Author Archives: femmefrugality

Alternatives to Payday Loans

Super smart alternative to payday loans!

Ever had a car break down with no other way to get to work?

How about an unexpected medical expense?

Want to fly home to help out in a family emergency, but don’t have the cash on hand for a plane ticket?

In all of these instances, you should turn to your emergency fund. Ideally, you already have one that holds enough money to cover 3-6 months of expenses.

Realistically, though? Only forty-one percent of Americans turn to their savings account in a time of financial emergency. That means that over half of us are using alternative methods to get through rough fiscal periods, and all too often we look at high-interest financing as the solution.

In these situations, one of the better solutions is a personal loan. They can be used for just about any expense you may incur and the interest rates tend to be significantly lower than other financing options. Let’s compare.

Credit Cards vs Personal Loans

If you have a line of credit available to you, it really can be a lifesaver. Charging your emergency is only viable, though, if you can pay it off in full before it accrues any interest.

Many credit cards charge 15.99%-24.99% APR. Currently, PenFed Credit Union offers personal loans for rates as low as 9.99% APR.  That’s a major difference in interest rates.

On top of that, when you take out a personal loan, you’re paying a fixed balance. Every month that you pay your fixed monthly payment, your balance will go down and a set portion of your payment will go towards interest.

Credit cards have no fixed monthly payments. While minimum payments are required, these amounts are dependent on your balance. If you can pay your balance off quickly, you’ll pay less interest than if you only chipped away via minimum payments. But if you could pay it off quickly, you probably wouldn’t be charging an emergency in the first place.

Cash Advances vs Personal Loans

Sometimes you may not be able to charge your next big expense. Let’s say you spent $1,000 on your latest emergency, but now you need to pay rent. It is also $1,000, and because of your own series of unfortunate events, you don’t have the cash on hand to write the landlord a check.

In these situations, there is a common temptation to yet again pull out the credit card—this time for a cash advance. This is even less advantageous than charging your card. Cash advances typically come with associated fees.

They also charge interest. While the rate is usually the same as for traditional purchase, you don’t have the luxury of waiting for your statement to close and become due before interest accrues. On cash advances, interest starts building up the day you make your purchase.

So to review, with a cash advance, you’ll start incurring interest right away, making it more expensive than charging something to your credit card as a purchase. In many situations, you’ll also have to pay cash advance fees, making it even more expensive.

Because the personal loan in our example is cheaper than purchasing on a credit card with minimum payments, it is most certainly cheaper than doing the same with a cash advance.

Payday Loans vs Personal Loans

If it is ever at all humanly possible, stay away from payday loans. Their interest rates are usually significantly higher than personal loans offered by credit unions or banks. Also, the computed interest rate could be triple digits.

For example, you may see rates advertised as a “low 15%”, but what these companies don’t advertise is that the interest is charged weekly. That makes your effective APR 400%.

Four hundred percent.

Exhaust the personal loan option first. Remember in our example that the effective rate on a PenFed personal loan is as low as 9.99% APR, and the payment structure is far more reliable than payday loans, which often balloon even higher with excessive fees that are unfortunately easy to accrue.

Note: If you need to borrow less than $500, you may not qualify for a personal loan. That does not mean you should turn to a payday lender. Check out this alternative.

Build Your Emergency Fund

If you don’t have an emergency fund, you’re obviously not alone. But that doesn’t mean you can’t start to improve your financial situation today.

Even if you live paycheck-to-paycheck, you can start socking small amounts of money away quickly. If 3-6 months’ worth of expenses sounds like too big of a number, set a lower goal. Maybe $500. Maybe $1,000.

Once you’ve reached your goal, by all means keep going. But by setting something achievable from the start, you’re more likely to stick with it.

Fun fact: If you set aside $25 every other week, you will have a $650 emergency fund after twelve months—not bad!

This post is in collaboration with PenFed Credit Union.

To receive any advertised product, you must become a member of PenFed Credit Union

Rate and offers current as of April 21, 2017 and are subject to change. Federally insured by the NCUA.

 

Frugal Ways to Teach Your Children Literacy

Number one is such an awesome freebie! Can't wait to implement these five frugal ways to teach literacy.

Literacy–and education in general–is very important in our house. We’ve been reading books to our kids since before they could sit up. We’ve been encouraging them to practice writing their letters since before preschool.

And it’s paid off. My kids can now either read or sound out words, depending on the child and their age. It’s an amazing thing to watch. One moment you have this tiny little baby who can’t do anything for themselves, and a few short years later they have the skills they need to consume any bit of knowledge they seek after. I’m simultaneously proud and awestruck.

Along the way, we’ve used some tools that have been super helpful. They just happen to be pretty darn frugal, too.

ABCmouse

ABCmouse.com has been one of our favorites since toddlerhood. It’s a curriculum disguised as a computer game, built by educators. The kiddos actually beg me to play it.

Not only has it been a huge help in teaching them how to read, but it’s also been great for teaching them computer literacy. A year-long subscription is affordable as far as I’m concerned, but you can check and see if it’s a good match for your kids by trying it for free for 30 days.

Super Why

Super Why: Puppy PowerTrue story: sometimes our kids watch TV. We noticed that after they started watching Super Why their interest in reading in general skyrocketed. It’s not like they weren’t interested at all before, but they started working harder at things like writing their letters and learning what the heck a “rhyming word” was.

We did this for $0 through Netflix, but the program will likely get rotated out eventually. You can also find episodes at Barnes & Noble.

Alphabet Magnets

Uppercase and Lowercase Magnetic LettersBefore they could write, we would practice “writing” their names on the fridge with their alphabet magnets. As they got older, we started using them to sound out words. Today, we’re using them to sort out when to use a capital and when to use the lowercase.

We got ours for free at the library, but you can find an affordable set via Discount School Supply.

Magnetic Doodle Board

The Doodle Pro SlimOur magnetic doodle board was the number one thing that encouraged our kids to work on their fine motor skills–which enabled them to write letters. While we’re definitely going to work on writing more legibly with lined paper, this device is what sparked interest at all.

Our first was a hand-me-down, and the second was a birthday gift. You easily find one for under $25, though, if you’re buying new.

The Library

Frugal tools to teach your kids literacy

The library, of course, has been our number one tool to teach our kids literacy. Every time they go, they have the freedom to pick out a book that meets their current interests. When they were younger, we did weekly story time. Every year, we participate in the summer reading program. As a reward, the library gives them a book to take home for keeps.

The best part of the library? It’s absolutely free, and odds are, there’s one near you.

How to Invest in ABLE Accounts

In honor of Autism Acceptance Month, Femme Frugality is running a series of Monday articles focusing on the triumphs and challenges those diagnosed with autism conquer as related to their finances and careers.

Joining us for the third post in our series is Tara Falcone, CFP®. Falcone is a CERTIFIED FINANCIAL PLANNER™, former Wall Street analyst, and founder of ReisUP LLC.

ReisUP is an early-stage financial services company dedicated to increasing investing education and access for everyday investors. Her mission is to empower people to “rise up” and play a more active role in achieving their financial goals. 

Totally sending this to my sister! How to invest in ABLE accounts.

A couple of weeks ago, we kicked off our Autism Acceptance Series by looking into a new financial vehicle: ABLE Accounts.

ABLE accounts allow individuals with disabilities, or their guardians, to stash away some money without having to worry about failing an asset test when they go to apply for state or federal benefits. These accounts can also be used to grow your savings tax free.

There are currently nineteen states that offer ABLE accounts. For simplicity’s sake, we’ll be looking at only Pennsylvania’s investment options today, though the same concepts can be applied in generality.

What are ABLE investment options?

The PA ABLE account has the following seven allocation options:

  • High-yield checking account
  • Conservative Investment Portfolio
  • Moderately Conservative Investment Portfolio
  • Moderate Investment Portfolio
  • Growth Investment Portfolio
  • Moderately Aggressive Investment Portfolio
  • Aggressive Investment Portfolio

“The Conservative and Moderately Conservative options invest 70-90% of their portfolios in cash and bonds, with the rest (10-30%) invested in a variety of stocks,” says Tara Falcone, CFP® of ReisUP LLC.

“The primary goal of these investment options is to preserve your principal, which is the money you deposit into your ABLE account, while offering limited to small returns on your investment. Small potential risk equates to small potential reward.

“The Moderate and Growth options’ portfolios are split roughly 50/50 between bonds and stocks. These investment strategies focus less on principal protection and more on generating a slightly higher return on the invested assets. Moderate potential risk means moderate potential reward.

“Finally, the Moderately Aggressive and Aggressive options are invested primarily in stocks (75-90%) with a small portion of the portfolios invested in bonds (10-25%). These options’ primary goal is to achieve the highest growth possible with little regard for principal preservation.”

Figure Out Why and How to Invest

Before making any investment, it’s important to identify why you’re investing, and what limitations your specific life situation may impose. Falcone advises looking at the following factors before choosing your allocation strategy.

Risk Tolerance

Investments are not stagnant. At times they’ll go up, and at others they’ll go down. Your risk tolerance is how much sleep you’ll lose over that fact.

“Generally, more conservative investment options are less volatile, meaning your account balance fluctuates less,” Falcone explains. “However, that also means it’s unlikely to grow as much since less risk yields less reward.”

“Meanwhile, aggressive options typically generate larger investment returns, but also subject your account balance to bigger positive and negative swings. This could put you at risk of not having sufficient funds to cover expenses when you need it.”

Time Horizon

How long can you let your money sit without touching it? That’s your time horizon.

“If a beneficiary needs to access a large portion of his or her ABLE account every year to pay for qualified expenses, a conservative investment strategy is likely more appropriate,” explains Falcone. “If someone in this situation were invested more aggressively, they may discover that their account balance has decreased in a market downturn, leaving them unable to pay for current expenses.”

If, however, you’re saving to provide for your child after you’re gone, you may have a longer investing horizon.

“Someone with a longer investing horizon who doesn’t need to withdraw a large portion of their account for five or more years may want to consider a moderate or aggressive option,” says Falcone.

“The larger growth potential inherent in these investment strategies could allow that person to take greater advantage of the tax-free growth nature of ABLE accounts. In this case, the beneficiary should consider reallocating to a more conservative strategy as the time when they will need to withdraw money from their account approaches.”

Savings Ability

“In theory,” Falcone continues, “the more someone can deposit into their ABLE account every year relative to their expected expenses, the more aggressive they can afford to be from an investment perspective.”

Check out this example with Ella and Ari:

This article is PACKED with helpful info for people deciding how to invest in their ABLE account for people with "disabilities."

 

Overall Goal

There are two basic reasons ABLE accounts are so attractive. The reason you were drawn to it probably says a lot about your overall goal.

Reason #1: Savings isn’t counted for asset tests.

If you’re applying for government benefits like Medicaid or SNAP, savings in your ABLE account will almost never count against you. This is important when you’re trying to build up savings for medical equipment, therapies, or even just a basic emergency fund that you will need in the near future. In these cases, Falcone notes that a conservative approach is probably the best fit.

Reason #2: You’re taking advantage of the tax-free growth.

If you’re saving for your child’s future but don’t have a large enough nest egg to justify a special needs trust, ABLE accounts are particularly attractive due to their tax-free growth. Falcone notes that any time you’re making a longer-term investment, you can afford to be more aggressive.

It is possible that you’re taking advantage of both perks. You’re saving large sums of money for a date far off in the future, but are only able to do so because that savings won’t count against you in an asset test. In these cases, Falcone says you can yet again afford to be more aggressive.

Risk Capacity

While risk tolerance is how you feel about the volatility of your investments, risk capacity looks at the risk you can take on from a concrete, objective perspective.

“Due to the assets test that owners/beneficiaries of ABLE accounts must pass in order to qualify for Medicaid and other social programs, risk capacity is arguably the most important factor to consider in these unique circumstances,” notes Falcone.

“Asset tests often prevent families with disabilities from building substantial emergency funds that could cover expenses temporarily should the ABLE account balance drop in a market downturn. Therefore, even though someone may be comfortable with more investment risk, he or she may not be able to afford being exposed to such risk due to lack of other cash sources.”

If you have friends and family who want to contribute, but you also want to extend your investment time horizon, you may want to direct them to specific bills that they can pay rather than making contributions to the ABLE account.

Falcone points out that this keeps your money in your account as a long-term investment while keeping it out of your regular checking account where it would be counted in an asset test.

How should I invest with my ABLE account?

Wondering what you should do in your specific situation? Below you’ll find Falcone’s recommendations for some common circumstances individuals or families may find themselves in.

While this advice speaks to generic situations, it’s always advisable to talk with a professional about your own, unique set of circumstances before making any investment.

High-Yield Checking Account

  • Someone with no risk tolerance. They are not willing to put any of their funds at risk to earn even a small return.
  • Someone who needs the ability to withdraw funds immediately. Otherwise, withdrawal proceeds can take 3-10 days to reach the beneficiary in Pennsylvania, per the Program Disclosure Statement.
  • Someone who is already the beneficiary of a special needs trust or has some other fund/account/support to help pay for future expenses. They don’t need the benefit of the tax-free growth nature of an ABLE account, but want to shelter more funds from the asset test.
  • A disabled adult with current cash need, desire to shelter some assets from the asset test, and/or desire for some financial independence to purchase/pay for things on their own.

Conservative Investment Portfolio

  • Someone with very low risk tolerance.
  • Someone with no or insufficient emergency fund (i.e. low risk capacity.)
  • Someone with potentially large unexpected expenses.
  • Someone with a present need for cash (i.e. short investing horizon of less than 2 to 5 years.)
  • Someone whose primary goal is to shelter funds from the asset test, not earn a substantial return on those funds.

Moderately Conservative Investment Portfolio

This investor will display similar criteria to Conservative, but is willing to give up some principal protection for slightly more current income.

Moderate Investment Portfolio

  • Someone with moderate risk tolerance and moderate risk capacity.
  • Someone with high risk tolerance and low risk capacity. They’re comfortable with volatility, but can’t necessarily afford to lose money in the short-to-medium term.
  • Someone with low risk tolerance but high risk capacity. They’re not as comfortable with investment volatility, but can afford to take on some risk to earn a potential return.
  • Someone with infrequent but potentially large unexpected expenses.
  • Someone with a medium-length investing horizon of 5 to 20 years–perhaps a parent saving for their child’s future expenses, including education.
  • Someone who wants their money to earn a slightly higher return.
  • Someone who has access to other cash sources or temporary support in the event of a market downturn.

Growth Investment Portfolio

Will display similar criteria to Moderate, but is willing to take on slightly more risk for slightly more capital appreciation potential.

Moderately Aggressive Investment Portfolio

  • Someone with a high risk tolerance.
  • Someone with a high risk capacity (i.e. sufficient emergency funds or other cash/support sources.)
  • Someone with a long investing horizon and desire to benefit most from ABLE’s tax-advantaged growth. This could be parents who want to set aside funds for their child’s future needs and want those funds to earn a substantial return.
  • Someone who already has a special needs trust or is seeking an alternative to a special needs trust. One example is parents with a young disabled child or young adult.
  • Someone who has a low savings capacity now, but a large future capital or income need. One group that may fit this profile is parents wanting to establish a fund to pay for their child’s needs upon their death.

Aggressive Investment Portfolio

These investors will display similar criteria to Moderately Aggressive, but to a larger extent for each point. Even more comfortable with risk, even longer investing horizon, even greater future income or capital need, even more sources of additional support, etc.

Evaluate, but don’t mix and match.

Falcone advises against investing in multiple different portfolios at one time.

“Allocate 100% of your account balance and future contributions to whichever investment option you choose,” she says. “Mixing them changes the overall allocation and therefore the resulting investment strategy. For example, allocating half of your account to the Conservative option and half to the Aggressive option results in a combined portfolio similar to the Moderate investment option.”

She says the only exception would be if you needed some cash on hand in the high-yield checking account, but wanted to invest the surplus.

Falcone leaves us with these final words of wisdom:

“No matter which option you choose, make sure to re-evaluate your choice every year and make appropriate adjustments if your circumstances and/or goals have changed.”

Getting the Most Out of Pregnancy Health Insurance

Holy shoot. I wish I had gotten more out of my pregnancy health insurance now. Spent so much of my own paycheck unnecessarily!

There are a lot of health care costs to manage when you’re expecting. If you have purchased short term disability to cover income while you’re on maternity leave, or hospital indemnity insurance to cover things like hospital admission or NICU costs, you’re likely paying even more.

These policies’ premiums generally aren’t too insane, and it’s common for employers to bring in a salesman once a year to try to sell them to you as a benefit. Depending on your near-future plans they can be a good price/value ratio.

While you’re paying out insurance premiums, make sure you’re taking advantage of every last benefit.  Here are a couple ways to get the most out of your pregnancy health insurance that most expecting mothers don’t think to ask about.

Get Your Breast Pump Through Health Insurance

The ACA requires insurance companies to cover breast pumps. TRICARE and most state’s Medicaid plans also cover this benefit. There are a few private insurers that are still trying to catch up with the law, but odds are your policy should be paying instead of you.

If your pregnancy health insurance policy doesn’t cover a breast pump for you to own, odds are it will cover breast pump rentals.  Especially while you are in the hospital, and especially if you and baby are having feeding problems or any other health issue that is preventing breast feeding.

While it’s great to have coverage, filing even more insurance paperwork while you’re pregnant doesn’t exactly sound like a fun time. Luckily, medical equipment providers will often handle the insurance and prescription nightmare for you. I was so glad for this when I had my kids.

One such medical equipment provider that operates in almost all of the contiguous United States is Aeroflow Breastpumps. They make the process super easy–all you have to do is fill out a single, one-page form.

This video shows you what they do on the back end from there. The fact that they take all of this work off of your plate is a beautiful thing:

Pregnancy Rewards Programs

Many insurance policies also come with rewards programs. These programs are usually set up so that if you’re taking good care of yourself during pregnancy–by doing things like taking your prenatal vitamins and going to all of your doctor’s appointments–you get some type of baby gear.

The three most common things I’ve seen are:

  • a free stroller.
  • a free pack ‘n’ play.
  • a free car seat.

Call and ask your provider if they offer anything like this.  Any one of these items can easily set you back at least $100 if not more, and none of them are the greatest things to buy used.

 

Want more? Check out other potential hidden benefits in your health insurance plan.

 

This post originally aired on Femme Frugality on January 11, 2013. It has been revamped to reflect changes in health care law with the support of Aeroflow Breastpumps.

Free Entrance to National Parks in 2017

This is incredibly useful and is going to save me some money! It tells you how to get into national parks for free--in the US and Canada.

Over four hundred of America’s national parks are free everyday.  But 118 of them aren’t.  Luckily, the park system does offer free days, so you can go enjoy our beautiful country while remaining completely and totally frugal.

National Park Free Entrance Days for 2017

This weekend is one of those times. On Saturday and Sunday, you can get into any national park for free. Here are the rest of the free days for 2017:

April 22-23, 2017

All of the free days in April are in celebration of National Parks Week.

August 25, 2017

Parks will be open for free in recognition of the National Park Service’s Birthday.

September 30, 2017

Admission will be free in honor of National Public Lands Day.

November 11-12, 2017

Enjoy some of that free fall foliage on Veterans’ Day Weekend.

Which National Parks require an entrance fee?

I’ve been lucky to travel a good bit in my time. National parks always bring such a sense of awe and wonder. It’s one thing to wander around in the wood in your backyard. It’s a completely different thing to spend time in pristine, protected wilderness.

Some of my favorites national parks that will be waiving their fees on free days are:

There’s a ton of others, too. I was surprised to find the ones in my own back yard that I never knew existed. To find some near you, you can check out the National Park Service’s website.

Free National Park Admission in Canada

If you happen to be visiting our neighbors to the north, you should know they have some pretty amazing national parks, too. Canada is celebrating it’s 150th birthday this year, and in honor of that fact, they are giving away national park passes for free.

The only catch?

You have to get your pass in advance.

 

We’d love to hear about your national park experiences! Tell us about them in the comments section.

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