Debt Management
Rebekah Eason
Holiday Cash for Students

By: Becky Eason, CFP®

The holidays are upon us and although 2020 isn’t a traditional year people are still getting into the holiday spirits. Gifts have become a huge part of the holidays, which we all know can add a lot of additional stress. This year there is the added stress of what is the best way to get gifts to loved ones? Shipping can be expensive and you risk packages getting delayed, lost, or broken so I wouldn’t be surprised to see more monetary gifts be given.


Holiday Cash for Students

Asking for a Friend - How do I know if I need to adjust my withholding? And if I should make an adjustment, how do I do it?

February 26, 2024

Question:

How do I know if I need to adjust my withholding? And if I should make an adjustment, how do I do it?

Answer:

When you file your tax return, do you get a larger refund or owe more than you feel comfortable with?

  • If so, you should make an adjustment. In order to determine how much of an adjustment you should make, you should consult your tax preparer.

  • If you self-prepare, a simple way to compute this is to take the amount of the adjustment you want to make and divide it by the remaining number of pay periods.

  • You can also use the Tax Withholding Estimator on the IRS website: https://www.irs.gov/individuals/tax-withholding-estimator

  • Then, you would fill out a new Form W-4 (for Federal) and/or State equivalent form.

  • Submit these forms to your payroll department at work.

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Asking for a Friend - My parents currently don’t need any help with their finances, but I am thinking about what happens down the road. Where do I start?

February 19, 2024

Question:

My parents are still going strong and don’t need any help with their finances right now. I am thinking about what happens down the road. I don’t want to wait until it’s too late. Where do I start?

Answer:

I’ll begin by asking if your parents have an estate plan including a power of attorney and living will.

  • If they don’t, I would start there.

  • If they have taken care of that, a good place to begin is understanding how they pay their monthly bills. That will be one of your immediate concerns when the time comes.

    • Are they paying online or by check?

    • Do they get bills in the mail or are they paperless.

    • If they are still paying by check and get bills in the mail, please encourage them to pay online and offer to help them with that transition. Paying by check is just too risky these days for anyone. Check washing (Google that one!) is increasingly common. Paying online is more secure.

    • If they are already paying online, it’s ok to put certain bills on autopay. Bills that don’t vary too much month to month are perfect candidates. Think of your utility bills, wireless and cable bills.

      Note: I don’t advocate putting streaming bills on autopay as you’ll want some control when you turn them on and off. Same with credit card bills. It’s always a good idea to review the bill every month before you authorize payment.

      Part and parcel of this process is to become an authorized user on these accounts.

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Asking for a Friend - I recently received an offer from my credit card allowing me to divide up a large purchase into monthly payments with no fee or interest charges. Is this a good idea?

February 12, 2024

Question:

I recently received an offer from my credit card allowing me to divide up a large purchase into monthly payments with no fee or interest charges. Is this a good idea?

Answer:

  • If your monthly budget can absorb the purchase without impacting necessary expenses, I would say pay it in full and forget about it.

  • On the other hand, if paying for the large purchase would cause you to have to skimp in other areas, dip into your emergency fund or longer-term savings/investments, I would cautiously say you should take advantage of the offer with a couple of caveats.

    • Choose the shortest payoff period you can. Credit Cards will typically offer a 12-month plan or shorter ones like 6 or 3 months.

    • Just be careful, credit card firms use this no fee offer to get you to try the service (which usually charges a monthly fee).

  • If you can, it’s always a good idea to pay off your credit card every month. If from time to time you can’t, these no fee offers can be useful.

Do your friends ask you financial questions?
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Asking for a Friend - How do I add a beneficiary to a bank account?

February 5, 2024

Question:

How do I add a beneficiary to a bank account?

Answer:

1) If you have a revocable trust already in place (or add one in the future), title your bank account in the name of your trust; by nature, your assets will flow to the beneficiary of the trust.

2) Add a Totten trust arrangement at your financial institution. When you go into your bank or credit union, tell them you'd like to add beneficiaries to your accounts through a Totten trust arrangement. They will have the forms you need for that.

3) If you are doing your banking through a brokerage type account, you can add a transfer on death (TOD) or payable on death (POD) arrangement.

Do your friends ask you financial questions?
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Asking for a Friend - The stock market just hit an all-time high. Why is my portfolio still worth less than what it was at the end of 2022?

January 29, 2024

Question:

The stock market just hit an all-time high. Why is my portfolio still worth less than what it was at the end of 2022?

Answer:

What a good question!

You are right that the S&P 500 just hit a new all-time high eclipsing the previous high from early 2022. That headline though only tells a small part of the story.

Many other asset classes including US Bonds, US Small Cap Equities, International Equities, and Real Estate to name a few are still below their values from the end of 2021.

Investors with well diversified portfolios have certainly benefitted from the increasing stock market and the rebound in bonds in the 4th quarter but may still not be where they were in early 2022.

That doesn’t mean you should give up on lagging asset classes. The investing climate can change quickly (especially if interest rates begin to fall) and certain asset classes will benefit.

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - I've spent the last year nailing down my spending plan; what would you recommend I focus on next to improve my financial health?

January 22, 2024

Question:

I've spent the last year nailing down my spending plan; what would you recommend I focus on next to improve my financial health?

Answer:

Focus on your savings buckets.

  • We recommend that you look at saving for any large purchases so that you don't have to borrow, or you can borrow less.

  • We then also recommend that you save in different types of tax focused accounts (such as a pre-tax retirement account, tax-free retirement account, and brokerage account).

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Asking for a Friend - I’m still seeing CD rates at my local bank over 5%. I’ve heard those rates may not last too much longer. Should I take advantage of them while I can?

January 15, 2024

Question:

I’m still seeing CD rates at my local bank over 5%. I’ve heard those rates may not last too much longer. Should I take advantage of them while I can?

Answer:

You’re right, those 5%+ interest rates may not last too much longer.

The Federal Reserve has hinted that they may cut interest rates at least 3 times in 2024. In the hope we can maintain low unemployment with declining inflation, interest rates will probably come down from current levels.

While cash really isn’t an investment strategy, if you do have some cash reserves that you don’t need in the next year or so, laddering CD’s or Treasuries may be a good way to lock in those higher rates before they go away.

Do your friends ask you financial questions?
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Asking for a Friend - How should someone in their 30’s start saving for retirement if they work a few part time jobs in the restaurant business that do not offer any retirement plans?

January 8, 2024

Question:

How should someone in their 30’s start saving for retirement if they work a few part time jobs in the restaurant business that do not offer any retirement plans?

Answer(s):

  • Kate: Open an IRA, you can contribute up $7,000 annually if you are under 50 and $8,000 if you are 50 or older. Each paycheck transfer an amount to that IRA before you do any of your spending. If you can set it up for an automatic contribution on your pay dates that is better because you don't have to think about it. Even if you can only start with a small amount it will add up over time!

  • Liz: Split between a traditional and Roth IRA, so you have some pre-tax and some tax-free savings for retirement. Make sure you invest your contributions, don't just leave them sitting in cash. Additionally, when you get a raise or any additional income, increase your percentage that you're contributing by at least 1%.

  • Becky: If they reach the contribution limit and still have excess money to invest, they could also contribute to a brokerage account.

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - I want to apply for one of those credit cards that give you points for travel. Is that a good idea?

December 18, 2023

Question:

I want to apply for one of those credit cards that give you points for travel. Is that a good idea?

Answer:

It can be a good idea, but with one key caveat.

  • Are you able to pay your credit card balance in full every month without fail?

    • Most of the credit cards that offer points come with an annual fee. If you don’t pay your balance in full every month you are paying an annual fee plus very hefty interest charges from the credit card company. This negates any value you are receiving from the points. You also need a pretty good credit score to get approved.

Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

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