1 in 4 young people dip into 401(k)s to pay off debt—here’s why that’s a problem

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Become Debt-Free

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Three ways to pay off student loans - here's what's best for you



Survey after survey shows that Americans want to become debt-free. But a significant number of young people are going about it the wrong way, experts say.

A new report by Merrill Lynch and Age Wave, which surveyed over 2,700 Americans ages 18 to 34, found that 25% of those with a 401(k) have already made an early withdrawal. The top reason: credit card debt.

Just under a third (31%) of respondents who raided their 401(k)s say they took out the money to pay off their credit card balance, while 16% said they put it towards student loans.

Debt can feel overwhelming: The average young adult under the age of 35 has a credit card balance of over $5,800.

But experts say the short-term relief you may feel from paying some of it off is not worth the consequences of taking money out of your retirement savings early. “401(k) plans are the worst place to take out a withdrawal or a loan,” says Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America.

Why you shouldn’t pay off debt using retirement savings

About 40% of working Americans are enrolled in an employer’s retirement plan, and 401(k)s are a common savings option.

A 401(k) is a great way to save for retirement because it offers significant tax savings. You can put in money directly from your paycheck before taxes are withdrawn, which reduces your taxable income. That means you will pay less in taxes each year. And because your contributions are automatically deducted from your pay, you won’t be tempted to spend those funds. Some employers even match contributions, which is essentially free money.

But if you withdraw your funds early, you’ll typically face consequences. Generally, the IRS allows you to start pulling money out of your 401(k) without penalty starting at age 59 ½, and you’re required to start taking withdrawals at age 70 ½.

If you dip into your 401(k) before that age, you’ll likely owe both federal income tax and a 10% penalty on the amount that you withdraw. You may be on the hook for state income taxes, too.

“It may seem like a really good idea to pull that money out and bring down your debt, but it likely has real, significant, long-term implications.”
-Lisa Margeson, head of retirement client experience and communications at Bank of America

Long term, taking an early withdrawal also means you “lose one of the advantages, as an early adult, that’s on your side when it comes to investing, and that’s longevity,” says Lisa Margeson, head of retirement client experience and communications at Bank of America.

That’s because the earlier you start saving, the more time compound interest has to work for you. With compounding, you earn money over time on both the funds you put into a retirement account, and the growth of your investment, so you’re earning returns on your returns.

That means if you invest early and leave your savings alone, over time, the money will snowball and you will have more wealth with less initial investment on your part.

“Near term, it may seem like a really good idea to pull that money out and bring down your debt, but it likely has real, significant, long-term implications,” Margeson says.



Suze Orman: Why you should never pay student loans from your 401K



All Americans, regardless of age, are feeling the squeeze. Salaries just don’t go as far as they once did to cover the necessities. In fact, the average paycheck has the same purchasing power it did 40 years ago, Pew Research found. When adjusted for inflation, the average hourly earnings peaked more than 45 years ago, according to Pew. A $4.03 hourly wage in 1973 had the same purchasing power that $23.68 would last year.

But younger adults may be feeling particularly grim, Merrill’s report found: 8 in 10 say it’s harder to become financially independent for them than previous generations. And 70% of Baby Boomers agree.

Nearly two-thirds, 60%, of people aged 18 to 34 now believe that “financial success” means being debt-free, as opposed to just 19% who say the definition is being rich, Merrill’s survey found.

“Freedom from debt, to some, seems like a low bar of accomplishment, but it’s just an elusive goal for many of the early adults today,” Margeson says.

Don’t miss:

Here’s why 1 in 3 college-age Americans consider payday loans with interest rates of 400%

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Three ways to pay off student loans - here's what's best for you



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How I’m saving 65% of my income without a 6-figure salary

I’m not going to lie to you here, this is basically a humble brag post. Hopefully educational and interesting as well, but let’s call this what it is.

My goal is not to come off smug, conceited, or that I’m better than anyone. I’m not. I make financial mistakes all the time still, even though I’ve taught myself so much over the years.

But my grandiose hope, is that you come away with what is possible, no matter your circumstances. I’ve had some advantages that certainly contributed to this point of my financial life, but it was also a lot of hard damn work!


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However, you can get out of any financial rut, it might be harder for you than it was for me, or it might be easier. The point is, you can accomplish some amazing results by putting in the effort.

Now, let’s get into the goods. Below I’m sharing what it took to get to saving 65% of income, my next steps, and my ultimate savings goal for the near future.

You may have read my story about my path to $100k saved and invested, which this post here is essentially a part of that series. There is probably a bit of overlap too, which was inevitable.

No six-figure salary

The reason I decided to include this in the title is because many of the articles about high saving rates, are people in a six-figure salary rage.

There are articles of people that don’t make that much too and there are also ones about people who make six-figures and barely save due to lifestyle creep. But the majority I see in major publications have big salaries.

And look, making more money and having a higher salary certainly can help you in big ways. More income, equals more potential to save. Generating more income helped me as well, which we’ll get into below.

But, I wanted to share my salary ranges for when I started my first full-time career of college to present. (Not giving the exact amounts to keep some form of privacy. My salary could be on the low end, middle or higher end of these ranges during the timeframes).

  • 2010 – 2014 ($30,000 – $36,000 Pre-tax)
  • 2014 – 2017 ($36,000 – $46,000 Pre-tax)
  • 2017 – Present ($46,000 – $85,000 Pre-tax)

It also wasn’t until late Summer and Fall 2014 when I started to take my personal finances seriously and work on build a savings rate and generating more income.

 

How I’m saving 65% of my income

Achieving a savings rate this high is not something that happens overnight and takes some work to achieve. It took me just about five years to get to this percentage, but the time to get here was well worth it when I see the results.

Below is how I’ve gotten to 65% savings rate and hopefully these tips can help you increase your own. Again, there are no big secrets!

Start with the basics – write it all down

Write every number down when it comes to your finances.

Things like your weekly or bi-weekly paychecks, bills, and other expenses. I certainly had an idea of numbers in my mind, but going off the fly like that is not enough to give you the full picture.

I wrote everything into a spreadsheet and added everything up. Now I visually could see where all my money is going, what is left, etc.

This also helped me catch where I could start make changes or what I could do to get more money back in my pockets.

Made expense cutbacks (to an extent)

Seeing all the numbers, it made me realize where I was either overspending or wasting money on things that really wasn’t important to my quality of life.

One area I caught, was that I was clearly overspending on food and going out socializing. Nothing wrong with it, but it should be in moderation.

I also caught monthly memberships that I wasn’t really utilizing much, so I canceled them.

Small things like this won’t make you rich, but these cutbacks will help you save more. I was happy to have $50-$100 back a month to save instead.

Additionally, I made efforts to save on living expenses. Moving out of a one bedroom apartment, to a two bedroom with a friend to split costs for example.

Pay off some piece of debt

No doubt, saving money is hard when you also have debt. I had student loan debt, a car loan, and a little bit on my credit card.

It was a bit foolish for me to get a brand new car in 2011, when my salary was low, had no real savings, and was living on my own, but it’s what I did.

However, the car loan had the highest interest and was over $320 a month. Getting that back to save each month would be a nice percentage increase and adds up quickly.

I started putting a bit extra a month first to get this lower and then in early 2017 I paid off the remaining balance in one shot. Took a hit in my savings at first, but quickly recovered with my savings rate and now the extra $300+ I get to keep.

Ideally, you don’t want to carry debt forever. Many people might have chosen to aggressively pay off their debt over saving, but I did both. I wrote more about that here.

Side hustles

I understand not everyone wants to do side hustles, but I found them to be incredible helpful in my financial journey in a few ways.

First, making more money which could go towards either expenses or right to savings. And second, they helped boost my professional knowledge. I learned a lot about marketing and websites by starting blogs, consulting, and freelancing when I could.

That in turn, was value I could add to my resume to get higher paying jobs and showcase my worth to companies. If you are looking for some side hustle ideas with serious income potential, check out this list.

Increase career worth

There is no question that increasing my salary helped me boost my savings rate.

However, making more money is not guarantee you’ll save well either. You have to have the financial foundation set, as to not fall into the traps of lifestyle creep.

During my savings rate strategy, there was a point where I plateaued unless I was making more money.

I hit around 40% savings rate, when there was no room left to save (unless magically my student loans went away). While cutting back expenses helped, there is only so much I could save on. But, with making money, there really is no limit.

So besides side hustling, I worked to improve my career in marketing. In 2017, I took a remote position with a higher salary, which gave me an extra 25% boost in my savings rate.

Keeping the consumer mentality in-check

Our society has a consumer mentality problem, we get obsessed with “stuff.” I still like the occasional nice thing and feel it’s important to treat yourself in someway. But, letting it get out of control hurts your savings rates and puts you in debt.

I don’t think there are any secrets to managing this other than practicing self-control and keeping your financial goals top of mind. It took a bit to break this habit, but once I did, I never looked backed.

Two things that help here, are remove your credit cards from one-click payments on shopping websites and also wait 24-48 hours before making a purchase.

By asking myself if its worth it and sleeping on it, 9/10 I realized I didn’t need it.

Create good financial habits that become the norm

Once I got my consumer mentality in-check I continued with good financial habits. Meaning, earning more, spending less, paying myself first, some budgeting, etc.

Your old financial habits that are hurting you are not easy to break. But as you start and keep your goals in mind, you’ll find good habits easier to do. It will get to the point where you don’t even think about it anymore, you just naturally do it.

I also quickly became addicted to the progress I was making with my savings rate. This made me want to keep going with what I was doing. At some point, this all became the norm and a daily part of my life.

The path to 100% savings rate

My next goal is to get in the 70-75% range and then ultimately, be at 100% savings rate from my salary job.

Because I love food and traveling, getting to my next level of 70-75% is quite challenging. But paying off my remaining student debt will free up more capital to save, increasing my job salary again, and making money off Invested Wallet will help get me there.

I’m not extremely frugal, probably never will be. I’m sure if I got more into that, I could easily get the percentage higher. But the effect on quality of life isn’t worth it to me.

Yes, it’s okay to enjoy and spend money on yourself! 😲

But I have my daily money habits in check and I really shed the consumer mentality, which keeps saving money easier. I think 70% will be the max I can achieve at my current love of income.

My goal in the next few years…

Building my side hustles and investments up to cover 100% of my monthly expenses, to then be able to save and invest 100% of my income.

It won’t be easy, but I have no doubt I can do it.

This article originally appeared on Invested Wallet. 


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SIEGEL: The positive economic effects of healthy food

The national debate over government-controlled health care has increasingly dominated the political scene. With the 2020 presidential election around the corner, candidates grapple with competing theories on both sides of the spectrum — Medicare for All has emerged as a policy test for the majority of Democrats, while Trump continues to vehemently express his desire to repeal Obamacare. While the political divide in the healthcare debate shakes the nation’s confidence in the government’s ability to fix our broken system, a new study offers a way to bridge this gap. In considering the economic effects of preventative care, specifically healthy food prescriptions, we have the potential to find common ground on the responsible provision of health care.    

In March, researchers from Tufts University’s Friedman School of Nutrition Science and Policy published a study indicating that “health insurance coverage to offset the cost of healthy food for Medicare and/or Medicaid participants would be highly cost effective after five years and improve outcomes.” Essentially, if providers were to cover 30 percent of the cost of healthy food purchases in supermarkets, the study estimates the prevention of 3.28 million cardiovascular disease cases, as well as 120,000 diabetes cases. Further, the broader healthy food incentive would lead to cost savings between $39.7 billion and $100.2 billion. As healthy food prescriptions emerge in private health insurance programs, this study validates the efficacy and efficiency of such preventative treatments to improve health and lower healthcare utilization.

The integration of programs encouraging healthy eating within the healthcare system have the power to positively impact a space desperate for innovation. While fruit and vegetable prescriptions have been proposed and implemented, they have not been scaled, ultimately lacking the evidence that this research provides. The passage of the 2018 Farm Bill included a provision supporting a Produce Prescription Program, establishing the importance of investing in a food is medicine model. However, this program does not have dedicated funding, but instead pulls money from the Food Insecurity Nutrition Incentive Program. With this new information, legislators should propose the provision of independent funds for this program, championing the call to invest in prevention. 

The Republican argument as it relates to the healthcare debate centers itself largely on cost-effectiveness. The institution of public insurance programs for the elderly and poor left the U.S. with a patchwork system of private and public insurance, comprised of a variety of targeted programs. Since their inception, Republicans have advocated for competition among private insurers and the flexibility of states to opt in or out of national health care initiatives. Most recently, they have pushed forward a “repeal and replace” mantra, highlighting President Obama’s shortfalls without providing much in exchange. On the contrary, Democrats have pushed themselves up against the wall on the other side of the room, calling for a comprehensive universal health care overhaul. Healthy food prescriptions offer both parties an opportunity to remove themselves from their respective walls concerning health care. Food interventions help to stop healthcare issues and costs from even appearing, a solution that both sides can agree attacks the problem at its source and cuts costs significantly.

Last year, California became the first state to prescribe food as medicine with their pilot program, which funds nonprofit organizations to deliver specific, free meals to those insured by Medicaid. Recipients of this service experienced medical costs at a 55 percent lower rate than other individuals, demonstrating the significant cost saving effects of this model. Subsidizing nutrition and capitalizing on the idea that food is medicine are necessary next steps in addressing questions on healthcare that have been largely ignored. Including food as a formal part of preventative treatment is transformative, and this study — along with the success of California’s pilot program — gives us the missing link between food and medicine. It is up to us to act on the power of food to ignite a paradigm shift in the healthcare arena. 

Lucy Siegel is an Opinion Columnist for The Cavalier Daily and was an Opinion Editor for the 128th term of The Cavalier Daily. She can be reached at l.siegel@cavalierdaily.com.

Should you use your IRA to pay for college?

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If you haven’t started investing yet, these tips will help get you on the right track for retirement.
USA TODAY

IRAs, or individual retirement accounts, are a valuable long-term savings tool, particularly for workers who don’t have access to a 401(k) through their jobs. If you’re saving in a traditional IRA, you’re probably aware that the money in that account is meant for retirement, and there are penalties associated with withdrawing funds prior to age 59½. However, there are a few exceptions to that rule.

The IRS will allow you to take an early withdrawal from your IRA of up to $10,000 to purchase a first-time home. It will also allow you to withdraw funds prematurely from your IRA to pay for college – either for yourself, your spouse, your child, or even a grandchild. Whether or not it makes sense to tap into your IRA for college purposes, though, is a different story.

What’s that money for?

If you open an IRA for the express purpose of socking money away for college, then there’s nothing wrong with taking withdrawals to cover higher education, provided you have another account somewhere earmarked for retirement. But if taking IRA withdrawals for college means depleting some of the cash reserves you’ve been setting aside for your golden years, then doing so is a pretty bad idea.

The less money you have in your IRA by the time your career wraps up, the less income you’ll have access to in retirement. It’s that simple. Therefore, if you withdraw a chunk of your savings to pay tuition bills, you’ll be without that money at a time in your life when you need it the most.

Furthermore, remember that any time you take an IRA withdrawal, you don’t just lose out on the principal amount you remove; you also lose out on gains that sum could’ve produced. Let’s say you take a $20,000 IRA withdrawal to pay for a child’s college 15 years before your targeted retirement date, and let’s also assume that your investments generally deliver a 7% average annual return. In that case, that $20,000 withdrawal will actually cost you $55,000 in lost retirement income.

An alternate solution

There’s nothing wrong with opening an IRA for the purpose of saving for college. The benefit of doing so is that your contributions will go in tax-free, thereby saving you money in the process of making them. The problem, though, is that with an IRA, your contributions are limited to whatever the annual maximum is. That number can change from year to year, but for 2019, it’s $6,000 if you’re under 50, or $7,000 if you’re 50 or older.

If you only have one child whose education you start saving for early on, an IRA might allow you to achieve your savings goals. But if you have multiple children and don’t start saving for college until they’re in their teens, you might come up short by only being allowed to set aside $6,000 or $7,000 a year. Furthermore, while you do get a tax break for funding a traditional IRA, withdrawals are taxed as ordinary income, so the amount you take out to pay for college won’t be yours to keep in full.

A better solution, therefore, might be a 529 plan. With a 529, you’re not limited in what you can contribute annually, and while the money you put in doesn’t give you an immediate tax break at the federal level (there are some incentives at the state level, depending on where you live), once you fund a 529, your money gets to grow tax-free. Withdrawals are then yours to take free and clear of taxes, provided they’re used for educational purposes.

Of course, the main drawback of 529s is that you’re restricted in how you can use your money. With an IRA, you can take withdrawals for college, or reserve money you don’t use for retirement. But if you do a good job of estimating your college savings needs, you might avoid a scenario where you overfund your 529 and run into that problem.

Tapping an IRA to pay for college is a move that can really hurt you if that money is supposed to be reserved for retirement. On the other hand, if you have separate funds for your golden years, a dedicated IRA might serve as a reasonable college savings solution.

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The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

Offer from the Motley Fool: The $16,728 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example, one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

Earth Day: How to save money by being sustainable

For example, when you buy a toothbrush, pick a bamboo toothbrush, these bio-degrade faster. Always carry a reusable bag in your purse, laptop bag, etc. and refuse a plastic bag. When you pick up groceries, carry a reusable sustainable bag to put your veggies and fruits in. If you want to refuse any plastic package and you like a brand, talk to me, I work with any brand to help them go plastic free. When you see garbage on the ground, pick it up and dispose them correctly.

Helping school districts work together – News from southeastern Connecticut

The Day’s April 8 editorial, “Another regionalization idea goes down in flames,” offered the opinion that achieving economies in education systems through mandated regionalization has little chance of succeeding in the Connecticut General Assembly.

Years of developing municipal budgets — four terms as a small-town first selectman — and the perspective I’ve gained as a freshman state senator representing the 12 towns in the 33rd Senate District have combined to form my experience-based perspective on this controversial issue.

First, I agree that cities and towns need to work together to achieve economies in our education systems. I have no argument with sharing costs and streamlining school administrations to save money. However, I believe that decisions on managing school systems should not be made at the state level. Local school boards are best qualified to evaluate options and determine how best to achieve cost economies. I am, and will always be, an advocate for home rule.

Second, there is no evidence that state-mandated consolidation will result in the economies it is intended to achieve. There is also no evidence to suggest that educational outcomes are enhanced by mandatory regionalization.

Third, there are models of productive cooperation already existing between school systems here in our district. The problem is that the state has imposed barriers making that cooperation much more difficult to achieve.

Simply opposing state-mandated consolidation is not a cost-saving strategy. We need a common-sense alternative that works to achieve real cost savings at the local level.

The solution I have proposed encourages local school districts to seek cost sharing with neighboring school districts, and removes the mandates and red tape that prevent those initiatives from happening. The state should allow neighboring boards of education, acting in concert, to define their own school districts and have that collaboration recognized as a Local Education Agency, or LEA. That solution puts school consolidation and regionalization decisions in the hands of each community, rather than subjecting communities to regionalization mandated by a state commission.

I strongly support elimination of regulations that add complexity and costs to regional cooperation and discourage local districts from engaging with one another. Here’s an example: my hometown of Essex collaborates with Chester and Deep River for grades K-12. It is a productive cost-saving collaboration, honed over the years. However, in order to achieve that collaboration, the state requires that our three towns operate five boards of education with 33 board members! So, sharing education resources, a cost saving strategy that is the objective of mandated regionalization, requires us to comply with restrictive and costly regulations at every turn. In essence, the state advocates cost savings but erects barriers to achieving economies.

Common sense tells us that sharing resources can save taxpayers money. My experience is that towns welcome and embrace productive collaboration, but they shouldn’t be forced to do it. When they reject cooperation, they in essence opt to bear the financial responsibility for that decision. The same should be true of sharing education resources. A local community should be free to fund its education system as it chooses, with or without voluntary collaboration or state funding.

There is one additional factor that shapes my point of view. Achieving cost economies is a key objective, but education outcomes are equally important. Those outcomes should never be compromised by regionalization. They should be enhanced and improved by it. Again, local school boards are best qualified to make those determinations.

Voluntary collaboration makes economic sense. It will work if we get rid of the red tape, complexities, and outmoded rules that inhibit local cooperation initiatives. The common sense solution is to make it easier for local school boards to do the right thing by establishing their own LEA’s.

Norm Needleman is the first selectman of Essex and the state senator for the 33rd District communities of Chester, Clinton, Colchester, Deep River, East Haddam, East Hampton, Essex, Haddam, Lyme, Old Saybrook, Portland and Westbrook.

 

 

 

 

 

 

 

 

Save Trees and Make Green With These 4 Tips

Did you know saving the planet can also save you money? Check out these four tips to help you keep more green in your wallet.

Planet earth shown from a distance.Planet earth shown from a distance.

Image source: Getty Images. 

Pop quiz: What are the “four Rs” you learned about on Earth Day as a kid? Many of us heard about them every April 22nd — but many of us have nonetheless forgotten them.

This year, though, it’s time to revisit those four Rs, because they can not only help save the planet, but also keep more cash in your wallet. Read on to learn (or relearn) how.

Reduce your consumption

Reducing, the first of the four Rs, has some pretty obvious benefits for your wallet. The less stuff you use — like energy or consumer products — the less damage you do to the earth, and the less money you spend.

So how can you consume less?

  • Turn your thermostat up a few degrees in summer and down a few degrees in winter. If you make this change gradually, you won’t notice much of a difference. Also consider a programmable thermostat that adjusts the temperature while you’re sleeping or at work.
  • Buy less stuff. Do you really need to break out the credit cards to buy the absolute latest phone or the most trendy clothes, or is last year’s line good enough?
  • Skip the single-serve and prepared foods. It’s way more expensive to buy prepared food, which creates tons of plastic and cardboard waste, than it is to cut up your own fruits and veggies, cook for yourself, or make a pot of coffee the old-fashioned way.
  • Unplug the electrical that use “phantom energy,” meaning they use electricity even when they’re turned off. All of the items in your home with clocks and batteries suck up energy, raising your bills and draining the planet of valuable resources. Your laptop doesn’t need to be plugged in at all times, nor does the DVD player that you haven’t turned on in two years.

Re-use instead of buying new

Most people opt for the convenience of buying something new when it would only take a little bit of effort to re-use what they already have.

Instead of opting for disposable paper towels, buy dish rags and cloths that you can use over and over. Or perhaps look into getting your shoes and appliances repaired instead of replacing them with something brand-new.

You can also look for used products when you do need to make purchases. There are some things you shouldn’t buy used — such as mattresses and children’s safety gear — but most of the time, used items are just as good or even better. And by buying used, you can get a lower price, keep an item out of a landfill, and conserve all the resources that went into making that new product you left on the shelves.

Repurpose

Whenever you have a need, stores are ready and willing to provide a solution — so long as you’re willing to pay the price. But perhaps you could instead repurpose something you already have.

Thinking of buying your child a play kitchen? See if that old entertainment center in the basement could be made into an awesome one instead. Likewise, an old dresser could be made into a changing table since your child will only need one for a few years anyway.

There are almost endless options for repurposing old items into new ones, from turning broken windows into picture frames to turning old salvage doors into desks or dining tables. Pinterest is a great place to find a way to give salvaged items new life, so before you buy, see if something you already own could serve the same purpose with a few tweaks.

Recycle

Recycling can actually earn you small amounts of cash if you turn in cans and bottles for the deposit. And scrap metal can sometimes fetch a pretty good price, too. If you don’t want to deal with it yourself, posting your scrap metal on Craigslist could help you find a buyer willing to pay a small amount to cart your metal away.

In some cities you also save money by recycling through avoiding fines imposed if you don’t separate out your plastic and glass. And you can make sure items such as old clothes are recycled by donating them. Even if they aren’t wearable, many charities sell these items to textile recyclers so they can be repurposed — and you can potentially score a tax deduction for your donation.

Remember the four Rs to save

Now that you’ve revisited the four Rs, you should have lots of new ideas for how you can do your part to save the planet while also spending less and growing your savings accounts. Earth Day is a great time to start making some of these new habits. Mother Earth — and your net worth — will be better for it.

The Motley Fool owns and recommends MasterCard and Visa, and recommends American Express. We’re firm believers in the Golden Rule. If we wouldn’t recommend an offer to a close family member, we wouldn’t recommend it on The Ascent either. Our number one goal is helping people find the best offers to improve their finances. That is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.

Village of Lewiston set to adopt budget

Donation made to Mason’s Mission Playground; Rec. Dept. leader honored

By Joshua Maloni

Managing Editor

Village of Lewiston trustees will meet at 5:30 p.m. Monday for a special meeting, at which time they are expected to adopt the 2019-20 fiscal year budget.

The tentative tax rate is $7.57 per 1,000 of assessed valuation, which is a 19-cent increase. This adjustment falls within New York state’s 2% tax cap, and will yield almost $30,000 in additional revenue.

Even with the tax rate increase, trustees expect they’ll need to take $285,260 in appropriated funds to balance the $3.72 million budget.

Mayor Anne Welch said raising taxes is a necessity with the new budget.

“Everything is going up. Your gas, your electric. So, you have to allow for that. If you just keep saying, ‘Oh, we’ll stay where we’re at, and we’ll just keep taking out of the fund balance,’ well, you can only go to the well so many times without replenishing it,” she said at a work session earlier this week

Welch added, “Hopefully, we don’t have to spend so much (in the future). But if you don’t raise taxes to meet the growing cost of living, you’re just digging yourself a deeper hole.

“I would much rather a 2% tax increase than a 12-15%.”

Trustee Nick Conde suggested the Village Board hold brainstorming sessions to find ways to lower costs and increase revenues, so future budgets won’t require such measures.

“I think it would be nice if we had a plan to say, ‘Hey, we’re going in this direction, and we’re going to start cutting expenses, and we’re going to start raising money.’ ”

This budget is up $128,927, or 3.6%. As in past years, the village’s biggest expenses are essential services, including:

  • Employee benefits – $480,591 (up $69,491 from the current fiscal year)
  • Sewage treatment – $474,711 (down $12,071)
  • Water services – $379,053 (up $17,765)
  • Police protection – $284,004 (flat)
  • Fire protection – $489,308 (of which $318,658 will be reimbursed by the Town of Lewiston; up $6,663)

Additional monies also have been allocated for the Department of Public Works to provide for vehicle repair work and an extra part-time worker, as well as for the Recreation Department’s year-round programming – something the board wholeheartedly endorsed.

Though it’s not a big factor in the overall budget, employee pay also is going up.

Welch said, “We’ve got to take care of our employees. You’re only as good as your employees. These guys, they work hard; they do every kind of job that there is. There isn’t one guy who does one job and one guy that does another job. They all do different jobs, and they work hard. You have to recognize that and give them a cost-of-living raise, so they can make ends meet, too. They’re not going to get rich here.”

But as far as overall spending within the departments, “You can’t cut it any more than we have,” Welch said. She described the next year’s fiscal plan as a “bare-bones budget.”

Clerk/Treasurer Amy Salada said, “But I do think – like you’re saying, Nick – it would a good idea maybe to have a little work session where you all kind of come up with some ideas on raising (funds).”

“Yeah; money-saving ideas; money-generating ideas,” Conde said.

Welch agreed. She said, “I’m all for that.”

“Here’s the thing, too, guys, we are one square mile,” she noted. “We don’t have any room for expansion. We don’t a get a big, new subdivision to (boost) the tax base. We’ve been lucky to get (the plaza at) Eighth and Center – more tax base coming. The new Fairchild – more tax base. River’s Edge (on North First Street). These are all adding tax base to us, but our property – we’re saturated. There is no room to expand. One square mile – that’s all we have; so, we have to do the best we can in one square mile. … We’ve got to be creative.”

On the revenue side, more money is expected from the sales tax, Lewiston Landing, building permit and mortgage tax categories. Trustees also have invested in treasury bills over the past eight months, netting an extra $9,000 to date. Overall, the Village Board expects to raise $3.4 million in the next 12 months.

The budget has to be approved by April 30. June 1 marks the beginning of the next fiscal year.

In addition to the tax rate increase, the sewer rate is set to go up 5 cents per 100 cubic feet of usage, from $4.69 to $4.74. This adjustment is mandated as part of what is required from the village per its tri-community wastewater treatment plant partnership.

A public hearing on this increase will take place at 6 p.m. Monday, May 6, ahead of the board’s work session. The meetings will be held inside the Morgan Lewis Village Boardroom at the Red Brick Municipal Building, 145 N. Fourth St.

Residents can expect to see the sewer bill price change in the July 1 bill.

The water rate, meanwhile, is expected to remain at $3.70 per 100 cubic feet.

Recreation Department Director Brendan McDermott, left, presents a certificate of appreciation to youth leader Scott Pedley.

Recreation Leader Recognized

During Monday’s regular monthly board meeting, Recreation Department leader Scott Pedley was presented with a certificate of appreciation for 30 years of service to the village.

Recreation Director Brendan McDermott said, “Scott has impacted the lives of thousands of youth – and I don’t use that word lightly.”

He added, “Scott has a big heart; he does not like this kind of recognition; he looks out for the underdogs that come into the recreation center and he keeps a watchful eye over those children. He’s done countless art classes for children and adults alike. He built the weight room and fitness center, really got that off the ground in the ’90s – and it continues to be well-used even currently. In addition, Scott’s coached floor hockey for us, basketball – pretty much every sport under the sun.”

Welch said, “He’s excellent,” and Trustee Vic Eydt noted, “He’s a great artist. … He’s very talented.”

The Lewiston Kiwanis Club presented Mayor Anne Welch and the Village of Lewiston Board with a check for $1,000 toward the all-inclusive Mason’s Mission Playground at Marilyn Toohey Park. Kiwanians Jack Hanrahan and Lee Allan (outside) joined President Marty Pauly in presenting the check.

Supporting Mason’s Mission

The Lewiston Kiwanis Club presented Welch and the Village Board with a check for $1,000 toward the all-inclusive Mason’s Mission Playground at Marilyn Toohey Park. President Marty Pauly said the funds were raised as part of the 2018 Niagara County Peach Festival.

“That’s awesome!” Welch said. “Thank you very much; we appreciate it.”

Kiwanians Jack Hanrahan and Lee Allan also were on hand to present the check. (See photo on Page 3.)

“That will go a long way with our playground,” Welch said. She noted, “Kiwanis does a great job all year-round with their charities.”

In addition, former Deputy Treasurer Ed Walker informed the board of a Mason’s Mission fundraiser at St. Paul’s Episcopal Church, “right across the street” from the Red Brick.

“They’ll be having their second annual Mother’s Day dessert auction and basket raffle on Saturday, May 4, from noon to 3. All of the proceeds from that event will be benefitting Mason’s Mission Foundation, the funds going directly to support the playground that’s going in here this summer,” he said. “We’re delighted to do it. If you have not come (in the past), we have an awful lot of fun with it. We’re hoping to raise a fair amount of money.”

Tickets are $20 per person, or a table of 10 for $160, and can be obtained from the church by calling 716-754-4591.

Welch thanked Walker and said, “I can’t say enough about the people who have donated and are fundraising. I’m thrilled that people are really, really donating.”

Walker will serve as auctioneer at the fundraiser.

All Things Political: Non-partisan ideas for good government

Roslyn Board of Education Trustee Adam Haber is not seeking re-election in May. (Photo courtesy of Adam Haber)

A wonk, as defined in Google’s online dictionary, is “a person who takes an excessive interest in minor details of political policy.” And, for those who know me, my specific wonky area of interest was born out of my passion for all things financial.

Finding ways to save money and raise revenue, without raising taxes or firing employees, is among my favorite things to do. I have more than a decade of success doing this as a school board trustee, as an appointee to the Nassau Interim Finance Authority, and in my current capacity working for the Town of Hempstead.

In my experience, businesses are more likely to invest in communities with well-run, efficient and transparent governments. To accomplish this, elected officials need to treat every penny as if it’s their own.

With that in mind, here are several ideas for good government that Long Island municipalities can incorporate to help attract capital:

Community Choice Aggregation: Your National Grid bill is composed of two parts, delivery and supply. The natural gas supply part of your bill is a market rate price that National Grid passes on to the consumer without a markup.

The New York State Association of Towns and the New York Conference of Mayors have created the New York Municipal Energy Program as a buying initiative that lets residents and municipalities save on their natural gas costs, through the supply part of their National Grid bill.

Through a CCA, NYMPEP’s chosen representative receives bids from dozens of third-party natural gas suppliers, picks the lowest one on behalf of residents and/or a municipality, and locks in pricing for 18 months if there is a greater than 10 percent discount to the average price over the last 12 months.

Not only could residents or governments save the equivalent of one month or more on their energy pricing, but residents can also opt out of the NYMEP plan at any time if prices drop. In other words, there is no risk and plenty of reward for the consumer.

Electronic Purchasing: Using an electronic platform to purchase goods and services cuts the time of procurement in half and increases the number of vendors bidding, due to a transparent and open process. Nassau County, to its credit, uses an eProcurement platform, SpecBid, with great success.

Pricing through an eProcurement platform often comes in at roughly 10 percent less than the traditional paper-based platform, and often even lower than New York state contract pricing, which is updated as infrequently as once a year.

Many items on government contracts are commodity-based products that fluctuate due to supply and demand, so eProcurement is a more current and competitive vehicle for government use.

Vendor Quick Pay: Although I just gave Nassau County kudos on eProcurement, they are notoriously slow to pay their bills. Many vendors who don’t have the luxury of waiting to be paid “factor” their invoices. Factors are entities that pay vendors immediately, but at a discount, making their money when they get paid in full at a later date by a municipality.

A new business model called vendor quick pay, has found a niche to operate profitably by partnering with government, creating a win for all involved. With vendor quick pay, a vendor signs up for the program in advance, gets paid on submission of an invoice within 24 hours, and the municipality and the vendor quick pay company split the discount, which is roughly 3 percent lower than the invoice.

The amount of the discount the municipality earns depends on how quickly they pay back the vendor quick pay company. For municipalities with efficient comptrollers, every million dollars paid this way could yield as much as $20,000 in found money.

Electronic Signatures: The world is quickly going digital, and paper contracts with a “wet” (or hand-written) signature are time-consuming and inefficient. Governments are starting to accept electronic signatures by using Docusign or similar vendors, who offer similar services.

Once governments accept the more efficient practice of electronic signatures, municipal employees will be spared the time-consuming task of walking invoices and contracts from department to department for signatures, thus saving both time and money.

Super Wonky Rapid-Fire Ideas:
• Unscrewing light bulbs in vending machines saves $100 per year in energy costs.
• Century Gothic Font uses 30 percent less toner than Arial, and toner is expensive.
• Shutting off workstations at night through a power strip saves over $150 per year per workstation.

There’s a multitude of revenue generating and money saving ideas in government that have nothing to do with raising taxes or firing employees. Once governments become motivated to stretch hard-earned taxpayer dollars through creative solutions, businesses will take notice and invest. All it takes is initiative from our elected officials.

Parents Rally To Save Mead’s Riverpoint Academy From Budget Cuts

The Mead school board next week will hold two meetings at which it’s expected to take public comments related to cuts that are proposed to close a $12 million deficit projected for the next academic year.

Already, parents are lining up convince board members to spare programs that benefit their children.

They include the parents of students at the Riverpoint Academy, a program with 170 high school students that emphasizes a science, math and entrepreneurial curriculum.

It opened in 2012 on Spokane’s Riverpoint campus, but is now located in north Spokane.

Traci Logan is the president of the parent organization for the academy. Her son is a student there. She says he’s flourishing there for several reasons.

“The traditional things, such as small classroom sizes, the personal relationships with the teachers that all the kids and parents have, the fact that they actually look at the whole child. It’s not just about good grades and academia. It’s about actually building a better human being,” Logan said.

The district proposes to close the academy for two years to save a million dollars. That is one of a few dozen money-saving ideas floated by district administrators.

The school board will hold a Monday evening forum at Northwood Middle School and a regular board meeting Wednesday at the district office to take testimony from the community.