Money and More© November 17, 2018

Holiday Spending

Is January a painful month financially?  For many people, January it is a not great month for their finances.  One reason folks struggle in January is because they overspent in the December holiday season.  Gifts, meals out, parties and more all take a toll on personal finances.  Having a spending plan for the season can help smooth out the bumps.  When I have a deliberate amount to spend on a person or function it helps me stay on track financially.

Without a plan, for me, this is one of those areas where, as we called in the army, “mission creep” sets in. That is a little bit here and little bit there end up becoming a big amount spent.  That is an amount big enough to throw my January finances into a tizzy.  I now have a list of those holiday expenses I face most years as starting point for my holiday planning.  While my spending is not perfect, it does make my January a whole lot better.

Employer Provided Disability Insurance

Disability is more likely and more devastating than death for many folks.  The inability to work couple with likely increases in expenses to help deal with the disability puts people in a worse financial situation than death.

Disability premiums paid by an employer results in taxable benefits when paid out.  Disability premiums paid by the employee has tax free benefits.

In a recent scenario I reviewed.  The employer offered 50% of salary benefit paid by the employer and an optional 16% paid by the employee.  Because the 16% would be tax free to the client, it amounted to an extra $1000/month.  One month of the extra benefits pays the cost of the premiums for 21 months.  Should a disability happen to this client and given the client’s situation–they would be well served by this optional coverage.

Employment based benefits change from year to year.  Next year this plan might not be as useful to the client.  I find it useful to review employee benefits such as disability each year during the open season.

Museum or other Memberships

Many museums and parks offer annual memberships.  When frequently used, such memberships are cost saving.    My own experience is that about 50% of the time, I have not gotten my money’s worth for the membership.  Reflecting on this disuse, it seems that as member I put off going until another day because the membership lasts another few months.  Before I know it, the membership is almost over, and I have only gone to the facility once or twice.  My family has not truly benefited (financially at least) from the membership.  Have you fallen into to this membership trap?

Avoiding Student Loans

I found this quip in the November 2018, The American Legion magazine.  “Thank you, student loans, for getting me through college.  I don’t think I can ever repay you.”

While this is meant as humor,  student loans are a huge burden on our society.  The loan industry has flourished as colleges have raised tuition at faster than inflation has risen.  It is a “Catch-22” situation for many families as spending for higher education goes up and up.   Whether you are the student, a parent or grandparent no one likes the fact that so many students today are graduating with horrendous student loan debt.

Here is a list of ways to offset, reduce, or avoid debt by reducing tuition costs or finding other sources to pay it.  Each one of these education planning ideas requires thought and some level of research as some can be complicated.

  1. Be a good student with great ACT and/or SAT scores (merit-based aid).
  2. Using one’s own or parents GI Bill benefits.
  3. Pick a school with tuition that relatively matches the income from the chosen profession.
  4. Take Advance Placement classes in high school.
  5. Attend community college for the first year or two.
  6. Utilize a 529 plan (preferably funded by grandparents).
  7. Earn educational grants (usually need based).
  8. Use a ROTC Scholarship or attend a service academy.
  9. Work at Starbucks or other employer that provides education benefits.
  10. Work full time and take reduced class load (paying as you go).
  11. Take advantage of the government loan forgiveness programs.

 

Money and More © will not be published  Thanksgiving Week so to spend time with friends and family.

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