Category: Opinion

Practical Money Matters – June 21, 2017

By Nathaniel Sillin
Could You Turn Your Hobby into a Career?
You can break personal finance into three broad categories: income, expenses and savings. Your personal cash flow statement lists your income and expenses and a common goal is to end each month with a positive balance – with money left over to put into savings.
We often tend to focus on how to make the most with what we have, but don’t forget the third category. With planning, dedication and an understanding of how your skill set could benefit clients, you could make the transition to a more entrepreneurial role and increase your income.
A friend recently shared her experience. She started working out while looking for a way to release stress. Soon, exercise became her hobby. And then her passion. Several years later, she got the necessary training and certifications to go into business for herself as a fitness instructor and personal trainer.
Others have similar experiences. A photography or coding course sparks intrigue, which leads to exploration as a hobbyist and an eventual career or part-time income source. Or later in life you may decide it’s time for something different and start by exploring your interests and then setting off on an entirely new path.
Acknowledge that you may be giving yourself a new job. First, consider whether you really want to turn something you enjoy into a financial pursuit. Some people find that the transition can “ruin” their hobby in a way – it could feel like a chore or job rather than an enjoyable outlet. As long as it doesn’t require a substantial upfront financial investment, testing the water before diving in fully could be a good idea.
With the proper clearance, you can stay at your current role and start a small side business or offer your services as a freelancer to see what the experience will be like (and how much money you can make). You might find that a profitable, or cost-covering, hobby is enough.
Identify ways to make your offering uniquely yours. No matter how hard you try, you can’t will money into existence. It will take a lot of work to make a business succeed and even with a driven entrepreneur at the helm, many businesses don’t make it past the first several years.
But whether you’re creating and selling a physical product or offering a service, you bring a unique set of skills and experiences to the table. Try to figure out how these can distinguish your offerings or add a unique twist that will help potential customers meet their goals.
Businesses succeed for a variety of reasons. They might create something entirely new, figure out how to make something less expensive or more luxurious, put their efforts into customer support or figure out a fun and creative way to advertise their product.
Figure out who your target customers are and what they like. If you’re going to make money you’ll want to identify a target market. Generally, this will be a group of people who want and can afford your offering. Both qualifiers are equally important.
Be brutally honest with yourself. There isn’t always a profitable market, and some hobbies don’t make great businesses.
Working within a proven market – selling something that people already buy – can be a good thing because you know there’s at least some demand. From there, you can figure out the best way to find customers that like the twist or extra touch you’ve put in.
Drawing on my friend’s experience, she has discovered several ways to attract her clients. Some people already have an active lifestyle and don’t necessarily need motivation. For them, she emphasizes her knowledge of fitness and health. She can craft a meal plan that aligns with their physical goals and work with them to improve their form and help prevent injuries.
With clients who are struggling to get started, she emphasizes the value of having an accountability partner. She takes the planning and worry out of working out; they just need to show up.
Are you ready to take action? Managing spending and saving are essential elements of any financial life. With some thought and planning you could grow another essential element – your income – while doing something about which you are passionate. 
 

Practical Money Matters – June 14, 2017

By Nathaniel Sillin
Prepare for Major Life Expenses with Tax-Advantaged Accounts
College tuition, a new pair of glasses and retirement may seem unrelated, but the tax law says otherwise. By knowing how and where to save your money, you could pay for each of these expenses with tax-advantaged – or in some cases income-tax-free – money.
Individual Retirement Agreements (IRAs) and 401(k)s are perhaps the two most well-known examples of these types of accounts. But they’re not alone. With educational and medical expenses in mind, consider the following types of accounts and how you might be able to use one to help yourself or your family.
Invest your college fund in a 529 plan. State-sponsored 549 plans come in two forms. Prepaid tuition plans let you lock in today’s rate for in-state public schools and 529 college savings plans allow you to invest your savings based on your goals and risk tolerance. Contributions aren’t a federal tax write-off, but if you invest in your state’s plan, there might be a state income tax write-off.
As new parents ourselves, my wife and I made the decision to start preparing for our son’s education with a 529 college savings plan. However, the state where we live doesn’t offer a tax incentive. After diligently researching our options, we chose to establish the account in another state.
Many states let non-residents invest in their 529 plans and you can compare the state-based benefits, investment options, fees and contribution rules when choosing your plan. The College Savings Plans Network (CSPN) has tools to compare 529 plans by features or by state.
If the money is spent on qualified educational expenses, such as tuition, fees or school supplies, you don’t pay federal income tax (and may not have to pay state income tax) on investment gains.
Provide financial support for a disabled person using an ABLE account. News of a life-changing disability could come at any time. Following the Achieving a Better Life Experience (ABLE) Act in 2014, states can now sponsor ABLE savings accounts. Like 529 plans, contributions may be tax-deductible on the state (but not federal) level and the investment earnings can be withdrawn tax-free to pay for qualified expenses related to a mental or physical disability.
Beneficiaries must meet two criteria to qualify for an ABLE account: the disability must have begun before they were 26 and it must have “marked and severe functional limitations.” Anyone can contribute to the beneficiary’s ABLE account, and there is a limit on the total annual contributions – $14,000 as of 2017.
For individuals dealing with a disability and those taking care of a loved one, an ABLE account could make it easier to manage and plan finances. Generally, if you have a disability you’re disqualified from some types of federal government aid if you have over $2,000 in assets. The first $100,000 in an ABLE account doesn’t count against the limit for non-Medicaid services, and the entire account balance doesn’t count against the Medicaid limit.
Collectively known as ABLE 2.0, several new bills may increase the annual contribution for those who have a disability and are working, increase the eligibility age to 46 and allow families to rollover money from a 529 college savings plan to an ABLE account.
Make medical expenses more affordable with an FSA. Some employers offer a Flexible Spending Account (FSA) as a benefit to their employees. Employees can fund the accounts by putting aside a portion of their paychecks. You can then spend the money on qualified medical expenses, including eye exams, glasses and dental procedures, without paying income tax.
FSA accounts have a use-it-or-lose it provision and the money you don’t use could be forfeited at the end of the year. Employers could, but aren’t required to, allow employees to roll over up to $500 each year or give them an additional two-and-a-half-month grace period to use the money.
Bottom line: Paying for higher education, covering medical-related expenses and saving for retirement are three important financial goals. Incorporating tax-advantaged accounts into your long-term plan could be a win-win for your wallet. You might be able to save money now by lowering your tax bill and lower your effective costs later by withdrawing and using the money for qualified expenses.
 

Practical Money Matters – June 7, 2017

By Nathaniel Sillin
Safely Cut the Cost of Elective Medical Expenses
Whether it’s a matter of comfort, appearance or safety, there are many medical procedures that you may want or need, but your health insurance won’t cover.
Laser eye surgery may fall into the want category for most people and it can be a hefty investment with each eye costing several thousand dollars. For those wanting to start a family, infertility treatments, which can cost over $10,000, may be closer to a need. Yet most states don’t require health insurance to cover treatments.
Considering the lasting impact that these and other procedures can have on your life, you may not want to seek out the least expensive option. However, that doesn’t mean you should forgo attempts to save altogether. From tax-advantaged accounts to comparison shopping doctors, there are many approaches to safely cutting costs.
See if you could get a tax break. Although tax breaks don’t lower a medical procedure’s price, tax deductions can decrease your taxable income and by using a tax-advantaged account you may be able to pay for some medical procedures with income-tax-free money.
Take a medical expense tax deduction. If you itemize your tax deductions, you can get a deduction for your qualified medical expenses that exceed 10 percent of your adjusted gross income. Laser eye surgery and some fertility enhancement treatments may qualify. However, cosmetic surgery doesn’t unless it’s related to a congenital abnormality, disfiguring disease or an injury resulting from trauma or an accident.
Use an employer-sponsored flexible spending account (FSA). Some employers offer FSAs as an employee benefit. You can make tax-deductible contributions to the account each year and withdraw the money tax-free to pay for qualified medical expenses, including health insurance deductibles and copayments. However, this approach could require planning as you may forfeit remaining FSA money at the end of each year.
Enroll in health insurance with a health savings account (HSA). An HSA account is similar to an FSA in that you can contribute pre-tax money and withdraw funds to pay for eligible medical expenses tax-free. HSAs don’t have the use-it-or-lose-it requirement, but to qualify for an HSA account, you need to enroll in a High Deductible Health Plan (HDHP) and can’t be eligible for Medicare.
Ask your health insurance company about discounts. Even when a health insurance provider doesn’t cover a procedure, members may still be able to save money by going through their insurance.
For example, health insurance generally won’t cover the cost of Laser eye surgery, but your provider may offer a 5 to 15 percent discount if you get the surgery at partner eye care centers.
Health insurance requirements can also vary from one state to another, and you should double-check your benefits before assuming something isn’t covered. Infertility treatment is one of these gray areas, as some states require health insurance plans to provide coverage while others do not.
Compare costs from different providers. Varying medical costs sometimes make headlines when patients find out that a $3,000 medical procedure at a hospital could cost several hundred at a nearby clinic. If it’s not an emergency, there are websites that you can use to comparison shop nearby medical centers and get estimated prices.
Some people also look for savings in other countries. Medical tourism is a growing industry, and millions of people travel outside their home countries seeking lower costs, higher-quality services, treatments that aren’t available at home, a relaxing environment to recover in or a combination of several of these factors. While the U.S. is a destination for some medical tourists, Canada, Southeast Asia, Latin America and parts of Europe are also popular.
Bottom line: Although you may not be able to convince your health insurance company to cover what it considers an elective procedure; you can turn to other methods to save money. As with other large expenses, you can take a dual big- and little-picture approach by looking for tax breaks that lower your effective cost and savings opportunities that can reduce a procedure’s price.
 

ViewPoint: Two Things You Need to Know Before Enrolling in Medicare

The Iowa Insurance Division’s Senior Health Insurance Information Program (SHIIP) talks to thousands of Iowans every year about enrolling in Medicare.
“There is a lot of information for Iowans to digest when they are deciding whether to enroll in Medicare,” Kris Gross, director of SHIIP said. “The top two misconceptions we hear from Iowans are that there is a requirement to sign up for Medicare Part A at age 65 and to enroll in Medicare Part B even if the person is continuing to work and has employer health insurance. Neither is true.”
Iowans with questions about Medicare may call SHIIP at 800-351-4664 (TTY 800-735-2942) or visit www.therightcalliowa.gov. SHIIP counselors are available in communities across Iowa and are available to help answer your questions and assist with problems you have concerning Medicare and related health insurance. SHIIP is a service of the State of Iowa Insurance Division. All services are free, confidential and objective.
Correct information about the top two misconceptions that SHIIP hears from Iowans are below.
First Misconception: You’re required to sign up for Medicare Part A at age 65. (This is not true.)
If you or your spouse continue to work and have insurance from this work, you are not required to enroll in Medicare. Medicare Part A is free for most people because of their FICA contributions while employed. For this reason, people usually sign up for Part A when they become eligible.
However, since Health Savings Accounts (HSAs) with high deductible health plans have become more popular as an employee health benefit, automatically signing up for Part A needs to be reconsidered and may not be in your best interest. If you continue to work and enroll in Medicare Part A and/or B, you and your employer can no longer make contributions to the HSA. There may be a tax penalty if you do. You can use the money in your HSA but you cannot make new contributions.
Even if your current employer does not offer a HSA, delaying Part A keeps this option open for potential future employment. Keep in mind, those entitled to free Part A will automatically be enrolled once you start receiving your Social Security benefit.
Remember, if you delay enrollment, when you finally do apply for Medicare the effective date of Part A may be back dated up to six months from the date you apply. To avoid a tax penalty, you should stop contributing to your HSA the month to which your Part A is back dated.
Second Misconception: I need to enroll in Medicare Part B even if I continue to work and have employer health insurance. (This is not true.)
A person who is actively employed with health insurance from that employer, can delay enrolling in Medicare Part B without a penalty until they quit working—no matter the employer size. Large employers must pay primary (first) while the person is working and Medicare pays secondary. Small employers do not have to pay primary.
Often workers are told the small employer insurance will continue to cover them, not understanding that the language in their employer health insurance may require they enroll in Medicare. If they don’t, the policy will pay secondary to Medicare even if they don’t enroll. It is very important to talk to the insurance company providing your employer coverage to verify if Medicare enrollment is necessary because the plan will only pay after Medicare pays.

Practical Money Matters – May 31, 2017

By Nathaniel Sillin
Food Waste is Money Down the Drain
How many times have you gone to pour milk in your coffee, only to see that the date on the carton was yesterday? Some people will instinctively throw it away, but chances are that’s not what the label is intended to convey. It’s likely a marker for when the food might taste its best, not if it’s safe to eat.
By some estimates, as many as 91 percent of consumers may misinterpret food date labels. It’s no surprise as there are dozens of different lables in use, but the misunderstanding and lack of meal planning are contributing to a larger problem. Between 30 and 40 percent of the U.S.’s food supply winds up in the trash or a compost container.
The benefits of reducing food waste are numerous. You’ll save money, which may be reason enough. You could also be lowering your carbon footprint by keeping spoiled food out of landfills and cutting down on the growing and transportation of food that doesn’t get eaten.
Cutting back on this waste could start with understanding what food labels actually mean.
Don’t misinterpret food dates as expiration dates. According to the United States Department of Agriculture (USDA), aside from on infant formula, food label dates aren’t an indication of whether or not the food is safe to eat. For example, “best by” may mean the food will taste, look and feel its best if its eaten by that date. It could still be good for days, weeks or even months (for non-perishables) after that date.
Some states do require expiration dates on milk or meat and food labeling could become less confusing across the country. But for now, you may need to rely on your judgment. The USDA writes that if foods don’t show signs of spoilage, such as changing colors or giving off an unpleasant smell, they could still be safe and wholesome.
Quick tips for keeping fruit and vegetables fresh for longer. Regardless of the date, proper food storage can impact a food’s longevity.
Wait to wash food until you’re about to cook or eat. Otherwise, the moisture could spur bacterial growth.
Strategically store items in your refrigerator. Your food will typically last longer if you put the least perishable items on the door, meat near the bottom back (unless there’s a meat drawer), veggies in the crisper and dairy or drinks near the top.
Generally, you want to keep fruits and vegetables away from each other because many fruits produce ethylene gas and exposure to the gas could cause vegetables to spoil more quickly. There are also vegetables that produce the gas and fruits that are sensitive to it.
If you’re storing a fruit or vegetable that gives off and is susceptible to ethylene gas, wrap it in aluminum foil or store it in a paper bag rather than using less-breathable plastic wrap or bags.
Find creative uses for foods that are on their way out. Whether you use an app to sync shopping lists and schedule meals or use a paper list, meal planning can help cut down on waste as well. But even with great intentions sometimes things get forgotten, or meals get pushed off until it’s almost too late.
You can save vegetables from the trash by roasting them, making soup or turning them into a casserole. Carrots, potatoes and other root veggies (plus zucchinis) can be grated and fried to make fritters. You could bake fruits into breads, throw them into smoothies or freeze them for later. In the end, the goal is to use everything you buy.
Bottom line: Food waste could be draining your wallet, hurting the environment and in some cases, may be completely unnecessary. Learning to correctly interpret food labels and performing a sight and smell test before throwing something away could help. In the end, taking the extra time to evaluate the true condition of your food can save you money.
 

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