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More bang for your buck: Taxes

**Disclaimer: This does not constitute as tax advice. Please seek out a licensed accountant or financial adviser for information on tax related questions.**

Government Bonuses!

Although receiving a tax refund may feel like a bonus, it’s really not. So where does this money come from? Each year you set your withholding amount, this is the amount of tax that you would like the government to take out of your paycheck. If you set the withholding amount to high the government ends up taking more out of your check than they needed to pay your taxes. This extra money is then returned to you in the form of a tax refund. So really you were just letting the government hold a little bit of each paycheck and then give it to you all at once. There can be advantages and disadvantages to this. First, let’s consider the advantages of receiving a large tax refund.

Advantages

Receiving a lump sum is always nice. It allows you to go on that vacation, catch up on bills or simply invest it toward a project. By allowing it to come out of our check automatically we are forced to save it and not touch it. This can be a great way if you are struggling to save money. Another advantage is that you do not have to worry about facing a tax bill at the end of the tax season.

While this sounds like a great idea, there are also some disadvantages. Below are some of the disadvantages of receiving a large tax refund.

Disadvantages

Ever heard the saying “Money now is worth more than money tomorrow”? This saying leads to one of the major disadvantages. By having a tax refund you sacrificed the opportunity to use that money throughout the year. That money was worth more when it was taken out of your paycheck due to inflation. Inflation means that over time the value of the dollar decreases, so you cannot purchase as much with it when you receive your refund as you could have along the way.

While receiving a tax return is neither good nor bad in any situation there are other ideas. Below are a few ideas to consider for next year.

Adjust Your Withholding

Adjusting your withholding can allow you more room in your monthly budget. If you are worried that extra money may get washed away in the day to day expenses, set up an account and set an automatic contribution to it. This could be a savings account, investment account, ext. By doing this you can have your money work for you in the form of interest earnings.

Have a Plan for Your Refund

Before your check comes in the mail, take time to write out a plan for how you will use the money. Whether it’s for one of the ideas mentioned above or another use, have a plan. The more specific your plan is the better.

Invest Your Refund

It is important to prepare for the future. It is easy to put this lower on the priority list because the future does not affect us now. If you find yourself doing this, maybe using your refund to catch up on investing is a good idea. Be sure to evaluate your goals and make educated investment decisions if this is what you decide to do with your refund.

Josh Payne

Peer Financial Counselor II

Powercat Financial

powercatfinancial@k-state.edu

Spending Post-Graduation: The 50/30/20 Rule

 

Seniors: buckle up. If your parents and/or FAFSA are cutting you off any time soon, you will need to learn how to manage your money yourself. The 50/30/20 rule is a great starting place for first-time budgeters because it is a simple way to make sure your spending habits are on track with generally acceptable benchmarks. Using this philosophy, your income should go towards 3 main buckets:

50%* of your income should go to NECESSITIES.

  • Necessities are living expenses such as:
    • Rent/Mortgage
    • Utilities
    • Transportation (gasoline, Uber/Lyft, public transit)
    • Groceries
    • Insurance
    • Minimum payments on debt
  • Your rent or mortgage payments should be no more than 30% of your income.

*If your necessities require more than 50% of your income, dip into the next bucket…

30% of your income can go to DISCRETIONARY EXPENSES.

  • Any “fun” purchases are considered discretionary expenses:
    • Eating out (restaurants, fast food chains)
    • Entertainment (concerts, sporting events, streaming music/video)
    • Hobbies (art supplies, books, sporting equipment, gym membership)
    • Traveling (airfare, hotel)

20%** of your income should be SAVED or put towards PAYING OFF DEBTS.

  • The earlier you start saving, easier it will be to achieve financial security and achieve your financial goals:
    • Emergencies
      • According to Dave Ramsey’s “7 Baby Steps,” start an emergency fund by working up to $1,000 in a savings account.
      • Financial planners recommend saving 3-6 months’ worth of expenses in a savings account.
      • If you don’t have very stable employment, perhaps this number should be higher for you. Your needs depend on your situation!
    • Student Loan/Other Debt Repayment
      • Find out what your monthly student loan payments are going to be by looking at the Federal Student Aid website and using their repayment estimator.
      • Use our student loan repayment estimator worksheet to see how much of your income you need to put towards your student debt.
      • Use your credit card like a debit card; only charge purchases you know you can afford. Pay off your credit card in full every month and start chipping away at your total balance.
    • Retirement
      • For someone starting young (ages 25-35), the industry-recommended benchmark to shoot for is 10-13% of your gross pay toward retirement accounts.
      • A peer financial counselor can help explain to you all the different types of retirement accounts!
    • Financial Goals
      • Whatever is left over can be used to achieve your own personal goals.
      • Use the S.M.A.R.T. acronym to remember how to set good financial goals: specific, measurable, attainable, realistic, and time-bound.
        • Example: “I want to have $20,000 in my savings account at the end of five years so I can put 20% down on a $100,000 house.”

**Like before, if your debt repayments require more than 20% of your income, dip into the discretionary expenses bucket.

This method, and other methods of budgeting, will look different for everyone. Make an appointment with Powercat Financial today at www.ksu.edu/powercatfinancial and we can help you fill out a spending plan specific to your unique situation!

Abby Pope, Peer Counselor II

Powercat Financial

302 K-State Student Union, Third Floor

918 N. 17th Street

Manhattan, KS 66506-2800

785-532-2889

www.k-state.edu/powercatfinancial

PowercatFinancial@k-state.edu

 

How should I invest my money?

“How should I invest my money?” This is a question I have received from a couple of students who have come in to Powercat Financial to discuss their financial futures. It excites me when I talk with these students who are in the game and are already preparing for retirement. These students often have little to no student loans and are already looking to the next part of life. They are thinking strategically and wanting to build wealth for themselves and future generations. For those who are reading this post and are themselves about to graduate or are wanting to invest, I am hoping to inform you of professional organizations and websites who will help you find excellent professionals. These professionals can help guide and assist you as you plan for and journey through life.

The CFP (CERTIFIED FINANCIAL PLANNER™) Board website is a great starting point. This website has an excellent search engine designed to help you find qualified individuals who care about you and your future. The website helps you search for CERTIFIED FINANCIAL PLANNER™ professionals. CFP® professionals are individuals who have gone through rigorous education, ethics training, examinations, and have obtained experience within financial planning before they are able to use the CFP® designation.

The National Association for Personal Financial Advisors (or NAPFA) is another great organization helping consumers find financial advisors. Financial advisors who are members of NAPFA hold themselves to a standard of fee-only financial planning. Fee-only means these financial professionals receive no commissions on any products they provide. This helps, not insures, they will provide unbiased advice that is best for you, the client.
The third place to go when searching for a financial planner is the Financial Planning Association website. The Financial Planning Association is a large group of CFP® professionals. Much like the website of the CFP Board, this website can help connect you with CFP® professionals who are masters of their craft.

CFP® Professionals are held to a fiduciary standard. Fiduciary standard simply means the advisor will always act in the best interest of the client. Are you surprised? Yes, not all financial advisors are required to act in your best interest. All financial professionals are held to the suitability standard. This standard means they will always provide whatever is “suitable” for your situation, not necessarily what is best.

For those wondering how much a financial planner will cost, it depends. Some financial planners are compensated by a percent of the money you have them invest/manage. This is called assets under management (AUM). There are some financial planners who provide “startup packages” for young professionals. The financial planner charges a flat fee for developing a basic financial plan and helping the young professional gain solid footing for their financial future. Other planners are paid on commissions for products (i.e. mutual funds, insurance, etc.) they sell. The immediate cost of hiring a financial advisor may be high, but in the long run it’s worth it. Financial planners help bring objectivity to what can be an extremely emotional subject.
On an end note, invest time in finding a financial planner. This can be an uncomfortable, nerve wracking process. Work through these feelings and find a financial professional who you can trust. I recommend starting with those who hold the CFP® designation and work from there. You are entrusting your future into the hands of this individual, do not be afraid to ask them hard questions about how they are compensated or if they are a fiduciary advisor.

While Powercat Financial cannot provide specific investment advice, we can help prepare you for the next steps of your financial future. Our office can help you walk through budgeting and helping you understand some of your larger financial goals. To schedule an appointment with our office, you can go request a free and confidential appointment at https://www.k-state.edu/powercatfinancial/.

References:
http://www.letsmakeaplan.org/?utm_source=LMAP&utm_medium=header&utm_content=homepage&utm_campaign=header.
https://www.napfa.org/find-an-advisor
http://www.plannersearch.org/

Philip Wegman
Peer Counselor I
Powercat Financial
www.k-state.edu/powercatfinancial

Money for Millennials

Currently, about 34% of millennials “are unsatisfied with their financial standing.” More than half are concerned that they will not be able to pay back their student loans (Forbes 2017).

Financial Knowledge
One of the main causes of these financial issues is a lack of financial knowledge. Forbes conducted a research study, posing the following question: “True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.” 40% of millennials answered incorrectly. According to Forbes, the lack of financial knowledge can be traced back to the increasing complexity of the job market. Staying employed and continually growing one’s skillset could be reasons that personal finance has not been the first topic of discussion for millennials.

Practical Advice
1. Apps
There was a time when those wanting to track their expenses kept a handwritten ledger of each transaction. Lucky for us, we have a variety of apps to choose from that do this. Most banks offer a mobile app where you can monitor expenses. If this is not an option, Mint is a useful free app that offers a user-friendly way to stay on budget for the month.
2. Track Every Dollar (Forbes)
Although apps can improve how efficiently people organize their expenses, this information is only helpful for those who use it. Setting aside a small amount of time each week to look over your finances can go a long way. The first step controlling expenses is to monitor each expense. Then, compare the actual expenses to a preset spending plan to stay on track.
3. Stay Current with Every Dollar
Once people get a better picture of their income and expenses, it’s easy to forget about it and continue spending without thinking about the budget. Setting aside a small amount of time each week to track your progress will pay off immensely in the future. As you build up the habit of staying current with your finances, it becomes easier to control costs each month.
4. Set a Specific Goal
Budgeting can be viewed negatively by millennials because the process can seem boring or restrictive. However, having a fun goal you are saving for can change budgeting into a motivational process. Whether it is saving for a vacation or setting aside money for gifts, having something to look forward to makes saving easier. When important life events come up, spending money will not be as difficult if you have already set aside funds to pay for them.
5. Get Help
Powercat Financial is a free peer-to-peer counseling service providing education to students on relevant financial topics including budgeting, student loan repayment, and credit. Making an appointment is a great first step in taking control of your personal finances. Visit Powercat Financial’s home page at www.k-state.edu/powercatfinancial to request an appointment.

Conclusion
The above tips are suggestions to build healthy financial habits. The value lies in the ability to incorporate these steps in everyday life. Taking each piece of advice one step at a time will help you achieve your financial goals.

Connor Fulk
Peer Financial Counselor I
Powercat Financial
finplan@k-state.edu

Pricey Puppies

Everybody loves dogs, right? Although our love for these furry friends may be abundant, there are a lot of things to take into consideration before adding an additional member to your household! I am going to outline some of the potential costs that are associated with owning a pet. If you are planning on purchasing or adopting a pet, you may want to ask yourself whether you will be able to afford the potential expenses associated with being a pet owner.

According to ASPCA the average annual cost of owning a dog varies by size:

  • Small Dog – $1,001
  • Medium Dog – $1,214
  • Large Dog – $1,448
Expense First Year Each Year Following
Adoption Fee/Purchase $0-1,500+ N/A
Food/Treats $120-500 $120-500
Food/Water Bowls $10-50 N/A
Collar(s)/Leashes(s) $10-50 $0-50
Bed/Crate $25-250 $0-250
Toys $10-200 $10-200
Health (Vet visits, Vaccines, checkups, heartworm prevention, flea/tick prevention, etc.) $700-1,500 $700-1500
Pet Insurance $9-55+ $9-55+
Pet Deposit if Renting $0-95+ $0-95+
Boarding Fee if Traveling without Pet $0-45+ $0-45+
Total $884-4,245+ $839-2,695+

These costs don’t include “one-time” expenses such as spay and neutering fees, carrier bag, etc. If you are thinking what I am thinking, that’s A LOT of money. As a college student we are constantly pinching every penny we can in order to pay for books, rent, utilities, so is there room in our budget to add a pet? I understand you may be thinking, “No way it costs this much money to have a pet!” To give a better idea of where the money is being spent, I broke down the yearly expenses that are associated with puppies.

*Note that prices may vary due to the bread of the dog, whether you are purchasing or adopting, and other factors.

As you can see, a dog may be an expensive addition to your college years. Another financially related topic I would like to point out is the cost of destruction that may occur, especially if you purchase a young pup. Dogs sometimes tend to get into things they aren’t supposed and chew up valuable things of ours. Now this isn’t the dogs fault, as they are learning what they can and can’t do, however, if your adorable new puppy chews up your only pair of tennis shoes, then what? Most likely you will be forced to head down to the mall and purchase another pair…which adds to your additional monthly expenses.

 

Now that I have touched a lot on the financial side of things, I wanted to end with one more thing you should take into consideration when thinking about adopting or buying a dog. Will you be able to give the dog the attention that he/she deserves? I believe this is one of the most important things to consider. If you work 40 hours a week on top of taking 15 credit hours, and attempting to have a social life is it fair to the dog to be left at home, locked up and receiving minimal attention every day? Even if you can afford the expenses associated with purchasing a pet, it may not be the right move. As a future financial planner we are taught to always act in the clients’ best interest, so I am asking you to act in the dogs’ best interest.

 

For my closing thoughts I want to be clear that I don’t think there is anything wrong with having a dog while in college. I simply want to make sure that all things are taken into consideration before making the decision. Personally, I plan to wait until post-graduation to bring my first puppy into my life!

 

References:

https://www.moneyunder30.com/the-true-cost-of-pet-ownership

https://www.petfinder.com/pet-adoption/dog-adoption/how-much-does-a-dog-cost/

https://www.akc.org/expert-advice/lifestyle/how-much-spend-on-dog-in-lifetime/

 

Jack Giardino

Peer Counselor I

Powercat Financial

302 K-State Student Union

Focus on the Fun this Spring Break

The sunscreen is packed, your Friday classes are finally over, and your friends are all throwing their duffel bags into the trunk of the car. You’re headed on a road trip and could not be more excited. Hours in the car together with friends is a bonding experience like none other. Money can be a reason to miss out on the fun, but it doesn’t have to be. Here are three quick tips for minimizing expenses—and maximizing the good times—on your upcoming travel this Spring Break.

1. Buy snacks in bulk

Buying snacks at gas stations throughout your trip can really add up. To save, buy candy, snacks, and soda in bulk at the grocery store before you leave. A 30oz bag of Sour Patch Kids at Dillon’s in Manhattan is $4.99. A 5oz bag sold at Kwik Shop in Manhattan is $2.59. If you and three of your friends each bought an individual bag at Kwik Shop, you’d spend $5.37 more for 10oz less. Likewise, this week at Dillon’s a six-pack of 16.9 fl oz bottles of Coca-Cola is on sale for $3.49. An individual 16.9 fl oz can of Coca-Cola at Kwik Shop is $1.29, so if you bought six you would spend $4.25 more than if you bought a six-pack at Dillon’s.

2. Meal Plan

Snacks aren’t the only road trip expense that adds up. Meals on the road can be pricey as well. With a cooler in your trunk and a little forethought, you can have quality meals on the road at a fraction of the cost. Over Winter Break I went on a road trip to the Grand Canyon and tried out a few meal planning ideas. Burrito bowls were by far the easiest and my favorite. Here’s what you will need to make four servings:

Road Trip Burrito Bowl Ingredients

1 cup dry quinoa

1 can black beans

1 can corn

(2) 10oz cans chicken breast

(1) 8oz jar salsa

2 Roma tomatoes, diced

2 avocados, diced

Onion flakes – season to taste

Optional: tortilla chips, lettuce, shredded cheese, lime, chopped cilantro

Supplies to bring:

Can opener

Small knife to slice tomatoes & avocados

1 large plastic container with lid – to mix ingredients

4 small plastic containers with lids– to eat out of and store leftovers

Plastic forks, a roll of paper towels for napkins

Cooler with ice packs/ice – for drinks and leftovers

This recipe is low maintenance and does not take up a lot of cooler space. The only prep needed before you leave is to cook the quinoa and pack it in a plastic container in the cooler. Most interstates have rest areas with picnic tables, perfect locations to stop and whip up your meal. To maximize freshness, wait to dice the tomatoes and avocados until you are ready to eat. Bon appetite!

3. Split the cost with your friends

Planning ahead by packing snacks and meals can save you a good chunk of change. Get your friends or family on board with snack and meal planning by discussing the idea with them beforehand. Agree as a group what snacks to buy and what meals will be made to make sure everyone is on the same page. Explicitly discuss how you will split the cost before you buy the

groceries to avoid the tension and awkwardness of asking your friends to pay you back for something they didn’t want in the first place.

Spring Break can be the time of our lives, but it doesn’t have to be our biggest expenditure of the year. By planning ahead this Spring Break, leave money worries behind and focus on the fun. For more Spring Break life hacks and tips, come to Spring Break Not Spring Broke this Thursday, 12:00-1:30pm in Union courtyard!

 

Kate Schieferecke
Peer Counselor I
Powercat Financial
302 K-State Student Union

 

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