News From Our Blog

Image description: Saving versus Spending.
The proportion of adults who are spending less this year compared to previous years continues to decline.
16 percent of U.S. adults have insufficient “rainy day” savings for an emergency.
32 percent of U.S. adults still do not save any portion of their income for retirement.
Learn more about American trends with personal finance from the 2014 Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling.

Image description: Saving versus Spending.

The proportion of adults who are spending less this year compared to previous years continues to decline.

16 percent of U.S. adults have insufficient “rainy day” savings for an emergency.

32 percent of U.S. adults still do not save any portion of their income for retirement.

Learn more about American trends with personal finance from the 2014 Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling.

Pay Down Debt or Invest My Money?

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By Kathy Sweedler, University of Illinois Extension Educator and blogger for Plan Well, Retire Well: Saving and investing your money

As the economy recovers, the trending question has been, “Is it better to pay down debt or build up savings and investment?”  Depending on your situation the question may sound a little different such as:

  • Pay extra on my student loan or invest in a Roth IRA?

  • Build up an emergency savings fund or pay off my credit card debt?

  • Pay off my mortgage or put more money in my 401(k) retirement plan?

but the intent is the same. Whichever question pertains to you, I suggest you ask, “How can I get the most out of my dollars and what’s important to me?”

We tend to be on the lookout for the “best buy” for our dollar. We know that if we spend our dollars on an item such as a movie ticket that the dollar will not be available to do something else (like buy dessert). The opportunity cost of the movie ticket is the loss of buying dessert. In this example, a dollar is worth a dollar because the choice is, “do I go to the movies tonight or buy dessert tonight?” Both options take place now.

For long-term decisions we need to consider how the dollar we have now may change in value over time. For example, dollars used to buy mutual fund shares today may increase in value over time.  If you use $100 today to buy mutual fund shares and the mutual fund earns a 10% annual return, at the end of the year you would have $110. This is a $10 gain.

But if you use your $100 to buy mutual fund shares, then you cannot use these dollars to pay down credit card debt. If you have a $100 credit card balance with an annual percentage rate (APR) of 23%, and the balance is not paid, at the end of the year you would owe $123. (I’m assuming no minimum payment required or fees to keep this example simple.) However, if you used your $100 to pay off the credit card balance, you would save $23 in interest cost. You have essentially earned a return on your money (gain) of $23 dollars.

When considering an investment with a return of 10% or paying off a debt with an APR of 23%, you get more from your dollar by paying down the debt. Look at the interest rates charged compared to the possible return on investing when deciding how to get the most from your dollar.

For some questions, the tax code makes this comparison more complicated. For example, you may be able to reduce your income tax liability if you itemize deductions and include mortgage interest costs. You may also have a tax-advantage if you invest money through an employer-sponsored retirement plan such as a 401(k). Keep in mind your tax situation when thinking about the opportunity costs of your dollar.

You also need to ask, “What’s important to me?” Financial decision-making is more than adding up numbers. Our personal finances are influenced by our values. Some people feel strongly that they do not want to carry debt. Others value having emergency savings. A saving fund can provide financial security, and help avoid taking on new debt when unexpected expenses come up. That’s what makes the question of “what to do with my money?” both interesting and difficult.

Both the opportunity cost of your dollar and your values are important when deciding whether to pay down debt or invest for the future. Visit the Plan Well, Retire Well blog to join in more University of Illinois Extension’s discussions about how to manage money.

Safely Dispose of Prescription Drugs on April 26

Saturday, April 26 is National Prescription Drug Take-Back Day

Between 10 a.m. and 2 p.m.on April 26, bring your unwanted prescription drugs to a collection site near you

Properly disposing of medicines is important to human health and the environment. If you dispose of drugs on your own, check out these tips from the U.S. Environmental Protection Agency (PDF).

Image description:
From the National Archives:

It’s Earth Day!

"City farmers" tend their gardens in the Fenway administered by the Fenway Civic Association. Four hundred twenty-five gardens are tilled on these five acres in metropolitan Boston, 04/1973.
Ernst Halberstadt, photographer.  From the series: DOCUMERICA: The Environmental Protection Agency’s Program to Photographically Document Subjects of Environmental Concern, compiled 1972 - 1977

This year’s Earth Day theme is “Green Cities” and the gardeners of Boston’s Fenway Victory Gardens have been at it since 1942!  (We wonder if cityofbostonarchives has any other photos from these historic gardens…)
Find out what you can do in your city or community for Earth Day!

Image description:

From the National Archives:

It’s Earth Day!

"City farmers" tend their gardens in the Fenway administered by the Fenway Civic Association. Four hundred twenty-five gardens are tilled on these five acres in metropolitan Boston, 04/1973.

Ernst Halberstadt, photographer.  From the series: DOCUMERICA: The Environmental Protection Agency’s Program to Photographically Document Subjects of Environmental Concern, compiled 1972 - 1977

This year’s Earth Day theme is “Green Cities” and the gardeners of Boston’s Fenway Victory Gardens have been at it since 1942!  (We wonder if cityofbostonarchives has any other photos from these historic gardens…)

Find out what you can do in your city or community for Earth Day!

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