Author: Liz Weston

Why Is Money So Confusing?

Posted on by Liz Weston

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Managing money is an essential life skill, yet most U.S. adults would fail a financial literacy test. Consider the results of a survey meant to measure financial literacy, called the TIAA Institute-GFLEC Personal Finance Index. On average, U.S. adults correctly answered only 50% of its financial literacy questions in 2022.

In other words: If you find money confusing, you’re far from alone. But the reasons you’re baffled may have more to do with how our brains work than how money does. Understanding some of the common barriers, along with strategies to cope, could help you finally get a handle on your finances.

Money is a new language

You wouldn’t expect to carry on a fluent conversation in Madrid or Mexico City if you only knew a few words of Spanish. Similarly, personal finance is loaded with terms, jargon and concepts that take a while to learn.

“Entering the world of money is like entering a whole new culture and learning a new language,” says Ed Coambs, a certified financial planner and couples therapist in Charlotte, North Carolina.

You shouldn’t feel stupid for not understanding everything instantly, and no one should make you feel that way. However, learning can be more difficult if we encounter judgmental, condescending or dogmatic people — which unfortunately describes many people who are fluent in personal finance lingo.

“Many money experts, professional or non-professional, can become varying degrees of authoritarian: ‘Yes, I know what’s best for you. This is what you should do,’” Coambs says.

People with a rigid approach to personal finance may not understand the culture and life experiences that shaped you. They may insist you funnel every possible dollar into paying off debt or saving for retirement, for instance, but you may feel it’s important to tithe to your church or support your elderly parents.

Rather than dictating how you should spend your money, helpful advisors meet people where they are, says Rachael DeLeon, interim director of the Association for Financial Counseling & Planning Education, a nonprofit foundation that administers financial counseling credentials.

“It’s figuring out: What are your values? What’s important to you? And how do you make that work within your own financial situation?” DeLeon says.

Money is emotional

For many people, money evokes strong and often negative emotions. For example, if you struggle with managing your finances, you may be so embarrassed that you try to avoid talking or even thinking about money.

“That’s what really stops people from making money progress,” Coambs says. “They feel ashamed that they don’t know, and they feel like they should know.”

Painful early experiences often shape our view of money, says Coambs, author of “The Healthy Love & Money Way: How the Four Attachment Styles Impact Your Financial Well-Being.” Listening to parents fight about money or suffering financial hardship can be traumatic, leaving us convinced that money is dangerous or shameful.

Coambs suggests discussing your feelings about money with supportive and compassionate people. That could include an empathetic financial advisor, a financial therapist or trusted, knowledgeable friends.

“Action is predicated on feeling safe for many of us,” Coambs says. “Until we feel safe and accepted, we’re typically going to feel stuck and stalled.”

Money is collaborative

Fear is another common emotion people experience around money: fear of making a mistake, not having enough, or being scammed or misled.

“There are a lot of predators in this space, and knowing who to trust is hard,” DeLeon says.

Educating yourself is crucial. You can learn about personal finance basics from trusted sources, such as the Consumer Financial Protection Bureau or the JumpStart Coalition, which focuses on financial literacy for young people, DeLeon says.

But you also can hire people to help you. DeLeon recommends fee-only advisors, meaning they’re compensated only by the fees paid by their clients rather than by commissions or other financial arrangements that could influence their advice.

Look for advisors who are fiduciaries, which means they are required to put your interests ahead of their own. Fiduciary advisors include CFPs and people with the credentials offered by DeLeon’s organization, the AFCPE, including accredited financial counselors and financial fitness coaches.

Currently, the AFCPE offers free virtual financial counseling sessions. You can learn more at AFCPE’s site. In addition, your employer, 401(k) provider, bank or credit union may also offer free or low-cost financial advice.

With money, it’s more important to know whom to ask than to have all the answers ourselves, DeLeon says.

“Not everybody needs to be a personal finance expert,” DeLeon says.

—

How to Afford Your Meds and Support Your Health

Posted on by Liz Weston

The cost of prescription drugs in the U.S. can be enough to make you sick.

What you pay varies enormously depending on the drug, the pharmacy, your insurance plan and your deductible, among many other factors. A drug that may have been cheap or at least affordable the last time you filled it could be far more expensive or not covered at all the next time.

Often, people have no idea what a prescription will cost until they get to the pharmacy counter, says Leigh Purvis, director of health care costs and access for AARP’s Public Policy Institute.

Still, finding a way to afford your meds is important. People who don’t take medicine as prescribed because of the cost could wind up sicker — or dead.

“What is a potentially relatively small problem today, like high cholesterol, could turn into a much bigger problem like a heart attack down the road if you don’t treat it,” Purvis says.

Check with your doctor and insurance plan

Your doctors may not know what your medications cost you, since they’re dealing with dozens of insurance plans with different formularies, or lists of drugs, and how they’re covered, Purvis explains. In addition, insurers may strike deals with certain pharmacies, so a drug that costs $60 at one could cost $160 at another.

If affording a drug is a challenge, your physician may be able to suggest alternatives, such as a generic or a different type of medication. Two other questions you can ask: whether a medication you’ve been taking for a while is still necessary and what lifestyle changes might reduce or eliminate the need for prescriptions.

If you have insurance, review your drug coverage options carefully each year at open enrollment — that yearly period in the fall when you choose your health insurance for the following year. Make a list of all your medications with their dosages, and check how those are covered by each plan. Insurers regularly change their formularies, so you may need to switch plans to get the best coverage. And even if your drugs are covered, you’ll typically have to pay out of pocket for prescriptions until you meet your deductible.

Your insurer or pharmacy may offer a mail-order option to reduce costs, but don’t assume that’s your best option. Shopping around could deliver significant savings.

Look at online prices

Start your search online. The number of online pharmacies has exploded in recent years, giving you many more opportunities to save.

Amazon launched a full-service pharmacy in 2020, joining more established dispensaries, such as Costco.com and HealthWarehouse.com. Besides those, several limited-service startups — including Cost Plus, GeniusRx, Honeybee, Ro Pharmacy and ScriptCo — offer deals on generic drugs.

The startups usually don’t take insurance, but their prices can be less than the typical co-payment, according to Consumer Reports. For example, the consumer research organization found that a 30-day supply for 20 milligrams of atorvastatin — a cholesterol drug — ranged from $14.60 at Amazon and $13.99 at Costco.com, to $3 at Honeybee and just 54 cents at ScriptCo. By contrast, insurance copayments for workers with prescription drug coverage averaged $11 to $12 last year for the least expensive drugs, including many generics, according to KFF, the nonpartisan health care think tank formerly known as the Kaiser Family Foundation.

Your savings may be offset by membership fees: Amazon’s Prime membership — which you’ll need if you want the lowest prices — is $139 per year or $14.99 per month, while ScriptCo charges $140 per year or $50 per quarter. Costco has a membership fee of $60 a year, but you don’t need to be a member to order prescriptions online or at its warehouse stores.

Investigate other discounts

GoodRx has a website and an app that allows you to compare prices at nearby chain pharmacies, and it provides free coupons that can save up to 80% off of the list price. You’ll find another price comparison tool that includes local pharmacies at NeedyMeds, a nonprofit that helps people find drug manufacturing discount programs and other ways to reduce medication costs. In addition, several chains including Walgreens, Walmart, Kroger and H-E-B have discount programs.

One often-overlooked alternative for Medicare beneficiaries is the Extra Help program, aimed at helping older people with limited incomes and resources pay for their medications, Purvis says. You can apply online or by calling 800-772-1213.

Watch out for drug interactions

Finding the best prices can take significant time and effort. And people who shop aggressively for the lowest cost drugs could face a hidden risk if they’re getting multiple medications from different pharmacies, Purvis warns. Without a single pharmacist overseeing their care, they risk potentially harmful drug interactions.

You can use an online drug interaction checker like the one at WebMD, but ideally you would ask your primary care doctor or a pharmacist to review your full list of medications at least once a year.

“Making sure that somebody has an eye on the big picture care is really important,” Purvis says.

—

8 Rules for Saving, Borrowing and Spending Money

Posted on by Liz Weston

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

The best personal finance advice is tailored to your individual situation. That said, a few rules of thumb can cut through the confusion that often surrounds money decisions and help you build a solid financial foundation.

The following guidelines for saving, borrowing, spending and protecting your money are culled from nearly three decades of writing about personal finance.

1. Prioritize saving for retirement

In an ideal world, you’d start saving with your first paycheck and keep going until you’re ready to retire. You also wouldn’t touch that money until retirement. Even if you can’t save 15% of your pre-tax income for retirement, as recommended by Fidelity and other financial services firms, anything you put aside can help give you a more comfortable future. Aim to take full advantage of any company match you get from a 401(k) at work — that’s free money — and borrow against or cash out retirement funds only as a last resort.

2. Save for a rainy day

You may have read that you need an emergency fund equal to three to six months of expenses, but it can take years to save that much. That’s too long to put off other priorities, like saving for retirement. A starter emergency fund of $500 can be your first goal, and then you can build it up. While you’re saving, try to create other sources of emergency cash, such as a Roth IRA (you can pull out your contributions at any time without taxes or penalties), space on your credit cards or an unused home equity line of credit.

3. Save for college

Got kids? Open a 529 college savings plan and contribute at least the minimum, which is typically $15 to $25 a month. Retirement savings comes first, but anything you can save will reduce how much your child may need to borrow. Also, research shows the simple act of saving for college increases the chances that a child from a low- to moderate-income family will go to college.

4. Borrow smart for college

A college degree can pay off in higher earnings, but lenders may allow you to borrow far more than you can comfortably repay. If you’re borrowing for your own education, consider limiting your total debt to what you expect to make your first year out of school. If you’re a parent borrowing for a child’s education, aim for payments that are no more than 10% of your after-tax income and that still allow you to save for retirement. If your payments are higher than 10% of your after-tax income, investigate income-driven repayment plans that could bring down your costs.

5. Use credit cards as a convenience

Credit cards offer convenience and can protect you from fraud and disputes with merchants. But credit card interest tends to be high, so don’t carry credit card balances if you can avoid it. If you routinely pay your balances in full, look for a rewards card with a sign-up bonus that returns at least 1.5% of what you spend.

6. Finance your home smartly

If you want to be a homeowner, the best time to buy your first home is when you’re financially ready and in a position to stay put for a few years. Opt for a mortgage rate that’s fixed for as long as you plan to remain in the home, and don’t make extra payments against the principal until you’ve paid off all other debt and are on track for retirement.

7. Buy used vehicles and drive them for years

Buying a car right now isn’t a great idea; supply-chain kinks and other pandemic-related issues have inflated the cost of both new and used cars. In general, though, buying a used car can save you a ton of money over your driving lifetime, as can driving your car for many years before replacing it. These days, a well-maintained car can last 200,000 miles without major issues, according to J.D. Power. This means you can get roughly 13 years of service out of your car if you drive it 15,000 miles a year. Ideally, you would pay cash for cars. If you need to borrow, try to limit the term of your loan to a maximum of five years.

8. Insure against catastrophic expenses

Use insurance to protect yourself against catastrophic expenses rather than smaller costs that you can easily pay out of pocket. If you have sufficient savings, consider raising the deductibles on your policies to save money on premiums. Be careful about high-deductible health insurance policies, though. Having a high deductible could cause you to put off medical care, and it’s better to err on the side of safety when it comes to health.

This article was written by NerdWallet and was originally published by The Associated Press.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article 8 Rules for Saving, Borrowing and Spending Money originally appeared on NerdWallet.

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How to Keep Your Tax Return From Getting Hung Up

Posted on by Liz Weston

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

There may never be a good time to draw the IRS’ attention, but this year you really want to avoid extra scrutiny.

The IRS is so understaffed and overwhelmed that even a tiny mistake could delay your refund for months. A return that requires “manual processing” — basically, any action by an IRS employee — could join a massive queue that started building at the beginning of the pandemic and has yet to be resolved. If something goes wrong, good luck getting through to a human: The IRS answered about 1 in 10 calls last year, down from about 1 in 3 before the pandemic, according to the National Taxpayer Advocate.

To avoid tax hassles, the best approach is to be careful, thorough and digital when you file your return.

Don’t file a paper return or ask for a paper check

Let’s start with the basics: File electronically and request direct deposit of any refund you might be due, says April Walker, lead manager for tax practice and ethics with the American Institute of CPAs. If your income was $73,000 or less in 2021, you can use the IRS’ Free File tax preparation option.

If you file electronically, you can begin tracking the status of your refund on the IRS site within 24 hours, says CPA Lei Han, associate professor of accounting at Niagara University in Niagara Falls, New York. If you file a paper return, tracking typically won’t be available for four weeks, Han says.

Paper returns don’t just take longer to process, notes Kent Lugrand, president and chief executive of InTouch Credit Union in Plano, Texas. Paper returns are also much more likely to contain errors — either that a taxpayer made or that an IRS employee introduced while transferring the data from a paper return into the agency’s computer system. Electronic filing, by contrast, won’t let you file a return with many common mistakes such as mathematical errors or failing to sign your return. You have to fix those before you can submit the return, Lugrand says.

E-filing software may not detect other problems, such as incorrect Social Security, bank routing or bank account numbers, so check all numbers carefully, Walker recommends.

Make sure your numbers match

The IRS’ automated matching system looks for discrepancies between the income you report and forms filed by your employer and financial institutions. A mismatch can cause the agency to freeze your refund and trigger a notice demanding more information.

If you invest outside a retirement account, beware: Brokerages are notorious for sending out “preliminary” 1099-B forms — which track investors’ gains and losses — to meet the IRS mid-February deadline, and then sending corrected forms a month or so later. If you rely on the preliminary form, you may end up having to file an amended return, which would have to be manually processed and could delay your refund for months.

Sometimes the W-2 or 1099 forms you get contain errors. If that’s the case, try to get the error corrected and the form reissued before you file, Han recommends. Consider filing an extension if you need more time to get the issue resolved, she says.

Properly report child tax credit and stimulus payments

Your return also could be derailed by a mismatch between the child tax credit or stimulus payments you report versus what the IRS says you got last year, Walker says.

Taxpayers who received monthly child tax credit payments in 2021 will have to reconcile those payments with the amount for which they were actually eligible. The IRS based the payments on income data from a prior year, so some families may have received too much while others will qualify for additional money when they file their returns, Han says. In addition, eligible people who didn’t receive the third stimulus payment, or who qualified for more than they got, can claim the recovery rebate credit on this year’s tax return.

In January, the IRS began sending out notices to taxpayers who had received payments in 2021: Letter 6475 summarized how much stimulus money the taxpayer got, while Letter 6419 reported total advance child tax credit payments.

If you’re married and received the payments, you likely received two letters about the child tax payments — one for each spouse, Walker says. If your family has one child and received $300 a month for six months for a total of $1,800, for example, you typically would get two IRS letters, each reporting $900.

“Some people thought the second letter was a duplicate, and so they might have thrown it away,” Walker says.

If you’re missing any of this paperwork, don’t just rely on your memory or your bank records, Walker says. You can create an account on the IRS site and view IRS records to find the correct figures.

“If you just wing it on that number, it’s probably going to cause a delay,” Walker says.

​This article was written by NerdWallet and was originally published by The Associated Press.

The article How to Keep Your Tax Return From Getting Hung Up originally appeared on NerdWallet.

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Grimace-Free Ways to Learn Personal Finance

Posted on by Liz Weston

The online landscape is littered with horrible personal finance advice: teenagers promoting day trading strategies, “influencers” flogging questionable investment schemes and people with dubious credentials insisting you shouldn’t invest in a 401(k).

Outrageous statements and flashy graphics grab attention, but there’s also plenty of sound, factually correct money content out there — and some of it is even entertaining. So if you want to learn more about managing your finances while having at least a little fun, here are some ways to go about it.

Audio worth listening to

With podcasts, you have a wealth of options (sorry, I couldn’t resist). One to try is “Stacking Benjamins,” which a Fast Company article accurately describes as striking “a great balance of fun and functional.” Former financial advisor Joe Saul-Sehy and certified financial planner Josh Bannerman mix news, banter and education with the help of regular contributors Paula Pant and Len Penzo, plus a wide variety of guests. (Full disclosure: I’ve been a guest on “Stacking Benjamins,” among other podcasts, and I co-host “NerdWallet’s Smart Money Podcast.”)

Also, check out two public radio podcasts: “Planet Money,” which explains how the economy works, and “This Is Uncomfortable,” which describes itself as a podcast about life and how money messes with it. Public radio isn’t known for being a laugh a minute, but high production values and good storytelling will keep you engaged.

If you like learning by listening, the social media app Clubhouse also might be worth exploring. This voice-only app allows you to listen and often participate in live conversations about a seemingly infinite number of topics. Consider starting with the Personal Finance Club. (Clubhouse started as invitation-only, but now is open to all.)

Of course, as with all social media, proceed with caution. Having a lot of followers doesn’t mean someone is credible, honest or knowledgeable. Plenty of people pose as experts without the credentials or experience to actually be one. No one is required to disclose conflicts of interest, and your default assumption should be that what you’re hearing or seeing may not be in your best interest.

Information or advice shared on social media is not customized to your unique circumstances, says CFP Lazetta Rainey Braxton of Brooklyn, New York. Research the ideas to ensure they make sense for your situation, and consider consulting an appropriate expert such as a tax pro, CFP or attorney, Braxton says.

What to watch

Suppose you’re more of a visual learner. In that case, you’ll find many credentialed experts to follow on Instagram, including CFP Brittney Castro and certified financial education instructor Bola Sokunbi of “Clever Girl Finance.” But for sheer fun, it’s hard to beat Berna Anat, also known as “Hey Berna,” a financial educator whose professed goal is to make “financial literacy more funny, more accessible and more Brown for young people everywhere.”

Anat and several other worthy Instagram creators such as “The Financial Diet” and “His and Her Money” are also on YouTube – along with a bunch of finance and investing channels spouting sketchy advice (often interrupted by even sketchier commercials).

Be wary of creators who pretend that making vast sums is easy or who promote risky strategies, such as options trading or borrowing money to buy volatile assets such as cryptocurrency, especially if you’re new to investing.

Also, be skeptical of creators who aren’t transparent about their financial situations or strategies, says Nashville-based CFP Jeff Rose, a blogger at “Good Financial Cents,” who has hosted the Wealth Hacker channel on YouTube since 2011.

Many people claim to have spectacular financial success but are really trying to lure you into buying courses or other products that make money for them and are not in your best interest.

That’s especially true on TikTok, where videos often last mere seconds, and bold claims about instant wealth seem to be the norm. Even here, though, some people are creating substantive, entertaining money content. Two to check out include Humphrey Yang (@humphreytalks) and Delyanne Barros (@delyannethemoneycoach).

Kick it old school

If books are your bag, you won’t have to caffeinate yourself to get through the following personal finance tomes that lace their education with plenty of humor:

  • “Stacked: Your Super-Serious Guide to Modern Money Management,” by “Stacking Benjamins” host Saul-Sehy and co-author Emily Guy Birken.
  • “Bad With Money: The Imperfect Art of Getting Your Financial Sh*t Together,” by comedian and LGBTQ activist Gaby Dunn.
  • Any of the three books by Erin Lowry, including “Broke Millennial,” “Broke Millennial Takes On Investing” and “Broke Millennial Talks Money.”

One final recommendation: “The Richest Man in Babylon,” by George S. Clason. This slender book of parables isn’t funny, but it is entertaining, an easy read and amazingly relevant nearly 100 years after its first publication.

The ways we learn about money may change dramatically, but much of the best personal finance advice doesn’t.

This article was written by NerdWallet and was originally published by The Associated Press.

Liz Weston, CFP® writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article Grimace-Free Ways to Learn Personal Finance originally appeared on NerdWallet.

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8 Rules for Saving, Borrowing and Spending Money

Posted on by Liz Weston

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

The best personal finance advice is tailored to your individual situation. That said, a few rules of thumb can cut through the confusion that often surrounds money decisions and help you build a solid financial foundation.

The following guidelines for saving, borrowing, spending and protecting your money are culled from nearly three decades of writing about personal finance.

1. Prioritize saving for retirement

In an ideal world, you’d start saving with your first paycheck and keep going until you’re ready to retire. You also wouldn’t touch that money until retirement. Even if you can’t save 15% of your pre-tax income for retirement, as recommended by Fidelity and other financial services firms, anything you put aside can help give you a more comfortable future. Aim to take full advantage of any company match you get from a 401(k) at work — that’s free money — and borrow against or cash out retirement funds only as a last resort.

2. Save for a rainy day

You may have read that you need an emergency fund equal to three to six months of expenses, but it can take years to save that much. That’s too long to put off other priorities, like saving for retirement. A starter emergency fund of $500 can be your first goal, and then you can build it up. While you’re saving, try to create other sources of emergency cash, such as a Roth IRA (you can pull out your contributions at any time without taxes or penalties), space on your credit cards or an unused home equity line of credit.

3. Save for college

Got kids? Open a 529 college savings plan and contribute at least the minimum, which is typically $15 to $25 a month. Retirement savings comes first, but anything you can save will reduce how much your child may need to borrow. Also, research shows the simple act of saving for college increases the chances that a child from a low- to moderate-income family will go to college.

4. Borrow smart for college

A college degree can pay off in higher earnings, but lenders may allow you to borrow far more than you can comfortably repay. If you’re borrowing for your own education, consider limiting your total debt to what you expect to make your first year out of school. If you’re a parent borrowing for a child’s education, aim for payments that are no more than 10% of your after-tax income and that still allow you to save for retirement. If your payments are higher than 10% of your after-tax income, investigate income-driven repayment plans that could bring down your costs.

5. Use credit cards as a convenience

Credit cards offer convenience and can protect you from fraud and disputes with merchants. But credit card interest tends to be high, so don’t carry credit card balances if you can avoid it. If you routinely pay your balances in full, look for a rewards card with a sign-up bonus that returns at least 1.5% of what you spend.

6. Finance your home smartly

If you want to be a homeowner, the best time to buy your first home is when you’re financially ready and in a position to stay put for a few years. Opt for a mortgage rate that’s fixed for as long as you plan to remain in the home, and don’t make extra payments against the principal until you’ve paid off all other debt and are on track for retirement.

7. Buy used vehicles and drive them for years

Buying a car right now isn’t a great idea; supply-chain kinks and other pandemic-related issues have inflated the cost of both new and used cars. In general, though, buying a used car can save you a ton of money over your driving lifetime, as can driving your car for many years before replacing it. These days, a well-maintained car can last 200,000 miles without major issues, according to J.D. Power. This means you can get roughly 13 years of service out of your car if you drive it 15,000 miles a year. Ideally, you would pay cash for cars. If you need to borrow, try to limit the term of your loan to a maximum of five years.

8. Insure against catastrophic expenses

Use insurance to protect yourself against catastrophic expenses rather than smaller costs that you can easily pay out of pocket. If you have sufficient savings, consider raising the deductibles on your policies to save money on premiums. Be careful about high-deductible health insurance policies, though. Having a high deductible could cause you to put off medical care, and it’s better to err on the side of safety when it comes to health.

This article was written by NerdWallet and was originally published by The Associated Press.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article 8 Rules for Saving, Borrowing and Spending Money originally appeared on NerdWallet.

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How Gratitude Can Help Your Financial Life

Posted on by Liz Weston

Gratitude makes us more aware of the sources of joy, wonder and hope in our lives. Being grateful also can improve health, strengthen relationships and help us manage our money.

Developing gratitude requires us to focus on what we have rather than on what we lack, says Meghaan Lurtz, a senior research associate with financial planning site Kitces.com and past president of the Financial Therapy Association. Such thankfulness has been shown to reduce feelings of impatience, perhaps making it easier to save and delay gratification as well as decreasing the temptation to spend.

“(Gratitude) can help to quell that ‘I need more, I need different, I need this, I need that’ feeling,” Lurtz says.

Gratitude makes us happier

Gratitude is a social, relationship-strengthening emotion with two parts, according to Robert Emmons, a professor of psychology at the University of California, Davis, and author of “Thanks! How the New Science of Gratitude Can Make You Happier.”

The first part is acknowledgement of the gifts and benefits we’ve received. The second is recognition that we have been blessed by help from others, good luck or perhaps the intervention of a higher power. Gratitude “requires us to see how we’ve been supported and affirmed by other people,” Emmons writes.

“There is a really important social quality to gratitude,” Lurtz says. “It can bring us together, it can connect us, it can help us to feel safe.”

It also short-circuits many negative emotions, such as resentment, envy or regret, Emmons found — it’s tough to feel envy and gratitude at the same time, for example. Lurtz believes that gratitude can increase contentment and reduces the desire to “keep up with the Joneses” by overspending or working excessively.

“We’re always trying to get to that next level,” Lurtz says. “We should be asking, ‘When is enough, enough?’ ”

The positive effects of gratitude, such as improvements in mental health, can strengthen over time. In a 2017 study, college students who wrote weekly letters of gratitude to another person for three weeks reported better mental health than other participants four weeks later, and the difference in mental health increased after 12 weeks, according to researchers at Indiana University.

“When you bring to mind that these things are going well, eventually, you’ll get to the point where you see more of those good things,” Lurtz says.

Gratitude can help couples navigate money conflicts

Gratitude can help couples weather financial conflicts, a 2015 study by researchers at the University of Georgia found.

Feeling appreciated and expressing appreciation are hallmarks of strong partnerships, says Ed Coambs, a certified financial planner and couples therapist in Charlotte, North Carolina.

“In a flourishing, healthy relationship, gratitude flows naturally and pretty easily,” Coambs says. “In a functioning relationship, it’s more intermittent, a little less consistent. In a dysfunctional relationship, it’s absent.”

Lurtz believes many couples’ disputes over money stem from partners not feeling appreciated. For example, one partner may reward themselves with purchases because they don’t feel adequately rewarded elsewhere in their lives. Meanwhile, the other partner may feel underappreciated for their efforts to save money and look after the couples’ future.

The future-focused spouse isn’t “right” and the present-focused one isn’t “wrong.” Financial planning is all about finding a balance between the present and the future. Expressing gratitude for each other can help couples strengthen their bonds and cultivate feelings of well-being so they can find that balance, Lurtz says.

Gratitude can be cultivated, but not demanded

Research shows that writing down a few things you’re grateful for, keeping a gratitude journal or composing letters thanking others for something they’ve done can all contribute to more positive emotions, better relationships and greater happiness.

Positive emotions and strong relationships are in turn associated with greater “financial self efficacy,” or people’s belief in their ability to accomplish their financial goals, Lurtz says.

And while sadness can increase feelings of “economic impatience” — the desire for a smaller cash award now over a larger one in the future — gratitude has the opposite effect, helping people to delay gratification, according to a 2014 study by researchers from Northeastern University; University of California, Riverside; and Harvard.

What doesn’t work is demanding that someone else feel grateful. Admonitions to “count your blessings” can actually intensify feelings of shame, anger or resentment, Coambs says.

“It may be well intended, but it can land very inconveniently,” he says.

This article was written by NerdWallet and was originally published by the Associated Press.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article How Gratitude Can Help Your Financial Life originally appeared on NerdWallet.

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Financial Vital Signs to Monitor Right Now

Posted on by Liz Weston

A midyear financial review is often a good idea. This year, it’s almost essential.

With people going back to offices, travel resuming and Congress making significant changes to various laws affecting your finances, consider taking some time to check in on your money. You might be able to make some smart moves to reflect the new realities.

Budgeting

See where your money is going now. Using a budgeting app or taking a close look at recent bank and credit card statements can help. Then think about expenses you may face in the near future.

If you’re using your car more, for example, you might already be paying more for gas and insurance, but you also could face higher costs for maintenance or repairs. If you have kids, you might plan for back-to-school costs, sports equipment and activity fees. Vacations, travel, weddings and other celebrations may need to be budgeted for, as well.

It can make sense to trim some costs so you can afford these resurgent expenses. One possibility: Rotate your streaming services and other subscriptions. These may have sustained you during lockdowns, but you could put some on pause now to save money while you continue to enjoy others.

Perhaps you have more income: You’re back to work after being unemployed, or you’re a parent about to get the first of six monthly child tax credit checks from the IRS. (These payments will be up to $300 per eligible child starting July 15). Making a plan for this income can ensure it goes where you want, rather than dribbling away in unplanned purchases.

Debt forbearance

Forbearance on federal student loans is scheduled to end this fall, with monthly payments resuming in October. If those payments would be a hardship, contact your lenders to see if income-driven repayment plans or other measures would help.

If you requested forbearance on your mortgage payment or other debt, that has an expiration date, as well. Debt that’s in forbearance isn’t forgiven, so you’ll typically need to plan to make up the payments you missed. Check with your lender about your options.

Flexible savings accounts

Congress more than doubled how much employees can contribute to flexible spending accounts for child care in 2021. Workers can put in a maximum of $10,500, up from $5,000 in 2020. The limit for health care FSAs remains $2,750.

This year, you’re also allowed to make midyear changes to your contributions to either account, something that normally requires a change in life circumstances such as marriage or having a child.

Your employer must opt in to these changes, but if it has and you can increase your contributions, you could save significantly on taxes.

Frequent traveler programs

Last year airline, hotel and rental car companies softened the rules for their loyalty programs to reflect pandemic travel restrictions. Many extended the expiration deadlines for points, miles and free hotel night certificates. But the pause on expirations won’t last forever. Check your rewards programs and make plans to use your rewards before they disappear.

Similarly, you may have credits from canceled travel that also will expire if you don’t use them. If you can’t use those in time, request an extension.

Health insurance

If you buy your own insurance, you may get a better deal on the Affordable Care Act exchanges now that Congress has expanded the subsidies, reducing costs for most people. If you don’t already have ACA coverage, there’s currently a special enrollment period that ends Aug. 15. If you get unemployment benefits at any point during 2021, you can qualify for a zero-premium comprehensive policy. COBRA coverage to extend an employer health insurance plan is also free from April to September.

Retirement planning

Companies with 401(k)s are now required to let part-time workers contribute if they have worked more than 1,000 hours in one year or 500 hours over three consecutive years. Contact your employer for details.

Congress eliminated the age limit for making contributions to IRAs, so you can contribute past age 70 ½ as long as you have earned income such as wages, salary, commissions or self-employment income. Also, the age that typically triggers required minimum distributions from retirement accounts has been moved from 70 ½ to 72 for people born after June 30, 1949.

If you’re feeling generous, though, the age at which you can start making qualified charitable distributions from an IRA remains 70 ½. These withdrawals won’t be added to your income if the distribution is made directly to a qualified charity.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article Financial Vital Signs to Monitor Right Now originally appeared on NerdWallet.

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You May Qualify for Free or Cheaper Health Insurance Now

Posted on by Liz Weston

The latest coronavirus relief package did more than dole out $1,400 checks. The law also made health insurance free for millions more people and reduced costs for others, at least for now.

The American Rescue Plan, which President Joe Biden signed in March, expanded subsidies for people buying their own insurance on Affordable Care Act exchanges. In addition, anyone who receives unemployment benefits this year can qualify for zero-premium health insurance through the exchanges, regardless of income.

In fact, many people who are currently uninsured will qualify for free or low-cost coverage through the exchanges or Medicaid, says Daniel McDermott, a policy analyst with KFF, the nonpartisan health care think tank formerly known as the Kaiser Family Foundation.

People who lost their jobs but want to keep their former employer’s health insurance also may get help. If you don’t qualify for group health insurance elsewhere, the federal government will pay your COBRA premiums for up to six months.

Millions qualify for free ACA coverage

Since 2013, ACA exchanges have allowed people to buy individual and family health insurance policies, usually with tax credits that reduced their premiums and other costs. ACA has four levels: bronze, silver, gold and platinum. Bronze plans typically have the lowest monthly premiums and the highest deductibles; platinum plans have the highest premiums and the lowest deductibles.

Before the new relief package, people with incomes greater than 400% of the federal poverty level typically didn’t qualify for subsidies to reduce their premiums. Now people with incomes up to 600% of the poverty level — up to $76,560 for a single person or $157,200 for a family of four — can qualify, according to KFF. (KFF’s calculator can show you how much you’d likely pay for ACA coverage.)

The relief package reduced premiums for the vast majority of people who buy their own insurance, McDermott says. In addition, nearly half of the 29 million currently uninsured now qualify for a free plan, he says.

Those with incomes below 250% of the poverty line also will benefit from reduced cost-sharing, which means lower deductibles and other out-of-pocket costs. At 150% of the poverty line — income of about $19,000 for a single person and just under $40,000 for a family of four — people qualify for zero-premium silver plans with annual deductibles of just $177.

Millions of unemployed people will be eligible for similar coverage. Anyone who receives unemployment benefits for any part of 2021 can qualify for a zero-premium silver plan with the maximum cost-sharing reductions, McDermott says. “For all intents and purposes, the health insurance exchanges are going to look at you as if your income was under 150%” of poverty level, he says.

This new provision for the unemployed may not be reflected on HealthCare.gov and most state-based exchanges until this summer, and perhaps not until fall, McDermott says.

“It is my understanding, though, that if these people enroll in coverage now and can prove that they received unemployment benefits at some point in 2021, then the benefits will be retroactive and they will eventually be reimbursed for the unnecessary expenses they incurred,” McDermott says.

How to qualify for ACA subsidies

The expansion of Affordable Care Act subsidies is retroactive to Jan. 1 and will continue through Dec. 31, 2022. People must purchase their insurance from Healthcare.gov or their state’s ACA exchange to qualify for subsidies. The act also created a new special enrollment period that extends through Aug. 15, 2021.

Some people still don’t qualify for subsidies, including most people with incomes above 600% of the poverty line; undocumented immigrants; people who have offers of employer-provided health insurance that’s considered affordable; and certain low-income people in states that haven’t expanded Medicaid coverage.

What you should know about free COBRA coverage

Many people prefer to keep their employer’s health insurance coverage when they lose their jobs, although the cost is often prohibitive. Most employers pay a large portion of the cost to cover workers, but former employees who opt to extend their coverage using the federal COBRA law typically must pay the full premium plus a 2% administrative fee.

Thanks to the new law, employers are required to provide free COBRA coverage from April 1 through Sept. 30 to eligible former employees who lost their health care coverage because of involuntary termination or a reduction in hours, says financial planner and certified public accountant Kelley Long, consumer financial education advocate for the American Institute of CPAs. The employers’ cost will be offset by federal tax credits.

If you’re eligible for other group health coverage — through a spouse, new employer or Medicare, for example — you won’t qualify for free COBRA.

“The intention is to help people who have no other options and would otherwise be uninsured because they can’t afford COBRA,” Long says.

Normally you have 60 days after you lose your job to opt for COBRA coverage, which typically lasts a total of 18 months. If you missed that 60-day window, or signed up but then dropped coverage, you may have another opportunity to enroll. The new law extends the sign-up period so that people who lost their jobs during the pandemic can get the free coverage. Employers are required to reach out to eligible former employees by May 31. If you think you’re eligible but you haven’t heard from your employer, McDermott recommends contacting your former employer’s human resources department.

There will be a special enrollment window at the end of September to allow people with COBRA to switch to an ACA plan, McDermott says.

This article was written by NerdWallet and was originally published by the Associated Press.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article You May Qualify for Free or Cheaper Health Insurance Now originally appeared on NerdWallet.

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If You Need to Find Tax Help, Try DIY First

Posted on by Liz Weston

Getting help from the IRS this tax season is going to be a challenge.

The IRS has finally opened the 23.4 million pieces of mail that piled up after the pandemic shuttered its processing centers last spring. But the agency still has a backlog of paperwork from last year even as it ingests this year’s returns, issues a third round of relief payments and gears up to send monthly child tax credit payments to millions of families.

The tax deadline has been moved from April 15 to May 17, giving people more time to file. Getting help is another matter. Callers face long wait times with no guarantee they’ll reach a human being. Meanwhile, many tax help sites are closed or working at reduced capacity because of COVID-19 restrictions.

Here are some common questions and answers that could save you some time or point you to resources that will help.

Where’s my stimulus payment?

The IRS dispatched two rounds of economic impact payments last year. If you didn’t receive your payments or received less than you should have, you can claim the “recovery rebate credit” on your 2020 tax return that’s due May 17.

The third relief payment, created by the $1.9 trillion stimulus package that President Joe Biden signed into law March 11, started arriving in bank accounts shortly afterward. The rules are somewhat different for this relief check, which is worth up to $1,400 per person. For the first time, all dependents of eligible taxpayers can get the payment, including college students. Also, there is a steeper phaseout: Single filers with adjusted gross incomes up to $75,000 can receive the full amount, but the payment decreases above that level and zeroes out at $80,000. The phaseout range is $112,500 to $120,000 for heads of household, and $150,000 to $160,000 for married couples filing jointly. Payments will be based on adjusted gross income on 2020 returns, if those have been filed, and on 2019 returns otherwise.

None of the payments are taxable, and you typically won’t have to repay the money if you get too much. Taxpayers can check the IRS’ Get My Payment tool to track the status of their relief payments.

In addition to the relief payments, monthly payments of up to $300 per child are expected to begin in July and continue through December. This enhanced child tax credit begins to phase out at adjusted gross incomes of $75,000 for singles, $112,500 for heads of household and $150,000 for joint returns.

How do I get a refund of the taxes I paid on unemployment benefits?

The latest stimulus package also exempts $10,200 of last year’s unemployment benefits from taxation for people with adjusted gross incomes under $150,000. The IRS has promised to automatically refund the appropriate amounts to those who already filed their 2020 returns before the stimulus deal was signed.

Where can I get free tax help?

Most taxpayers can file their federal taxes online for free, using software that guides them through their returns and checks for errors. The IRS’ Free File program is available for taxpayers with adjusted gross incomes of up to $72,000. Unfortunately, some online tax preparers promise free filing but then divert users into paid options, so it’s best to begin the process on the IRS’ Free File page at www.irs.gov/freefile.

If you need more help, you may be able to get free assistance through the IRS’ Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs, although many of the programs are operating differently this year. Some sites are temporarily closed and others are not operating at full capacity, but the programs also have added low- and no-contact options.

For example, the largest such program, AARP Foundation’s Tax-Aide, has added online and drop-off services, says Lynnette Lee-Villanueva, program vice president. In-person sessions are still available but only by appointment.

I got a notice! What do I do now?

Consumer advocates have criticized the IRS for continuing with collection and enforcement actions while the agency was still dealing with its backlog. (As of Jan. 29, the IRS still hadn’t processed 6.7 million tax returns from 2019.) In some cases, taxpayers received past-due notices for payments already made. Sometimes the notice itself was so delayed that the taxpayer didn’t have enough time to respond before penalties were levied.

The IRS has information on its coronavirus tax relief hub about how its “mission-critical functions” have been affected. The website offers details on what you can expect and what you can do next if you received a bill or notice. If you’ve taken steps to resolve the issue that prompted the notice, for example, the IRS recommends doing nothing further — simply wait for the agency to catch up.

If your issue is pressing, though, you can try the number listed on the notice and consider contacting the Taxpayer Advocate Service office in your state. You also could hire a CPA or enrolled agent, who can give you advice and represent you with the IRS.

This article was written by NerdWallet and was originally published by The Associated Press.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article If You Need to Find Tax Help, Try DIY First originally appeared on NerdWallet.

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