Thursday, April 25, 2019
Every so often, I share a personal experience that I hope can help others. Imagine buying a plane ticket for a relatively high price to fly before a holiday (i.e., Easter) weekend. When it comes time to pick your seat online, no seats are available that do not cost an additional fee (e.g., extra leg room, front of plane, etc.). What to do?
I recently faced this situation for the first time in 40 years of flying and decided to do nothing. “How dare they force me to pay an extra fee when I’ve already paid enough,” I reasoned, so I bought plane tickets for my husband and I without a specific seat assignment.
Flash forward to the night before the flight and the airline STILL wanted to charge my husband and I an additional fee to pick our seats. So, once again, I opted out and our paper boarding pass read “See Agent” in the space where a seat number would normally appear.
We ended up playing “chicken” with the airline until seats in different parts of the plane were assigned. My seat, I noted, was one that they tried repeatedly to charge an extra fee for. We were in “limbo” status up until 15 minutes before the flight started to board, along with the upgrade hopefuls and the standby wannabees.
It was a very eerie and unsettling feeling with a total lack of control.
Bottom line: You cannot be forced to pay additional fees to pick airline seats if those are the only seats that are available. You will eventually be seated somewhere. My husband and I declined over $100 in airline fees and ended up sitting 20+ rows apart.
I can’t help but wonder what this experience is like for a family with, say, 2 adults and 3 young children. Do they have to pay several hundred dollars for the parents to sit with their kids or does the airline simply scatter the family throughout the plane if they decline the fees like I did?
Something to think about if you are traveling to popular destinations at peak times. You may get what you do not pay for.
Wednesday, April 17, 2019
Financial education has been in the news a lot lately. According to John Pelletier of Champlain College in Vermont, there has been an unprecedented number of financial education bills in state legislatures in the last two years. I recently attended Next Gen Personal Finance’s The Road to Financial Capability financial education advocacy conference and below are five key concepts that resonated with me:
¨ Special funding is not required for financial education mandates. High quality free curricula and professional development programs for teachers are readily available from several key non-profit providers. The only thing that is missing now is the will to make financial education available to every student across America.
¨ Financial education and consumer regulation are compliments-not substitutes- for one another. Americans need both education and regulation to make wise financial decisions and avoid costly financial pitfalls and fraud. An example is teaching about credit cards and regulating them with laws such as the CARD Act.
¨ Financial education standards determine the content taught to students. They should focus on topics related to students’ lives now or in the near future. Student loans need to be included in state standards and financial education materials.
¨ Financial education can be a great equalizer in an era of increasing income disparities in the United States. After learning about saving and investing, compound interest, and other key concepts, students may have financial hope for the first time in their lives.
¨ Financial education includes teaching self-control. Conscientious people have good self-control but not everyone is conscientious. Teaching strategies include making students wait for something (delayed gratification) and showing them the consequences of a lack of self-control.
Thursday, April 11, 2019
We are down to the wire on 2018 tax season with less than a week to file returns (or filing extensions) and make tax payments. Having prepared by own return in early March, I am sharing some tips and insights for folks who are still in the home stretch:
¨ Complex Returns Are Still Complex- If you filed a 1040 form before 2018, you likely had to file one or more of six new tax schedules numbered Schedule 1 to Schedule 6. I filed three of these forms. The IRS simply took some of the lines from the previous 1040 “long form” and transferred them to a new location. The new 1040 half-sheet format looks simple and “postcard-like” but looks can be deceiving.
¨ Something Old, Something New- In addition to the new schedules 1-6, many familiar schedules from past tax years remain. I skipped Schedule A this year because I no longer benefit from itemizing deductions but I still filed schedules B, C-EZ, D, and SE. A new calculation this year was the qualified business income deduction available to self-employed business owners and freelancers.
¨ Know Your State Tax Rules- Even if you can no longer deduct items on a federal income tax return, you may be able to on state income taxes. For example, I deducted 2018 property tax payments and medical expenses in excess of 2% of adjusted gross income (AGI) on my New Jersey income tax return.
¨ New Tax Forms Have a Learning Curve- I do my own taxes and preparing my return took about the same time this year as before. I no longer had to calculate employee business expenses and other itemized deductions. That saved some time. This time savings was reallocated to learning the format of the new schedules. However, I now have a good template to use until the Tax Cuts and Jobs Act expires in 2025.
According to a popular saying, there are only two certainties in life: death and taxes. I would also add a third certainty: periodic tax law changes. Here’s hoping that your 2018 income tax season is not too stressful. Use it as a “teachable moment” and adjust your tax withholding or quarterly estimated payments if you paid too much or too little to the IRS.
Wednesday, April 3, 2019
A recent 18-hour trip (as a passenger) provided an opportunity to review current personal finance events in detail. Below are some financial topics that have been recently making headlines:
¨ Retirement Savings Legislation- The federal Retirement Enhancement and Savings Act is under consideration in Congress and reportedly has widespread bipartisan support. The bill has a number of provisions to open up savings opportunities for more American workers. New Jersey recently passed similarly-motivated legislation: The NJ Secure Choice Savings Act.
¨ Tax Scams- As the 2018 tax season enters its final two weeks, the IRS is warning taxpayers about impersonation scams. Fraudsters call, claim to be from the IRS, and request Social Security numbers or other personal identification information to commit identity theft.
¨ Lower Investment Advisory Fees- Standard advisory fees of one percent of assets under management (AUM) are increasingly being challenged by lower cost services. Competitive investment advisory firms are charging relatively low annual flat fees or AUM fees as low as 0.25% to 0.40% of AUM.
¨ Tax Underwithholding Threshold- The IRS lowered the underwithholding penalty threshold from 90% (and later 85%) of 2018 taxes owed. This change came in response to concerns about tax withholding adequacy in the wake of the Tax Cuts and Jobs Act.
¨ Stock Market Performance- On March 29, the last trading day of the first quarter of 2019, the Standard and Poor’s index had its best first quarter performance since 1998. CNBC referred it as a “stellar quarter.”
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