Wallet Literacy
The reviving grass isn't the only green on people's minds right now. With the annual April 15 federal income tax filing deadline arriving Monday and April being National Financial Literacy Month, money is at the head of the list.
Unfortunately it appears even if we're thinking about money, we're not thinking about it correctly.
The free credit score website WalletHub recently released its report on 2019's Most And Least Financially Literate States.
The study uses 17 measurements, ranging from high-school financial literacy grades to the share of adults with a rainy-day fund.
Pennsylvania comes in 36th out of 50 states and the District of Columbia.
Pennsylvanians ranked ninth in wallet literacy but in the middle of the pack — 27th — in financial planning and habits and a dismal 46th in financial knowledge and education.
WalletHub defines Wallet Literacy as building an excellent credit score, not overpaying for financial products, minimizing debt, and having adequate insurance coverage.
After the Great Recession of 2008, it was clear more Americans needed to learn more about their finances.
The housing-market collapse was a sharp reminder and the following financial crisis alerted Americans of our obsession with debt and the dangers of quick access to finances for under-informed consumers.
But 11 years on, it appears we haven't educated ourselves enough, according WalletHub's survey.
Americans ended 2018 racking up $67 billion in new credit-card debt. That's not surprising, considering only two in five adults actually have a budget, according to WalletHub.
Total American credit card debt passed $1 trillion for the first time ever last year, so it seems clear that better financial education is necessary to turn this trend around.
Why is it so hard for individuals to understand personal finances?
Wendy Bennett, senior financial adviser of Bennett Associates Wealth Management, 101 E. Diamond St., said, “Sometimes you don't know what you don't know, but that ignorance can cost you.
“There are so many moving parts and questions to be answered when it comes to personal finances. How will my career choice impact my potential earnings? How much should I save and in what type of an account? When I do invest, how can I do so in a manner that will help me achieve my personal goals?” she noted. “The questions are endless, but finding answers can be quite difficult.”Howie Pentony, owner of Pentony Capital Management, 1284 Perry Highway, Portersville, said, “Most people rely on financial people like me to help them.”Pentony said, “It's not easy to understand. You have to have good people to make sure they are doing the right thing.”Bennett agreed.“If you don't have the answer to all your questions, don't be afraid to talk to a professional such as a legal, tax or investment adviser.“Most professionals will gladly answer your questions and will educate you on a variety of matters to help ensure you don't make mistakes that cannot be reversed, or at least not without difficulty or long-term consequences,” she said.Pentony said, “Hire someone with real experience. You need to find an adviser that will invest your money the way you want it invested.”Bennett said, “The biggest mistake people make is not having a plan for their financial future. You wouldn't travel to any physical destination without your GPS or a plan for how to get there. Well, you also need a road map for your personal finances.”Bennett said, “A very common but very big mistake is carrying high balances on credit cards from month to month.“Not only do you pay high interest rates, but also if you're making minimum monthly payments, it can take years to pay down the debt. Don't charge more than what you can afford to pay, in full, when you get your monthly statement,” she said.Another big mistake is living paycheck to paycheck with no emergency fund, she said.“Emergency funds should be large enough to cover major unanticipated expenditures, or even a temporary job loss, to avoid racking up debt,” Bennett said.Pentony said it's been estimated that 50 percent of American households headed by a male over 55 have no money saved for retirement. “In my opinion, they think that someone is going to take care of them. I think they are sadly mistaken,” he said.To avoid being at the mercy of an unknown future, both Bennett and Pentony said it's important to save money and invest it.“In addition, make it a priority to contribute to your retirement account every month. If you never do, you'll never be able to retire,” she said.“And don't rely on your savings accounts to be your retirement fund — it will never keep up with inflation. Over time you will lose purchasing power which means your money will buy you less than it did in the past because of the pace at which prices and costs have continued to rise,” she said.Educate yourself, she advised.“With so much information available at your fingertips, spend time studying those things you need to better understand. Redirect time spent on social media to reading about things like debt management or how the tax law changes impact your net earnings or eligible deductions,” said Bennett.If the ins and outs of personal finance are hard to grasp, Monday's federal tax filing deadline is easy.According to the federal Internal Revenue Service, the official deadline to file your federal income tax return is Monday.Jean Bowen, coordinator of the Volunteer Income Tax Assistance program at the Center for Community Resources, 212 S. Main St., said her 67 volunteer tax preparers are booked solid Monday.
“Through April 1, we filed 1,884 returns,” said Bowen, whose VITA volunteers prepare returns for free for eligible people. More appointments have been filled since the beginning of the month.She said this year it appeared many taxpayers delayed filing a return because many thought changes in the tax law would shrink their returns or maybe even show they owed money.“Everybody was talking about getting less back. But from what I've seen, people are getting about the same back or maybe a little more,” she said of her clientele which is mostly people making $50,000 or less with children and filing simple returns.But it's not just taxpayers who will be creating a crush at the post office as they wait to the last minute to get that midnight April 15 postmark.Robocalls used by scammers to try and trick taxpayers out of money and information are also peaking.After analyzing 15 million consumer complaints released by the Federal Trade Commission over the last three years, AllAreaCodes.com ranked Pennsylvania No. 15 with 1,867 FTC complaints per 100,000 people.The IRS has stated repeatedly it will never call to demand immediate payment, will not ask for credit or debit card numbers over the phone, and will not threaten taxpayers with the police or lawsuits.If you suspect a call is a scam, the IRS urges consumers to call it directly at 800-829-1040.
Below are five common myths about tax refunds:Myth 1Calling the IRS or a tax professional will provide a better refund dateMany people mistakenly think that talking to the IRS or calling their tax professional is the best way to find out when they will get their tax refund. In reality, the best way to check the status of a refund is online through the “Where’s My Refund?” tool at IRS.gov or via the IRS2Go mobile app. Alternatively, those without Internet access can reach “Where’s My Refund?” by calling the automated refund hotline at 800-829-1954.Myth 2Ordering a tax transcript is a ‘secret way’ to get a refund dateOrdering a tax transcript will not help taxpayers find out when they will get their tax refund. While taxpayers can use a transcript to validate past income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation, they should use “Where’s My Refund?” to check the status of their refund.Myth 3‘Where’s My Refund?’ must be wrong because there’s no deposit date yetUpdates to “Where’s My Refund?”on both IRS.gov and the IRS2Go mobile app are made once each day – usually overnight. Even though the IRS issues most refunds in less than 21 days, it’s possible a refund may take longer for a variety of reasons including when a return is incomplete or needs further review.Myth 4‘Where’s My Refund?’ must be wrong because a refund amount is less than expectedThere are several factors that could cause a tax refund to be larger or smaller than expected.Situations that could decrease a refund include:4 Math errors or mistakes;4 Delinquent federal taxes;4 State taxes, child support, student loans or other delinquent federal nontax obligations; and4 IRS holds a portion of the refund while it reviews an item claimed on the return.4 The IRS will mail the taxpayer a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury’s Bureau of the Fiscal Service if all or part of their refund was reduced and offset to pay certain financial obligations.Myth 5Getting a refund this year means there’s no need to adjust withholding for 2019Annual tax planning is for everyone. To help avoid an unexpected tax outcome next year, taxpayers should make changes now to prepare for when they file 2019 tax returns next year. This can mean adjusting tax withholding with their employer or increasing estimated or additional tax payments.Checking withholding is important every year, and the IRS encourages people to do a Paycheck Checkup. This is especially important for anyone who got an unexpected result from filing their tax return this year because they had too much or too little withheld from their paycheck in 2018.Use the IRS Withholding Calculator to determine whether the right amount is being withheld. If an adjustment is needed, taxpayers should submit a 2019 Form W-4, Employee’s Withholding Allowance Certificate, to their employer as soon as possible.Source: IRS
