Tag Archives: financial

Money Matters: Take a Close Look at Social Security

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By Nathaniel Sillin

If you’re not close to retirement age, it’s easy to ignore what Social Security is doing. However, some significant announcements late last year make now a very good time to pay attention.

What follows is a summary of notable changes to Social Security at the start of 2016 and ways to ensure you’re making the right retirement planning and claiming (http://www.consumerfinance.gov/retirement/before-you-claim/) decisions based on what’s ahead:

  1. 2016 Social Security payments won’t increase. In late October, Social Security (https://www.ssa.gov/myaccount/) announced that there wasn’t enough inflation in 2015 to create a cost-of-living adjustment (COLA) to monthly benefits this year. Understandably, this announcement shook up recipients who look to Social Security for a significant part of their monthly income. It’s only the third time payments were frozen in the past 40 years since automatic COLA adjustments began, but here’s the rub – all three occasions occurred after 2010. In short, most seniors will have to live with an average monthly payment of $1,341 with married beneficiaries receiving a total of $2,212.
  2. Married and divorced individuals may have to rethink the way they claim benefits. Also last October, Washington settled a federal budget battle in part by closing some notable loopholes in Social Security law that allowed certain married couples to substantially increase their benefits over time and certain divorced individuals to claim benefits from former spouses under certain circumstances. These new restrictions on so-called file-and-suspend and restricted-claim strategies go into effect this coming May. In short, if you’re close to age 62 (the earliest age you can start claiming Social Security benefits) getting qualified advice has never been more important.
  3. Other COLA-related issues. When there’s no cost-of-living adjustment, there’s no change in the maximum amount of earnings subject to the Social Security tax, which will stay at $118,500 in 2016. This means earnings above that level aren’t subject to the Social Security portion of the payroll tax or used to calculate retirement payouts. At the same time, the Social Security earnings limit for people who work and claim Social Security payments will stay at $15,720 in 2016 for people ages 65 and younger. Social Security beneficiaries who earn more than this amount will have $1 in benefits temporarily withheld for every $2 in earnings above the limit.
  4. Some benefits are going down – a little. The highest possible Social Security payment for a 66-year-old worker who signs up for Social Security this year will be $2,639 per month, down $24 from $2,663 in 2015. The reason? Social Security noted that despite no cost-of-living adjustment there was an increase in the national average wage index, one of the statistical guideposts the agency uses to calculate benefits.
  5. Service changes. If you haven’t created a My Social Security account, do so for two reasons: First, there have been reports of ID theft related to thieves attempting fraudulent signups for such accounts. Second, the agency is making more detailed account data available online such as estimates of monthly payments at various claiming ages. Also, Social Security expanded office hours in some of its field locations in 2015, so if you need face-to-face assistance, check hours of operation at your closest local office (https://secure.ssa.gov/ICON/main.jsp).

Bottom line: Social Security froze benefit amounts for the coming year, and that has an impact on both current and future recipients. You can’t fully understand your retirement without understanding how Social Security works, so now’s the time to learn.

 

Building a Back-to-School Budget

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By Nathaniel Sillin

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Back-to-school spending isn’t just about clothes and markers anymore.

In 2014 Forbes reported that Accenture estimated that nearly half of respondents reported they would spend $500 or more on back-to-school expenses, including not only clothes and desk supplies but electronics as well.

Yet there’s one more aspect of back-to-school spending that’s growing and can add hundreds—and sometimes thousands—to a family’s overall K-12 education budget. Since the 2008 economic crisis, many public school systems have tried to make up for funding shortfalls by adding first-time or expanded fees for sports, extracurricular activities and specialized academics.

This means that back-to-school budgeting, even for families with kids in public school, now requires a more holistic, year-round approach to all back-to-school expenses.

Given their potential dollar amounts, parents should examine school fees first. Public education has never been completely free of charge beyond local taxes. (Parents have traditionally paid extra money to support their kids’ participation in sports, music or other extracurricular activities.) However, many school systems are adding fees for a broader range of offerings including after-school activities, top-level courses, lab-based instruction and even Advanced Placement or AP classes. So before you start spending money on clothes and supplies that can be bought off-season, on sale or possibly used, get a handle on how applicable instruction and activity fees might affect your budget. Parents in financial need may qualify for public aid or grants to cover such fees; if not, choices will need to be made.

Consider turning back-to-school shopping into a money lesson. Most kids like to have certain kinds of clothes, shoes or supplies. Those “wants” can be turned into a discussion about spending priorities, value, choice and comparison shopping. Using the back-to-school budget calculator with your kids can help them learn how create a budget before shopping so that you only come home with the essentials. As kids get older, the discussion can expand to cover bigger-ticket purchases like smartphones, computers and fees for special courses and activities they want to pursue. Some of these issues might evolve into a discussion about earning money through chores or a part-time job.

Once priorities are decided, every expense should be tracked, including a child’s round trip school transportation, meals, tutoring fees or immunization and health care expenses not covered by insurance. And once that budget is set, it means a constant search for smart ways to save. Some ideas may include:

  • Carpooling – Track your costs to make sure you’re not adding significantly to your overall transportation budget.
  • Packing lunches at home
  • Working with school administrators to raise outside donations or grant funding to cover parents’ out-of-pocket costs
  • Organizing school supplies in one place to avoid purchasing duplicates
  • Renting equipment, supplies or instruments used until a child’s interests are established
  • Scouting garage sales, thrift shops and online marketplaces for used, required-edition textbooks, instruments, electronics, sports equipment, clothes and other supplies you’d otherwise buy new; online resources shouldn’t charge shipping or return fees
  • Reviewing school and classroom supply lists before buying essentials
  • Bulk and group-buying supplies and services with other parents to get volume prices
  • Consolidating back-to-school shopping during tax-free days (if your state offers them)
  • Swapping used supplies and equipment with other parents
  • Checking retail memberships for any back-to-school savings they offer
  • Watching for print and online coupons or special discount offers through your school
  • Listening to your kids – They might spot money-saving ideas faster than you can

One final secret budget item—rewards. Saving money on back-to-school expenses can help parents meet a number of financial goals, but kids’ academic or activity success deserves recognition. Consider setting aside a little of those savings for a reward they can enjoy.

Bottom line: When setting your back-to-school budget this year, think beyond the supplies. Consider every possible fee and expense associated with your child’s school year and plan accordingly.

Nathaniel Sillin directs Visa’s financial education programs. Follow Practical Money Skills on Twitter at @PracticalMoney.

Money Matters: Wedding on a Budget

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By Jason Alderman

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Have a tight wedding budget? Jason Alderman has some tips to help to stick to your price point without downgrading your big day. (Courtesy: Creative Commons)

Should a dream wedding mean delaying a down payment on a home? That’s a trade-off many couples make these days.

The Knot, a wedding planning and publishing company, recently released its Real Weddings Study of average wedding costs for 2014, announcing a national average price tag of $31,213 (not including the honeymoon).

The average cost of a wedding is a good point of comparison against other major financial goals in a new marriage. Considering that the average price of a new home in America is now $200,000, that wedding estimate would cover the majority of a 20 percent down payment—$40,000. Despite getting married to my wife at our family home 15 years ago, I still remember the sticker shock for all the wedding costs—a whopping $10,000 for the entire event from tux, dress, flowers, food and honeymoon.

Here are a few suggestions to plan a wedding that won’t break the bank:

Marry off-season. The most popular wedding months are now June and October, with longtime leader June losing a bit of ground. The most popular day to get married is Saturday and nighttime is the most competitive time slot for receptions. Consider a January wedding when the post-holiday rush is over – cold weather wedding venues are generally empty and priced to move. Weekday weddings have the potential added bonus of guests drinking less on a work night and weekend brunch weddings can be served buffet-style with more reasonably priced menu choices.

Find alternative venues. Farms, barns, warehouses, art galleries and of course, family property can be cheaper venues for a wedding, but make sure such spaces are properly insured for alcohol, food or other party-related risks. Also, in many communities, party venues must be properly licensed and/or zoned to avoid fines or legal action.

DIY if possible. Couples with a flair for party planning, decorating and cooking might be able to slash costs planning and executing their own event with minimal dependence on hired or volunteer help. From flowers to photography and wedding cake to wedding planners, check for affordable options. If a venue allows couples to supply their own flowers and decorations, it is wise to comparison shop. Consider professional photographers or skilled amateurs who meet your tastes and budget.

Use a gift registry to pay for the wedding. Couples can set up online gift registries that allow guests to directly fund honeymoon trips or specific expenses associated with the wedding.

Plan a destination wedding. Resorts around the world and well-known domestic wedding/travel destinations like Las Vegas or Hawaii offer wedding packages that blend a ceremony and vacation getaway. Planning a winter wedding? Research options for a warmer climate or snowy destination at a ski resort.

Finally, be flexible. Some venues have cancellations and if a couple is willing to put themselves on a waiting list and move quickly if they get the call, savings might be possible.

Before the planning a wedding, it’s wise to start with planning finances. A meeting with a qualified financial advisor might help put wedding costs in perspective with other major financial priorities. But the bottom line is that dream weddings don’t have to put a couple’s financial life on hold. Consider real financial priorities first and build a smart wedding budget from there.

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Jason Alderman directs Visa’s financial education programs. To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney.