The Economy: Changing the Lives of Empty Nesters

Kathryn Crumpton is the manager of the Aurora Center for Financial Wellness.

Have you discovered what it’s like to be an empty nester?  Have your children left the nest?  It can be an interesting experience when your children become adults and move out on their own.  There can be a satisfying feeling that you have done your job and your children have reached adulthood.  Yet, it can be sad if they move to a different city or worse, a different state.  How does it feel when they move back home?

Due to the tough economy the past few years, some children are moving home because of a change in their financial situation.  Sometimes, a whole family needs to move in. How do you make this situation work – physically, emotionally and financially?  If you are in a situation where you need to merge two families together or bring a child back home, it’s best to think this through and establish some rules. 

Remember whose house it is; those rules trump all others unless a reasonable comprise can be obtained.  Make sure the rules are clear and followed.

1. Figure out chores and who is responsible for what and make sure everyone is doing their fair share.
2. If your child and/or their spouse are working, then some financial consideration should be paid.  Call it rent or room and board, but agree on an amount and be firm that it is paid each month.
3. Determine how long they can stay.  This doesn’t have to be forever. 
4. You are not responsible for their debt.  If they need help – offer to help them establish a budget and payment plan for their debts.  If you decide to help financially, make it clear if it’s a gift or a loan.  If it’s a loan, draw up an agreement for a repayment schedule including interest.

If this sounds a bit like “tough love”, it is.  I have talked to many parents who are unhappy with children who have moved home and do little to get themselves back on their feet.  Sleeping until noon, not contributing financially or failing to help out around the house can make a situation unbearable rather soon.  Laying down a plan in the beginning can go a long way and can help establish harmony in the home.

Even if you are not struggling with debt, the chances are you know someone who is. We can help families live well again. Contact an Aurora consumer credit counselor today: call 1-414-482-8801 or visit our website.

What are the top 12 causes of a tax audit?

Have you ever been audited by the IRS?  I think an IRS audit is one of those events that most people dread.

Here are 12 audit “red flags” according to Kiplinger’s Personal Finance magazine:

1. If your income is over $200,000.00
2. Failure to report taxable income – report all 1099s and W-2s
3. If you give a lot of money to charity – the IRS knows what people of certain incomes generally give to charity.  If you are claiming too much, it may trigger an audit.
4. Claiming a home office
5. Claiming rental losses
6. Deductions for business travel, meals and entertainment
7. Claiming 100% business use for a vehicle
8. Claiming a loss for a hobby
9. Having a business where most of the money is cash
10. Not reporting a foreign bank account
11. Taking excessive deductions

It’s important that you are able to back up your deductions and be careful of claiming what you can’t prove.  Certainly, you should claim all credits you are entitled to.  If your income is below $49,000,  you can get your taxes done for free at a VITA site.  For a location near you, call 1-800-906-9887.  If you need a paid preparation, check them out with the Better Business Bureau and check with family and friends for a referral.

I have been doing my taxes since my Dad taught me when I was in my early 20s.  I sort everything into separate piles – income, house (mortgage interest and taxes) and charitable giving.  I add, add, add again and leave them for a day or two.  I check them over one last time before I send them. Since our taxes look pretty much the same from year to year, I have never had an audit.  I’m quite certain that I don’t want to.

If you have an interesting story about an IRS audit, I would love to hear it!

Take six steps towards a healthier, happier tax season

It’s that time of year:  income tax season.  You’ve received your tax forms from your employers and financial institutions.  You’ve seen more commercials than ever offering tax filing services.  Your inbox might be full of offers for the latest versions of tax filing software.  And you’ve probably even been waved down by people dressed as the Statue of Liberty!

Kathryn Crumpton is the manager of the Aurora Center for Financial Wellness.

When someone owes us money, we always want it as soon as possible. During tax season, people check their mail, e-mail and bank accounts every day in anticipation of their refunds. Some even choose a “refund anticipation” loan to get their money faster — at a cost.  Is it worth spending money just to get your money?

So, what’s the smart way to go about filing a tax return?

Here are a few things to keep in mind:

• Put together everything you will need to complete your taxes.  Try to have a space allocated for this information that can be accessed during the year. You’ll want to make sure everything is kept together from the beginning.
• Why pay to have your taxes done if you can get them done for free?  If you earn under $49,000.00 a year, you can get your taxes done for free at a VITA (Volunteer Income Tax Assistance) site.  Most sites can file your taxes electronically so you will get your refund sooner.  To find a VITA site, call 1-800-906-9887.
• Choose a reputable tax preparation service. If you use a paid preparer, select one you can contact later in case the IRS has questions about your return.  Check out your preparer through the Better Business Bureau or people who have used them before.  Make sure you ask about fees before you schedule an appointment.
• Be patient for your refund.  Some places offer a refund anticipation loan where you get money from your tax return now and pay later.  These will be harder to qualify for as the IRS will no longer provide your “debt indicator” on electronically filed tax returns.  The debt indicator would inform the preparer if any federal debt was owed that would reduce the tax return.  This type of loan is now riskier for the tax preparer who is looking to be paid back when you receive your return.  Refund anticipation loans can be very costly and with electronic filing, your tax return can be deposited in your account within 10 days. A little patience can save you money.
• Don’t avoid your debt. If you owe money to the IRS or state, send in what you can and make arrangements to pay off the rest.  Filing an extension only delays the inevitable and you will be charged interest and possibly a penalty.
• Be sure to get all the tax credits and deductions you are entitled to. Don’t overlook fair and legal opportunities to reduce your tax burden.

These are just some things to keep in mind when you file your taxes. Of course, I’d also love to know how you’re planning to use your tax return this year.  Are you saving, spending, paying off debt, or investing?

Even if you are not struggling with debt, the chances are you know someone who is. We can help families live well again. Contact an Aurora consumer credit counselor today: call 1-414-482-8801 or visit our website.

What are the top 3 reasons you should be saving money?

Do you have a savings goal this year?  Are you comfortable with the amount of money you have saved so far?

I know I have said it before and I will say it again.  If you want to be successful with money, you need to be able to save money.

Putting money aside for retirement, emergencies and specific goals is important and will get you on the road to financial success.  Let’s look at each of these factors in detail.

No one knows what will happen to Social Security, and really, Social Security shouldn’t be considered your only form of retirement.  Many companies use to offer their employees a pension plan that would pay them a portion of their salary when they retired.  These plans were called “defined benefit” plans because you knew what to expect when you retired.  More employers are providing their employees with a defined contribution plan which means they make a contribution to the employees plan (usually yearly) and when you retire, you have the vested balance available to you.

If your employer allows you to make a contribution to your plan – do it.  If they match a portion of what you put in, than put in as much as you need to in order to get the full match.  There are several websites that can help you determine how much to save to match the amount of money you want when you retire.  Just Google “retirement calculator” and take your pick of websites.

An emergency fund is also important.  This money should be liquid and easy to get to when you need it.  This will also cut your dependency on credit cards.  When I was a kid, people saved for that “rainy day.”  With the availability of credit cards, savings has been replaced by the available credit we have on our cards.  The balance on this account will rise and fall as it is used.  That’s okay, just strive to have enough in there at all times to cover three months of rent or mortgage payments.

Specific goal accounts are used to fund short and long-term goals.  You may have an account to cover a child’s education or an account to purchase a home.  It might be an account for vacations or furniture or holidays.  If you have several goals, you may want to have separate accounts for each goal.

I know that times are tough. I know that every dollar you make may need to go towards your current debt payments and living expenses.  That’s why it is important to review your budget to see what you can change to allow you to save.  Look for ways to save — not for reasons why you can’t.

For example, it’s tax season — why not use money from a tax return to open your emergency account?  Even a small contribution every paycheck can add up by next year.

Whatever you do, remember the old saying: where there’s a will, there is a way.

Even if you are not struggling with debt, the chances are you know someone who is. We can help families live well again. Contact an Aurora consumer credit counselor today: call 1-414-482-8801 or visit our website.

When does compulsive gambling become a crisis?

Do you gamble?  Do you gamble on a regular basis or just an occasional lottery ticket?

Some people are doing a whole lot of gambling inWisconsin. The Wisconsin Council on Problem Gambling 2011 Report stated that the average amount of debt for callers to the hotline last year was $157,000.

And that’s just the average amount of debt!  Some have less, while others have more.

I have always said that if I did needlepoint, I would embroider the following and hang it in my office:  Desperate People Do Desperate Things.  I believe that gambling beyond one’s means is an act of desperation.

Yes, gambling can be an enjoyable form of amusement — when it’s not affecting your financial wellness. When gambling goes from casual entertainment to an addiction, it doesn’t take long before things start spiraling out of control.  Like other addictions, gambling can destroy finances, marriages, careers and families,  cause people to hate themselves, and even lead to suicide attempts.

Gambling is not a realistic way to get rich nor is it a substitute for putting money into a retirement account.  It should be looked at as entertainment and no more should be spent than what would be budgeted for an evening of entertainment. It should be fun whether you win or lose.  Keep track of the emotions you feel when gambling and if you begin to feel like you are losing control, stop.  Think about those feelings and how they are affecting you.

Several years ago,  I had a woman come into my office wanting to pay off her credit card debt.  During our appointment, she told me the debt was incurred casino gambling.  We worked out a plan to pay off her credit cards and I told her that I could get her out of debt, but I couldn’t keep her out of the casino.  She told me that all she wanted to do was to borrow money from a friend and go back to the casino to win her money back.  I set her up with an appointment with a therapist, but she never went and she never returned my phone calls. The casino was filling a void in her life that was left when her husband died. I often wonder — and worry about — what happened to her.

If you are feeling that your gambling is out of control or you know someone in this situation, please contact the Wisconsin Council on Problem Gambling.  They can be reached at 1-800-Gamble5 (1-800-426-2535).  There is a lot of great information on their website, including this quiz:  Are you a compulsive gambler?.

Even if you are not struggling with debt, the chances are you know someone who is. We can help families live well again. Contact an Aurora consumer credit counselor today: call 1-414-482-8801 or visit our website.

Can saving money really be as simple as “feeding the pig?”

Are you between the ages of 25-34?  If so, are you concerned about your financial future?

You may have seen TV interviews with young adults in this age range, who are becoming very concerned about their current financial situation and what the future holds for them. You may also start seeing or hearing an ad campaign called “Feed the Pig.”

This isn’t an invitation to play “Farmville” with your friends on Facebook.  “Feed the Pig” is all about saving money and motivating you to do so.  It is geared to the 25-34 year olds who are also known as “career-builders.”  The Feed the Pig website offers lots of tips to save money.  You can even sign up to get daily tips on your cell phone.  If you feel like you aren’t saving enough, this website may just be your way of starting.

Its becoming harder and harder to save money. Prices are rising and wages are not always keeping pace.  If your plan is to put whatever is left over at the end of the month into a savings account, I think you might find that there isn’t anything left over at the end of the month to save.  You need to make saving money a priority and set up a plan to make sure it happens.

Probably the easiest way to save is to have the money taken out of your paycheck and deposited into a savings account.  If that’s not possible, look into having a certain amount taken out of your checking account and put into a savings account. We tend to live paycheck to paycheck. Your best bet is not having the money available to spend in the first place.

A few years ago, I had $50.00 taken out of every check and deposited in the Aurora Credit Union.  Last year, I took $2,500.00 out of the savings account and opened a one-year certificate of deposit at the credit union.  I have never taken money out of either account and when I got my statement the other day, the balance of the savings account and CD is almost $5,000.00. I don’t miss the money and so far I haven’t needed it.

I have another emergency account that I do put money in and use for emergencies – like the dryer that died and the garage door that needed to be replaced.  That account took a beating last year, but at least I had the money and didn’t need to use credit.

Whenever I teach a class on personal finances, I always tell the audience that if they want to be successful with money, they have to save money.  That’s really true for everyone.

Think about saving money in three categories:

• Retirement
• Emergencies
• Specific goals  

I’ll discuss these more in my next blog!

Even if you are not struggling with debt, the chances are you know someone who is. We can help families live well again. Contact an Aurora consumer credit counselor today: call 1-414-482-8801 or visit our website.

Do you have the resolve to keep your financial resolutions?

As 2012 begins, let’s stop and reflect for a moment:  did you actually achieve any of the New Year resolutions you made at the beginning of 2011?

As we begin a new year, many of us will make resolutions or promises to improve ourselves.  Maybe you want to lose weight, exercise more, stop smoking or reduce debt.  These are all worthy goals — but most of them will be broken by Valentine’s Day.  Making a promise is only good if you have a plan in place on how to achieve those results.  So if your plan is to reduce your debt, how will you actually do that?

First, take a look at your whole financial picture.  Who do you owe, how much and what are the payment arrangements.  Is there any extra money in your budget to accelerate your payments?  Will you use some or all of your tax return to pay down debt?  Will you be able to put some money aside into a savings account so you won’t be dependant on credit cards?  If you have a partner who you share money decisions with, are they on board with your goal?  It’s not enough to just have a plan in your mind, you need to write your plan down and keep a journal as to how you are doing to achieve your goal.

Make sure your goal is achievable.  Have small measurable steps to achieve your goal.  Celebrate your achievements, but not in a way that will have a negative impact on your goal.  For example, if your goal is to save $10.00 a week, don’t celebrate by taking the money out of the savings account and going out to dinner.  Or if you lose 10 pounds, don’t celebrate by eating a carton of ice cream and a family size bag of chips.

Think of goals as a way to make your wishes come true.  Many times there are sacrifices on the way to obtaining your goals.  Saving money may mean brown bagging a lunch instead of eating out.  Losing weight may mean eating less carbs and more fruits and vegetables.

I believe that most everyone wants to be financially successful and that might mean different things to different people. It may mean the ability to meet all financial obligations each month.  Or it may mean having a comfortable savings account.  It may mean being totally debt-free.  Whatever it means to you is what you want to accomplish and it may take years to get there.  Unless you have a written plan that you follow, recording your successes and road blocks, it probably won’t happen.

It can happen.  And you can start today.

Are you ready?

Even if you are not struggling with debt, the chances are you know someone who is. We can help families live well again. Contact an Aurora consumer credit counselor today: call 1-414-482-8801 or visit our website.