Posts Tagged "personal finance"

Aerial photo of a row of houses

Many Demands on Middle Class Paychecks

Ask middle-class Americans how they’re doing, and you’ll often get the same answer: there are still too many demands on my paycheck.

Several recent surveys reach this conclusion, even though wages have been rising consistently at a time of low inflation.

Student loans trump 401(k)s. Two top financial priorities are in conflict: student loan payments, which people described as a “burden,” and saving for retirement, which they viewed as “important” in a TIAA-MIT AgeLab survey.

The debt seems to be winning: three out of four adults paying off student loans say they would like to increase how much they save for retirement but can’t do it until their loans are paid off – and that can take years. One woman described her loans as “draining” her finances.

A promising sign on the horizon is that some employers are finding creative ways to help employees pay down college debt, giving them more leeway to save money in their 401(k)s. But these efforts impact a small number of workers, and the amount of debt continues to rise year after year for every age group, from new graduates to baby boomers who helped send their children and grandchildren to college, a Prudential study found.  

Buying a house isn’t an option. The good news is that about half of Millennials already own a home. Most of the others want to buy a house but can’t afford it, 20- and 30-somethings told LendEdu in a survey. Their top reasons were student loan and credit card payments and a lack of savings, which is the flip side of having too much debt.

Millennials are also putting off other goals until they get a house – marriage, children, even pets. “It’s quite obvious that this uphill battle” and debt “is having secondary effects,” said LendEdu’s Michael Brown.

Medical debt looms large. Americans borrowed $88 billion last year to pay their hospital, doctor, and lab bills. That debt fell hardest on the 3 million people who owe more than $10,000, according to an estimate by the Gallup polling company and a group of healthcare non-profits. …Learn More

Social Casinos: Stay Far, Far Away

This report about online casinos is incredible.

The PBS Newshour reports that these gambling websites – for poker, roulette and slots – are able to target people who are the most vulnerable to gambling addiction. The video features a site that assigns VIP status to encourage vulnerable customers to keep playing.

That’s not the only problem. Customers pay real money to buy chips to gamble or cover their losses on the gambling site. But when the customer wins, the website “do[es]n’t pay real money. They only…give you virtual chips to continue to play on their apps,” said a Dallas woman who said she lost $400,000 while gambling online.

Only 1 percent of Americans are gambling addicts, so the problem, while very serious for them, is not widespread. However, in the video, Keith S. Whyte of the National Council on Problem Gambling said that online social casinos are far more addictive than brick-and-mortar casinos.

Whyte said these social casinos are not regulated. The social casino profiled in the video said that it strives “to comply with all applicable standards, rules and requirements.” …Learn More

Magnifying glass over the words 'life insurance'

Prevent Life Insurance Surprises

Angela Mahany was completely in the dark about how complicated her late husband’s finances had become.

Dick Mahany, in a loving effort years ago to make sure she would be set financially when he died, had borrowed money from a whole life insurance policy that had built up a cash balance to buy a term life insurance policy payable at his death. But when he used up the whole life policy’s value, he had to come up with enough cash to pay the premiums for both policies.

Angela discovered her husband had been doing this just a few months before he passed away in February 2017. By then, he was suffering the effects of Agent Orange exposure during the Vietnam War and could not help her figure out how to pay the premiums.

“When I was all of a sudden responsible for the finances, it blew my mind,” Angela Mahany, 73, said.

Her finances were far more complicated than the circumstances most people can expect to face when they become widowed. But being uninformed about the life insurance is not unusual.

“A husband wants to be in control, and he’ll take care of things,” said Paul Brustowicz, a former insurance agent and a grief counselor at his church. “The problems occur when he does not tell his wife about everything or what’s been done. Of course, this can also happen to a widower, if his wife handles the finances.”

Brustowicz recalled one woman who walked into the insurance company where he used to work and informed the receptionist that she could no longer afford the premiums on her deceased husband’s life insurance. The clerk looked up her policy number and confirmed her suspicion about the widow: rather than owe any money, she had $25,000 in death benefits coming to her. “The wife had no idea,” Brustowicz said. …Learn More

Photo of tornado damage in Beavercreek, OH

Why Americans Can’t Come Up with $400

In Beavercreek, Ohio, the cleanup from a recent tornado has begun. But debris is still piled high on many residents’ lawns.

“What we’re seeing following this tornado is people not having enough cash to pay upfront for house debris removal even though insurance companies will reimburse them,” former mayor Brian Jarvis said on Twitter. The debris cleanup comes on top of other costs like temporary housing in this city east of Dayton.

Much was made recently of a survey in which four of every 10 American families said they could not cover an unexpected $400 expense. But no one explained why. New research has some answers.

Even when people have $400 in their checking or savings accounts, they don’t always feel like they have the money to spend. That’s because they may have already committed the funds to paying off their credit cards, according to an analysis by Anqi Chen at the Center for Retirement Research.

This problem isn’t confined to low- and middle-income people either: 17 percent of households earning more than $100,000 would have to scramble to find the extra $400.

The study uncovered what cash-strapped families have in common. …Learn More

Stars and stripes

Happy Independence Day!

Here’s the back story to your barbecued chicken and grilled hamburgers.

On July 4, 1777, Philadelphians marked the first anniversary of independence from the British with a spontaneous celebration. Future president John Adams described the ships parading on the Delaware River that day as “beautifully dressed in the colours of all nations.” In the aftermath of the Civil War, freed slaves turned the Fourth into a celebration of their emancipation.

If you have the day off from work, thank Congress for declaring the Fourth a federal holiday in 1870. Enjoy! …Learn More

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Check Out Our Retirement Podcasts

Thousands of baby boomers retire every day and sign up for Social Security. Yet the payroll tax that funds their benefits is being levied on a shrinking share of workers’ aggregate earnings.

You might not know this but inequality and growing U.S. trade with China are among the forces that are behind this trend, Gal Wettstein explains in a new podcast about his research for the Center for Retirement Research (CRR).

This is the latest in a series of podcast interviews in which CRR researchers talk about their work on issues related to work, aging, and retirement. The podcasts are hosted by yours truly.

Others explore how motherhood reduces women’s Social Security benefits, the limited impact of cognitive decline on older workers, and the disparate impact of the same retirement age on different types of workers.

The podcasts – “CRR essentials” – are available in iTunes and online on the Center’s website. …Learn More

Young woman with piggy bank

Savings Tips Help Millennials Get Serious

This is young adults’ financial dilemma in a nutshell: you’re well aware you should be saving money, but you admit you’d rather spend it on the fun stuff.

Yes, paying the rent or student loans every month takes discipline. But it isn’t enough. Even more discipline must be summoned to save money, whether in an emergency fund or a retirement plan at work.

Tia Chambers' headshot

Tia Chambers

Tia Chambers, a financial coach in Indianapolis and certified financial education instructor (CFEI), has put some thought into how Millennials can overcome their high psychological hurdles to saving.

The 32-year-old lays out six doable steps on her website, Financially Fit & Fab, which she recently elaborated on during an interview.

Get in the right mindset. “It is the hardest part,” she said. “When I speak with clients, money is always personal, and it’s also emotional.” The best way to clear the emotional hurdles is to keep a specific, important goal in mind that continually motivates you, for example buying a house. Or create a detailed savings challenge, such as vowing to save $1 the first week, $2 the second week, $3 the third week, etc. This adds up to $1,378 at the end of the year, she said.

Cut expenses. Some cuts are no-brainers. Scrap cable for Hulu and Netflix subscriptions. Drop that gym membership you never use. The biggest challenge for young adults is saying no to friends who want to go out for dinner or drinks. Chambers suggests enlisting your friends to help – after all, they’re probably spending too much too. She and her friends have agreed to go out one weekend and save money the next weekend by hanging out at someone’s apartment. Another idea is happy hour once a week instead of twice. …Learn More

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