Partners in BALANCE (May 2016)

Summer Spending Tips

Everybody loves summer, right? School’s out. Students are graduating. Friends are getting married. And everybody’s thinking vacay! Trouble is, the costs for all that fun can add up and sink your savings goals in the process. The good news is that with a little planning, you and your family can enjoy all that summer has to offer, without busting your budget.

Consider these summer spending tips:

1. Visit During the Off-Season
If you couldn’t swing Thanksgiving in Arizona or Christmas in the tropics, summer’s your time to visit. Destinations like these, that draw big crowds in winter, tend to slow down in the hotter summer months. If you can take the heat, you can snag some great deals during the off-season.

2. Try Camping
If you stock up on all of the newest gear, even camping can be expensive, but many outdoor retailers rent all the basic equipment you’ll need for a campground getaway. Some even offer free workshops to show you the ropes of pitching a tent and using a cook stove. Take up fishing and save even more on meals while you enjoy the great outdoors.

3. Skip the Cash Gifts
While it’s true that cash is a one-size-fits-all gift for new grads, it’s not very personal. And if you’ve got lots of students to remember, you could easily zero-out your checking account. Instead, consider giving each of the students in your life a book that’s been influential in your life. One that teaches the basics of budgeting, saving and investing would be a great way to get the new grad off on the right foot financially.

4. Make it a Potluck
Backyard barbeques are a summer staple, but when you’re footing the bill for everybody’s burgers, sides, drinks and desserts, the tab can run a little high. Next time you play host, ask each of your guests to bring something. Most people love to pitch in on a party, and even non-cooks can help by bringing things like soft drinks, ice, and disposable dinnerware.

5. Give a Family Heirloom
If you’ll be attending the wedding of a family member, think about putting together a cookbook of family recipes. Or perhaps it’s time to pass on a family heirloom, such as a piece of jewelry.

6. Be First on the Registry
If you’re not related to the happy couple, their online registry will let you know what gifts they’d really like to receive. But don’t wait until the last minute to shop. The day before the wedding, the only “unclaimed” items on a registry are likely to be super-expensive items that only the rich uncle can afford.


Maintain and Save

When we’re looking to save money, the first thing most of us do is scrutinize our every purchase to see where we can squeeze out unnecessary spending. After all, a nip and a tuck here and there can add up to a bundle of savings over time! What many forget, though, is the cost savings that can result from proper maintenance of the things we already own – especially the really high-ticket items, like a home and car, which can be costly to repair and even more expensive to replace.

R. L. Polk reports the average person holds on to a new vehicle for just under six years. That’s longer than it was before the Great Recession, but with the average new car price topping $33,000, it makes good budget sense to find ways to extend the ownership period as long as possible. Just think of the boost it would be to your retirement savings if you bought just one fewer car in your lifetime, and instead directed that cash to an IRA or 401k account!

Here are some simple things you can do to keep your car and other stuff in good shape for the long haul.

Get Regular Oil Changes
Be sure to read your vehicle’s owner’s manual to find out how often oil changes and other preventive maintenance is recommended. Nobody knows more than the manufacturer about what your car needs to continue running properly. Plus, not following the manufacturer’s recommended maintenance schedule could affect your warranty.

Check Tires Regularly
A flat tire’s not just inconvenient and expensive to replace. If not fixed promptly, a flat tire can lead to costly wheel damage. In addition to checking tire pressure monthly, have tires rotated, balanced and alignment checked regularly. Oftentimes, this regular maintenance is included in the warranty for new sets of tires.

Following Cleaning Instructions
If the tag says “dry clean only” believe it! Professional cleaning can add up, so you may be tempted to try laundering at home, but it’s a false economy if it means you ruin an expensive item of clothing. Instead, look at care instructions before you buy and decide then whether or not it’s a smart purchase.

Rotate Your Mattress
Some super-premium beds have different maintenance instructions, but if you have a standard mattress and box springs set-up, you’ll get longer life out of it by rotating it at least twice a year. If you notice sagging sooner, go with a three-month rotation schedule.

Replace AC Filters Regularly
A home’s air conditioning system is one of the most expensive items to replace if it goes bad. Twice-yearly maintenance is a prudent investment, and replacing filters regularly is really important since clogged filters can cause the system to burn-out prematurely.

Maintain Exterior Paint
Shabby and peeling paint doesn’t just make the outside of a home look unkempt. A proper paint job protects surfaces from the sun and weather, and helps ensure that cracks are repaired, preventing leaks and helping to keep destructive pests like termites at bay.


College Planning 101

Most parents have already heard the bad news: a college education has never been more expensive. Many, in fact, are still paying off their own student debt and would like their children to avoid that burden. The good news is that there’s a lot parents can do to help their children and make the costs of college more manageable.

1. Invest in a Tax-Advantaged 529 Account
The 529 account is an education savings account and it’s a fantastic deal to save for education expenses for a child, grandchild, or even yourself. Though contributions to 529s are not tax deductible, the account’s earnings are not taxed when you use the money for qualified education expenses – things like tuition, books and even room and board. Start automatic deposits from your paycheck when your child is young and you could have a substantial nest egg when she’s ready for college.

2. Apply for Financial Aid
You have to be poor to receive financial aid for college, right? Wrong! While many scholarships and grants are needs-based, many other financial aid opportunities are merit-based. So, if your child does well academically, or meets other specialized criteria, she may qualify for assistance even if you are affluent. For example, many colleges and universities have endowments and use this “institutional aid” to attract promising students – and not just athletes — to their programs.

When exploring your options, keep an eye out for scammers. While there are reputable college financial planners, no legitimate scholarship program will require students to pay to apply for aid. And, of course, be wary of any college funding strategy or investment that sounds good to be true!

3. Explore Local Community Colleges
Academically-speaking, community colleges offer a phenomenal value for meeting almost any degree program’s general education requirements. Plus, students at community colleges often benefit from close teacher-to-student ratios, while many university and four-year college GE classes aren’t even taught by full-time faculty. There are also huge savings on room and board when a child attends a local institution and can continue living with mom and dad. Just remember to investigate requirements for transfer students to ensure that preparatory coursework will be accepted by the student’s chosen degree program.

4. Borrow Sensibly
Even with financial aid and parental support, many students will still need to take out loans to pay for college. The key is to limit borrowing to an amount the student can reasonably be expected to pay back in ten years or less. The lower the loan amount, the better, but a good rule of thumb is to borrow no more than the expected first year’s salary.

5. Let Your Child Have Skin in the Game
If the money’s there to pay all of your child’s college expenses, it’s all good. However, parents who skimp on critical goals — like saving for their own retirement – to pay for a child’s education, may never recover from the financial hit. Remember, your child can pay for college with a combination of student loans and work earnings, but you can’t get a “retirement” loan to pay expenses when you’re no longer working!


Is an HSA Right for You?

If you have health insurance coverage through your employer, you probably feel pretty lucky to have it, even if you’re paying higher premiums and higher deductibles than in the past. But how much better would it be if you could set aside money to pay for current and future healthcare costs, take that money with you when you change jobs, and save on your taxes

Sound good? Then meet the Health Savings Account, or HSA.

An HSA allows those with high deductible health plans to set aside money tax-free to pay for qualified medical expenses, like copays and deductibles, as well as items and procedures that may not covered by your insurance – things like eyeglasses, hearing aids, and dental work. When you withdraw HSA funds to pay for these qualified expenses, the withdrawals are tax-free, too. Plus, the interest or other earnings on your HSA are tax-free. For these reasons, HSAs are sometimes referred to as “triple tax-advantaged” accounts.

Who Can Benefit Most From an HSA?
If you’re one of the millions of Americans who are generally healthy and never even come close to meeting their annual health insurance deductible, an HSA could be a great way for you to sock away the cash you’ll need later in life when you’re not so healthy. For those who have max’d out their IRA and/or 401k contribution limits, an HSA can also function as another retirement savings vehicle, since there are no income limits to participate.

Because the account is in your name, it belongs to you even if your employer contributes to it as part of your benefit package. And, unlike Flexible Spending Accounts, HSAs have no “use it or lose it” requirements, so funds accumulate from year-to-year.

For 2016, the IRS limit on HSA contributions is $3,350 for individuals and $6,750 for families, with another $1,000 in catch-up contributions allowed for those age 55 and older.

There are specific criteria, though, to qualify. You cannot be claimed as a dependent on someone else’s tax return. You must be enrolled in a high deductible health plan (HDHP), and that must be your only health coverage. (An HDHP is defined for 2016 as a plan carrying an annual deductible of $1,300 or more for individuals and $2,600 for families.) You must also be under 65, since those enrolled with Medicare can’t contribute to an HSA.

Who Might Not Want an HSA?
Generally, HDHPs carry lower premiums to compensate for the higher deductibles, so the money you might otherwise have spent on higher premiums can go into your HSA. But it can take a while to save up enough money in your HSA to meet your annual deductible requirement.

Even if you’re young and healthy, you could, for example, get into a car accident that would quickly run up medical bills. So, while you build up your HSA, be sure that you’ll have access to the cash needed to pay your full annual deductible if you experience a serious medical event.

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