytips.
The Federal Trade Commission has been gathering information about “data brokers.” Data brokers collect personal information about consumers from a wide range of sources — including public records, loyalty cards, websites and social media — and provide information for a wide range of purposes. The FTC offers an informative 2-minute video with an overview of the industry: Sharing Information: A Day in Your Life . Currently there are no individual consumer rights to limit distribution of information contained in a marketer’s data files or to correct false information in those files.
Data brokers use computer programs to combine and analyze data about consumers. They create lists based on the data collected, often making inferences about consumers and place them in categories. Potentially sensitive categories include those that primarily focus on ethnicity and income-levels, a consumer’s age, or health-related conditions like “Age 65 ,” “Diabetes Interest,” and “Expectant Parent.”
Recommendations have been made to Congress for legislation giving consumers transparency on how and when the information is being gathered, options to “opt-out”, and rights to correct false information. To find the links to the informative, 2 min. video on data brokers or to the federal trade commission links on the topic about Data Brokers, visit our blog located at blogs.extension.iastate.edu/moneytips.
Housing sales are trending upward, distressed sales are falling, and the value of homes is equivalent to values from 2005. This is the news from the Housing Scorecard, which contains unbiased information on trends in housing and is issued monthly by Housing and Urban Development, www.hud.gov. This is good news for individuals who have a home for sale; it also might make it easier to decide if it is wise to start a home improvement project on a home you plan to sell in the future.
The USDA and Iowa State University Extension & Outreach partnered to develop an online homebuyer education program http://www.extension.iastate.edu/HomeBuyer/ . The course offers much more comprehensive information than can be share in this column. Completion of the course earns you a certificate required for some USDA loans. The site also maintains a list of publications to help homeowners maintain or improve their homes.http://www.extension.iastate.edu/HomeBuyer/publications.htm
For those having trouble with their mortgage a valuable source of information and (possibly leading to help with restructuring their loan) is HARP http://www.makinghomeaffordable.gov which is a site for homeowners to find relief for mortgages that are underwater.
We haven’t recovered from the housing bubble, but it’s good to see slow and steady progress. Owning a home is still a step toward personal asset building; keeping it realistic is the key.
Bacon hit an all-time high price of $5.70 a pound just a few months ago, and some of us can remember when hamburger cost less than $2.00 a pound. And then, some chef dumped hot sauce on a chicken wing in the 80’s and they haven’t been used to make chicken stock since.
These are all examples of the economic concept known as supply and demand. When supply is stable and demand increases, prices will rise. When supply is limited and demand is steady prices will also rise.
I envy the person who turned a the bony chicken wing into a profitable dish, and my mouth is watering at the thought of BLTs for a summer meal. And as a busy housewife, Hamburger is my go-to, easy to use and versatile meat. For these products, the demand remains steady or even rising now that it is summer grilling and picnic season, but supply is going down. The cattle herd inventory is at a low and PEDV, a swine disease will reduce the supply of pork during the coming months. Therefore, it’s not likely these prices will fall soon. What’s a BLT-lover to do?
A solution is to look at how you use these products and take steps to make the most of what you buy. Buy hamburger and bacon during sales and repackage, and freeze in recipe or serving size packages. Plan for left-overs or freeze them for later use and reduce serving sizes to save money and help the waistline either. For other ways to save, visit the ISU Extension & Outreach site Spend Smart, Eat Smart.
It is the end of tax season, and I want to remind people to make sure you are having enough withheld from your paycheck for federal and state income taxes!
As a volunteer with VITA (the Volunteer Income Tax Assistance program), I saw several people this year who needed to make large payments with their tax return. In one case, an employer had restructured, and the employee hadn’t noticed that her payroll withholdings changed. Another had gotten a new job and didn’t fill out their paperwork properly. One person got a second job and their income had gone up a lot they had neglected to increase the withholdings.
Owing a little money with your tax return isn’t a problem. In fact, many people see it as the ideal scenario.
But you’ll face real problems if you owe substantial amounts:
- Finding the needed money may involve, creating debt which can start a downward spiral where you’re behind on your bills and building credit card debt, too.
- You’ll also probably be charged a penalty and interest for not paying as you go — the law requires that we pay our income taxes throughout the year, not just at the end of the year.
Even though tax season is over, that doesn’t mean you should stop paying attention to your tax situation. It’s a year-round task, especially when your family or income changes. For more information about tax-savings strategies, contact your local Iowa State University Extension office and ask for publication PM 1455 – Money Mechanics: Income Taxes or download if from our store at www.store.extension.iastate.edu/, and search for PM 1455
What’s in Your Mailbox? Clever marketers often put the name of a key product or service in an email address. If you need unbiased information you’ll need to look closely to tell if the brochure, webpage, or mail is from a firm or business that has cleverly created a sales document that looks like a source of credible information.
If you need details about Medicare, for example, the best source is Medicare.gov. Your mail box can contain information sent by Medicare Associates, Medicare Institute, My Medicare, etc. As an Email, it might look like My Medicare.com (not .gov) or Medicare Services.org.
The Consumer Financial Protection Bureau released a report in 2013 analyzing the amount of money spent on providing financial education to consumers and the amount spent trying to influence consumer’s decisions about financial products. The report found that for every dollar spent for unbiased education information, $25 is spent on financial marketing. This includes the purchase of mailing lists that were created when you were a customer or you answered questions on a form that ended up creating a profile of you and a resulting prospects list that can easily be generated by a computer. It’s a source of income for magazines, manufacturers, stores, and webpages who sell lists.
You can limit some direct marketing (both postal mail and email) by using the services of DMAChoice.org ( https://www.dmachoice.org/) They provide the opt out services to stop most junk mail from landing in your mailbox. Check out their site for more information about marketing and steps you can take to limit the sale of your personal information.
Water Main Breaks
County supervisors across the state have been advising homeowners to run their cold water tap for 3 to 5 minutes; fill a glass, and then measure the water temperature. If the water was 40 degrees or less, then you needed to seriously consider running a constant stream of water from your tap to prevent your water main from freezing.
Pipes are usually buried a good 8 inches lower than the typical frost line for our area. With the lack of snow cover and the record breaking cold, the frost has pushed to and beyond that depth, freezing and breaking water mains.
Few homeowners realize that the pipe that runs from the street to your home is YOUR responsibility and is not covered by your homeowners insurance. A rider to the homeowners’ coverage policy or a separate specialty insurance option must be purchased to cover the cost of repairing or replacing your water main. The good news is...spring is coming soon.
All Open Enrollment for Individual Health Insurance Ends March 31
With the arrival of March, Iowans no longer can procrastinate when it comes to health insurance. When the annual open enrollment period ends on March 31, most people will be unable to purchase individual health coverage from any source until the next open enrollment period, set to begin Nov. 15, 2014.
“It has been widely publicized that the open enrollment period for the new Health Insurance Marketplace at www.healthcare.gov ends on March 31, but most people are unaware that the term open enrollment period applies not only to the official Health Insurance Marketplace, but also to all individual health insurance policies,” reports Brenda Schmitt, family finance specialist with Iowa State University Extension and Outreach. “That means that outside of the designated open enrollment period, most people who want to purchase health insurance on the individual market will be unable to purchase health insurance anywhere.”
The 2014 open enrollment period was set for a full six months to provide time for people to learn about the new health insurance system. In the future, however, the annual open enrollment period will be shorter, about two months starting in autumn each year, Schmitt said.
People who experience major life events, including events that cause them to lose their health insurance, will be eligible for a “special enrollment period,” which lasts 30-60 days. Examples of eligible life events include loss of insurance due to job loss or divorce, marriage, and birth or adoption of a child. As a result, people who have access to group insurance have no need to fear being left without options if they unexpectedly lose their group coverage. To learn more, go to www.healthcare.gov and search “special enrollment period.”
Group plans will continue to be open to new group members; for example, newly-hired employees will be able to enroll in the employer’s health insurance plan regardless of what time of the year they are hired or during their employer’s annual open enrollment. But those who purchase insurance in the individual market must do so this month or be prepared to wait until the fall 2014 open enrollment period for 2015.
Bartholomae urges anyone who is currently without health insurance to take action this month to enroll. Iowans who are concerned about cost may be eligible for financial assistance in paying their premiums, she said, and free insurance is available through the Iowa Health and Wellness Plan to those meeting income guidelines ($15,282 for a single individual or $31,322 for a family of four). Hawk-I (for children) and Medicaid also continue to be available, Bartholomae noted
Free assistance with health insurance enrollment is available. Find help at https://localhelp.healthcare.gov or at www.getcoveredamerica.org. ISU Extension and Outreach offers informational workshops about the changes brought by the Affordable Care Act. To learn more, go to http://www.extension.iastate.edu/humansciences/health-insurance or contact any ISU Extension and Outreach county office to find local workshops.
I generally discourage people from considering Pay Day Loans as a possible solution for financial problems – it’s costly and can be part of a downward financial spiral.
In November 2013, for the first time, the Consumer Financial Protection Bureau (CFPB – www.consumerfinance.gov) took legal action against a payday loan company. And they now have a link for submitting complaints about payday loans.
The CFPB is a new federal agency whose purpose is to regulate the financial products industry, in order to protect consumers. They accept complaints about any financial product. They’ve recently added payday loans to their eight specific categories (plus a ninth “other” category) to choose from when submitting a complaint: mortgage, debt collection, credit reporting, bank account or service, credit card, money transfer, payday loan, student loan, vehicle or other consumer loan.
If you want to tell the CFPB about something that isn’t exactly a complaint, they also have a link where you can tell them your story. Hearing from consumers is essential for the CFPB to do its job, so if you have had problems, or even just interesting experiences (positive or negative) telling the CFPB may help lead to better regulation, better consumer information, or better education for everyone!
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