Author Archives: femmefrugality

The Earned Income Credit: Why It’s Not Cool to Hate on Poor People

Whoa these are some pretty bold but admittedly persuasive arguments. Low-income people are the ones who benefit most from the EIC--major corporations are! Also, I wasn't sure if I'd qualify for this credit since I'm middle class, but it turns out I do.

The Earned Income Credit (or EIC) is a tax credit that’s available to low-income Americans. As it’s a credit and not a deduction, filing for it often results in people getting a refund, and a large refund at that.

It’s been called the biggest cash-assistance program in the country. And you don’t have to be on welfare to get it.

But before you get outraged about this credit that you work so hard and pay taxes to supply, consider this:

  • The people receiving the EIC (or EITC) are working and paying taxes, too. The amount you get refunded is proportionate to the amount you make. It drops off after reaching a certain income, like a bell curve.
  • It’s been argued and proven through research that it actually encourages work rather than collecting welfare.
  • It’s also been argued that it’s a minimum wage subsidy. It’s no secret that big companies own our government.  This tax credit has been issued and renewed by Republicans and Democrats alike over the years. (Think Reagan and Clinton just to name a couple.)

    Instead of raising minimum wage, the government compensates people who live on wages that can’t even accumulate to higher than the poverty line at full-time by giving them back a chunk of money every April. Companies don’t have to pay their workers as much as a result.

    The biggest beneficiaries from this credit are not the low-income recipients, but the mega corporations that aren’t required to pay their workers a living wage.

The minimum wage vs. the cost of living is so disproportionate right now that many states have proposed to raise it to a rate where anyone working  a full-time job would make enough to be above the poverty-line.

Would this be better or worse for low-income workers?  Would it disqualify them from receiving the EIC? Would the raise compensate for the refund lost? It would all depend on how much you’re making and how the tax law changes impact you over the next couple of years.

Want to claim this credit, but don’t know how? Or think you won’t qualify? You’d be surprised. Get free help with your taxes from the VITA program. Or, if you prefer filing online, check out MyFreeTaxes, which is free even for middle-income earners and small business owners.

For example, if you’re one of those imaginary people popping out babies to get the most out of the system, you know that right now you max out your EIC “earning” opportunities with three children. I wouldn’t have a baby this year simply for tax purposes.  Because next season you’ll max out at two.

UPDATE: Since the writing of this post, legislation passed that extended the 3 child limit.

Low-Income Households Aren’t the Biggest EIC Beneficiary

But proportionately there are so few people who work the system as opposed to people who are in the system because they’re really trying to make life work.

The biggest problem in our government spending isn’t the poor.  The bigger problem is the rich who would impose subsidies on everything from sugar cane to the everglades to the minimum wage so that they can make even more money.

And that’s on both sides of the aisle.

Have a little sympathy for those celebrating a brief relief from their struggles this spring.

Featured on JLCOLLINSNH:  VITA, income taxes and the IRS

Being Too Optimistic is Bad for Your Finances

Who would've thought optimism could be bad for your personal finances? I see the point, though. And appreciate these tips on how to infuse your money with some pragmatism, too.

A few months ago we talked about how PTSD can make investors more risk-averse. This was especially worrying for females with PTSD, as women already tend to set their investment goals lower than men while also living longer. Missing out on the gains of riskier investments early on, compounded with already insufficient goals, means you’re a lot less likely to be ready for retirement.

Then, a little over a month ago, I wrote an article that examined why people take on huge loads of debt–even when logic would dictate that doing so would be bad for them. It turns out, one of the factors is your optimism levels.

We all have different levels of optimism, and the more we have of it, the more likely we are to envision good things happening in our future. Which can be good when you’re investing, but not so great when you’re taking on debt. Because the future of your money situation is unpredictable, and you might not be able to repay as readily as you’re anticipating.

That got me thinking about other ways optimism may negatively impact our finances.

Yes, I realize that is an incredibly pessimistic line of thought. But I’m going to relabel it “pragmatic,” because it turns out, too much optimism can be bad for your money in several ways.

Gambling

Optimism bias is when we overestimate the likelihood of positive events.

This is incredibly dangerous when applied to something like gambling, where the odds are quite blatantly not in your favor. Even if you’re familiar with the probabilities of winning mathematically, you optimism bias can make you feel like you’re special, and that if you just play long enough, you’ll be that one person who beats the system.

Investing

Yes, we did just say that being risk averse is a bad thing in investing. However, being overly optimistic can be a bad thing, as well.

Allan Schwartz, LCSW, Ph.D. points out that prior to the Recession, there were warning signs. But optimism bias got in the way for many big investors, so the signs were ignored and the effects of the Recession were magnified.

Business

There’s a lot of ego in entrepreneurship. There has to be. You’re constantly selling yourself and/or your product, and you need people the believe in your value. If you don’t believe in your own value, you’re not going to get clients or investors to hop on board.

However, if you buy too much into this ego–to the point where you believe you cannot fail–you run the risk of ignoring real and significant problems in your business model, product or personal abilities. If you ignore these problems long enough, they will catch up with you–no matter how much you believe in yourself.

Lack of Savings

Extreme optimists are less likely to save money than their more pragmatic peers. The reasoning behind this is simple, and very similar to the reasoning that gets overly-optimistic people into debt: You overestimate your ability to bring in large sums of money in the future.

The Optimistic Ostrich

Have debt? Have a gambling problem? Have zero savings?

Being overly optimistic makes it easier to bury your head in the sand. It makes it easier to pretend like there aren’t any problems.

But we all know what happens when you refuse to acknowledge a problem.

It gets worse.

You debt piles up. You drain the bank account to feed your gambling addiction. When an emergency does happen, you don’t have any funds to cover it.

Burying your head in the sand is a comforting sort of optimism, but it’s not going to help you get ahead or fix the problems in front of you.

Optimism Bias is Still a Good Thing

Almost every study I’ve read on this topic says that despite its drawbacks, optimism bias is still a good thing. Without it, our species may not have made it as far as we have.

Our ability to predict our own death is depressing, but with optimism bias, we’re able to find ways to prevent that death and fight off depression. We’re also willing to take risks that result in progress–either on a personal level or for the entire species.

People who are optimistic in general tend to earn a higher paycheck, and are more willing to take on those riskier investments earlier in their career.

Optimism bias is a good thing for our species in general.

While this same overly-optimistic trait isn’t good for our personal finances, that doesn’t mean optimism is bad. It just means we need to temper our financial optimism with some realism.

We need to look our debt and other money problems square in the face.

While it’s good to believe the future will hold good things for our career, we need to save just in case things don’t work out the way we’re hoping.

While it’s good to believe in your marriage, you also need to prep your finances in case you become one of almost 50% of women who don’t see their 20th anniversary.

While it’s healthy to take risks, we need to draw a line in the sand. One that establishes when the odds are too great to overcome–even for our own optimism.

So go on. Be happy. Believe in a better future. Believe that you can manifest all the money in the world. But don’t believe in it so hard that you allow yourself to think it’s a sure thing. You still have to hedge against risks, even if you think you can overcome them.

Pay Your Science Center Admission with Snow

So cool! If you save a snowball until the summer solstice, you can actually use it to pay for admission at the Science Center in June!

For the past several years, the Carnegie Science Center has been hosting this fun event on the summer solstice. On the solstice, you can pay for your admission—in snow!

How to Pay for Your Science Center Admission with Snow

If you bring in a snowball on June 21, 2018, you get to name your own admission. This is a big deal as kids’ tickets are usually $11.95 and adults get in for $19.95. When you’re taking the whole family, those admission prices can really add up.

NOTE: If anyone in your household has an ACCESS card, whether it’s for Medicaid or SNAP benefits or cash benefits, you can get up to four tickets for just $3 each. This discount is available everyday of the year–not just on June 21st! You can check out other regularly occurring discounts here.

Prepping for Name-Your-Own-Price Day

If you’d like to take the family to the Science Center in June for cheap, here’s what you’ll need to do:

  • Clear out room in your freezer to store the snowball.
  • Make a snowball.  Don’t make it silly big.  Remember you need to store it for at least four months.
  • Put it in your freezer until June.
  • Bring it to the Science Center on June 21, 2018. Be sure to prep a cooler so your snowball doesn’t melt on your way in!
  • Bring at least a tiny bit of money to pay for your admission. I don’t know that this is a requirement, but it is good form.
  • Have a fun day at the Science Center!  You’ll get to use a giant slingshot to propel your snowballs into the Ohio River.

Learn More About the Event and Snow in General

What’s the best name-your-own-price promotion you’ve ever seen? Have you ever used snow as currency? Inquiring minds want to know! Leave your story in the comments.

 

Why Seniors Are Starting to Prefer Retirement Villages and Communities

Today’s post, contributed by an outside writer, is brought to you by Lendlease.

Retirement communities are way hipper than we give them credit for. Showing to my mom.

Our popular culture has somehow managed to paint retirement villages or communities as undesirable places for only downtrodden seniors. This wrong impression, unfortunately, deters some people from exploring the benefits and opportunities of optimal living that can be attained at a certain stage of life.

If you’re considering to move to retirement villages on the central coast NSW, or anywhere for that matter, but are still unsure if you should pursue the option, then read on. We’ll explore the benefits and opportunities it offers.

No more stressful driving

Driving can become stressful as we age–as our driving abilities decline. Because of this, most residents choose to utilize the free transportation that’s offered by retirement communities. The time for relying on a car is over. If you still want to drive, parking is available for residents.

Tastier food

There are a lot of seniors that are used to living alone and aren’t eating right anymore. In retirement communities, residents don’t need to worry about meal preparation or groceries. As an alternative, they get to obtain a fine dining experience every day. The food is often better, alternative meals are typically offered and special diet needs are accommodated. Most new residents who had been eating poorly before moving in experience improvements in their health and well-being just from the new diet.

Feel normal again

Sometimes, living alone doesn’t allow us to participate in activities and games that we used to enjoy, which were both fun and helped keep our minds sharp. Senior communities offer different prospects to keep seniors happy and engaged. This typically include games like bridge, chess, engaging reading and fascinating lectures and classes on every imaginable topic.

Safety

Residents can rest easy because the entire community is secure. Additionally, residents relish the peace of mind from fast emergency response systems that can be found apartments, or even on the resident’s person as a pendant.

This system reduces fears about being trapped or falling–scenarios that are all too common for seniors residing alone, although there are seniors who are living alone and are just doing fine.

Stronger family relationships

Older folks commonly become reliant on their grown children, or sometimes other close family members, for aid of all kinds. Unusual role reversals can pressure relationships and foster harmful feelings of bitterness, both by parents and their children.

Younger family members become free from the role of being full-time caregivers and are able to guarantee that time with their older loved one is high-quality and significant. Older residents are often glad to go back to the role of a family matriarch or patriarch and usually happy that their grown children no longer have to “become the parent of the parent.”

New friends–and family

Many older adults who live alone can become isolated, which is harmful at any age. At retirement communities, there are normally activities that allow you to make friends and share a meal with one another. Conversely, those who are more withdrawn appreciate that their privacy is valued, but are still pleased to have folks around.

Of course, senior communities aren’t for everyone. However, it’s without a doubt that there are many seniors living alone in unsafe or unhealthy situations who would gain tremendous benefits from a retirement community. Check out the Lendlease Communities if you’re looking for retirement villages on the central coast NSW. The famed community offers scenic surrounds, first-class amenities and a friendly community that will ensure seniors a love coming home.

Her Money Matters: Book Review

Wow, this book looks amazing! Even if you know what you should be doing with your money, it can be hard to actually do it if you have mental blocks. This book helps you change your money mindset to fix your personal finances.

Have you ever read a book that just hits you? And hits you hard?

I just had that experience over the past couple of weeks.

Jen Hemphill, Accredited Financial Counselor and integral member of team Brystalifer, recently released her new book: Her Money Matters. She was kind enough to supply me with a free advance copy so I could let you all know my thoughts on it.

A Different Kind of Personal Finance Book

I’ve read some pretty amazing books on personal finance.

This one is different in the best of ways. It’s for people who know what they should be doing, but struggle to make actual progress. Maybe you keep hitting bumps in the road that force you to drain your emergency fund. Maybe your past money experiences are informing the way you make financial decisions in ways you’re not even conscious of.

Whatever your block is, Jen gives you actionable steps to help you overcome. To help you dream bigger, focus on positivity and get your personal finances functioning in the way want them to.

The biggest lesson that really struck me was that confidence is one of the biggest factors behind motivation. I had never really thought about it in this way before, but it’s so true. When we feel like we’re capable–when we feel like we really can reach our goals–we’re more likely to work at them full force. We’re going to be more excited because we feel like we really can achieve, and that our efforts will not be fruitless.

This can apply to so many areas of your life, but it definitely applies to your money.

A Personal Experience

I’ve been in one of those ruts lately. The kind where you know what to do and fully intend to do it, but one emergency or another keeps popping up and derailing your plans.

Prior to this read, I wouldn’t say that it was shattering my money confidence as much as my hope that things would improve. But now I understand those two things are intertwined.

After reading Jen’s book, I have some of that confidence back. And I have a clear vision of the path I need to pursue it. I want to share the results of just a couple of these confidence-building exercises. And encourage you to do them, too.

I’d also encourage you to pick up a copy of the book. Because it’s fan-freaking-tastic.

Identifying Your Why

A big thing that Jen points out in the book is that you can have all the goals, but if you don’t know why you have those goals, you’re going to have a harder time turning them into reality. You need to identify your “why” for those times when the going gets tough; if you can zoom out to the bigger picture, you can put a small blip in your financial life into perspective–no matter how nasty that blip may feel in the moment.

She goes into great detail, helping you identify and construct your “why.” Here’s mine:

My money matters because I want stability and security for myself and my children, and I want to be an actor in my life rather than a passive vessel.

Healthy finances help me achieve both of those goals.

Building Your Confidence

One of the many things Jen has you do to build your money confidence is to list out your past financial wins. I have this hangup where I feel guilty praising myself, but this read helped me realize I’m going to have to get over that if I want to get out of this weird funk.

So here are my wins:

  • When I was a teenager, I paid off ten grand in six months.
  • I paid off the last round of debt in a quarter of a year.
  • I’ve stashed significant money into my emergency fund multiple times–even while I was living on a lower income.
  • I’ve become a pro at fighting health insurance companies–though it agitates me to no end that I have to do so.
  • I pulled my income up above the poverty line.
  • I got paid to return to college as a nontraditional student.
  • I’m saving for retirement.
  • I’m really good at taxes.
  • I’ve been fortunate enough to help other people with my money.
  • I once wrote a successful goodwill letter to fix my credit.
  • I’ve been meaning to get around to sending old clothes in to threadUP for waaaaayyyy too long. In the past couple months, I finally made it happen. My closets are much cleaner, and my wallet is a tiny bit thicker.
  • Booking crazy cheap travel so I can see more of this interesting world. I’m able to do this most of the time.

Writing this list was like pulling teeth at first. I felt gross listing out things I had done well, and had to stop myself from qualifying them with the negative money moves I’ve made in the past.

Full honesty, I feel gross posting it for the world to see, too. But I’m doing it anyways. Because I know I can’t be the only one with this issue. Also, my goal for 2018 is bravery.

As I went on, though, I noticed that it was starting to work. I realized that because I had done all these things before–sometimes with less resources than I have now–I can get things back to where I want them to be if I set my mind to it.

Recommend?

Obviously, it’s a resounding “yes”.

If you’ve read the conventional advice, but your money isn’t where you want it to be, this book is my number one recommendation. Jen gives you a fresh perspective, and puts you to work implementing these new concepts at the end of each of the twenty-three chapters. I gave you an example of just two of them.

If you want to fix your money, first you’ve got to fix the way you think about it. You can do that by getting your very own copy of the book.

 

What is your financial “why”? What are some of your past money wins? Let me know in the comments!