Monthly Archives: February 2022

Inflation!

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Inflation.  It’s all over the news.  The inflation rate this year is the highest it has been in 40 years.  And now I find myself changing my behaviors to address the higher cost of just about everything.

It all started with the thermostat in my house.  I read throughout the fall that I should expect significantly higher heating costs this winter.  I decided to be proactive and turned down the temperature in my house by 2 degrees by day and 7 degrees by night.  It hasn’t had any negative impact on my daily life and I get to spend extra time in cozy hoodies and under blankets and with cuddly cats on my lap.  I am indeed using less natural gas than last year.  And I’m paying a lot more for it, so I’m truly grateful that I took action early.

Then came the gas pump changes.  Gasoline is incredibly expensive right now.  And changing my driving habits isn’t really a very viable option for me.  So I’m being extra careful about chasing the lowest prices.  I know from my experiences that the price per gallon varies wildly even within State College.  The cheapest prices are on the north end of town, near the sad mall, and even cheaper just north of there in Bellefonte.  And the ultimate lowest price in the area is at the members-only warehouse club across from the sad mall.  But don’t take my word for it, because these things can change on a moment’s notice.  Take a look at the Gas Buddy app.  It will tell you the most recent gas prices wherever you happen to be.  I know that when I need to fill my tank, I try to do so when I’m near the places with the lower prices.

Most recently I’ve been changing my grocery shopping habits.  A lot of the supplies that I used to keep on a monthly auto-ship I have recently dropped from the convenient delivery process.  It’s just significantly cheaper for me to buy a lot of these things at the warehouse club.  It’s less convenient, but the savings is worth it at a time that groceries in general (and especially pet supplies) are soaring in price.  In addition to changing where I buy, I also find myself changing what I buy.  Beef is barely a part of my diet anymore because the price is just too high. Now I eat mostly pork and poultry proteins, as well as vegetarian options such as beans and eggs.  And in the winter months I tend toward frozen berries and vegetables to keep the costs manageable for these out-of-season fruits and veggies.

I suspect the cost of things is going to get worse before it gets better.  I’m sure more changes lie in my future.  I’m hoping that I won’t need to make any major purchases in the near future.  (Hang in there Prius and refrigerator….you can keep going a little longer!!!)  Inflation is stressful.  But it’s our current reality.  We can’t easily change the state of the economy.  But we can change how we react to it.

 

Crypto: Enter at Your Own Risk

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I watched the Super Bowl on Sunday.  I’m not normally a pro football fan (though I do faithfully watch Penn State football games).  But there’s something about the Super Bowl that I really enjoy.  It’s a purely American event.  I sit on the couch with my husband and eat pork rinds and pizza and chicken wings as we watch the game.  And when the game doesn’t hold my attention, the commercials generally do.  My personal favorite this year was the Doritos-loving Sloth.  But the thing that kept popping up in the ads this year was cryptocurrency.  I was stunned by the number of ads for both crypto and for places to store your crypto.  And it made me realize just how little I know about the topic.

I started in on research and was quickly in over my head.  The things I did gather is that there is the cryptocurrency itself (Bitcoin, Dogecoin, etc.) and the crypto wallets (Coinbase, Mycelium, etc.).  The currency that doesn’t physically exist is then stored in these wallets that don’t physically exist.  The whole thing is a bit unsettling to me.  There have been so many news stories about how crypto has been extraordinarily volatile.  So this is less like a savings account and more like an investment in the stock market.  Except even more volatile.  I’m normally not terribly conservative with my investment strategies, but crypto is not where I want my retirement funds to be invested.  I think if I were to venture into this world, I would not invest anything that I wasn’t prepared to lose altogether.  And that’s the same strategy I use for gambling (I like the nickel slots on rare occasion, as well as raffle and lottery tickets).  I go in prepared to lose.  It’s a form of entertainment rather than an investment.

I think the reason the crypto commercials left me feeling unsettled is because of the sheer number of those ads.  The last time I remember that many similarly-based Super Bowl ads was in 2000, for Super Bowl XXXIV.  Fourteen different tech companies (most of them no longer in existence) advertised during that Super Bowl, which is why it is still referred to as the Dot Com Super Bowl.  What makes this so unsettling for me is what happened just a few months later.  That is when the Dot Com Bubble burst.  A lot of people lost a LOT of money in the stock market that year.  A lot of tech companies lost significant value, and even more shuttered altogether. (Personally I breathed a huge sigh of relief that I had sold most of my investments in 1999 to put a down payment on a condo).

Cryptocurrency might be the way of the future.  Or it might not.  But right now, I’m looking at it more as a gamble than as an investment.

It’s Tax Time Again

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It always makes me cringe a bit when I hear from students that they are “having their taxes done.”  It’s really not as intimidating as you might think to file on your own.   Here is what you need to know:

  • The Lifetime Learning Credit will allow you to reduce your tax liability if you had expenses for tuition and fees in 2021.  You will need to complete IRS form 8863 and Schedule 3 to claim this credit.
  • Student loan interest can be claimed as an adjustment to income, reducing your tax liability.  You will need to complete Schedule 1 to claim this credit. But, while you may have had interest on private student loans, you should not have paid any interest on federal student loans in 2021.  The interest rate on all federal student loans has been set at 0% since March 2020.
  • Student loan disbursements that you received DO NOT count as income.
  • Scholarships that do not exceed tuition and fees DO NOT count as taxable income.
  • If your income for 2021 is less than $73,000 you can e-file for free, with assistance from one of several well-respected tax software companies.
  • Free in person tax filing assistance is also available through Volunteer Income Tax Assistance.
  • If you need to locate your 1098-T from Penn State, it is available on LionPath.  Click on the “my finances” button, select “manage my account/make a payment.”  You’ll find “Tax Forms” near the bottom of the left menu.
  • If you are living in Pennsylvania, you will likely also need to file state and local income taxes.
  • Additional guidance for international students is available here.

And here are a couple of things that are special for the Covid times in which we live:

  • Economic impact payments you may have received, either directly from the federal government or in the form of a special Covid grant through the University, are not counted as taxable income.
  • A special income adjustment is allowed again this year for up to $300 for cash donations made to charity.  Normally this is a deduction reserved for those who itemize their deductions, but this year, to encourage this type of giving with so many organizations in need, it is deductible on top of the standard deduction.  It’s easy to find on line 12b of the 1040—and even easier if you use tax software.

Filing your income tax may feel a little intimidating.  Throughout my career I have learned that nobody comes to law school because they love math.  But filing taxes is definitely something that a law student should be able to handle on their own, without having to pay a professional (or persuade a parent).  The online/software programs available to help make it really easy.  And if you are getting a refund—that makes it all worthwhile.  And if you are NOT getting a refund, all the better.  That means that you have not been giving the federal government free use of your money all year!

There’s no need to fear.  Your “I Filed My Taxes” adulting badge is just around the corner!

Wants and Needs: Choose Wisely

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It’s been a long time since I’ve brought out this old standard saying, but it bears repeating.  If you live like a lawyer while you are a student, you will live like a student when you are a lawyer.  It’s a classic saying that law school financial aid administrators have been using for as long as I can remember to try to encourage students not to borrow too much money.  But I’ve seen a friend of mine (let’s call her Jane) who has never even thought about law school dig herself into a financial hole in a very similar way.

I have been watching Jane make financial mistakes for years, despite my efforts to stop her.  She is so focused on the life that she wishes for that she shops for it.  She buys high end camping gear for trips she doesn’t take.  She buys furniture for a house she doesn’t have.  She buys clothes that are perfect for events she doesn’t go to.  And spending that money for the life she longs for puts that life even more out of reach because she doesn’t have the money to get there.

One of the big challenges in life is knowing how to define your “wants” and your “needs.”  And it’s ok to treat yourself to some wants, as long as it doesn’t interfere with the ability to meet your needs.  I need to eat.  I do not need to eat steak or lobster.  Special treat foods are nice every once in a while, but I know that my budget won’t allow for that on a regular basis.  Plus I think it makes the special things less special if you indulge in them too often.  I need shelter, but I don’t need a giant house for just me and my husband and our trio of crazy cats.  We have a small house that needs work, and that covers our needs just fine.  I need transportation to work.  I could take the bus.  But I indulge one of my wants by driving a car.  It’s a 10 year old Subaru.  It’s not the car of my dreams.  But it does fill my transportation needs (as well as some transportation wants!) just fine.  I don’t have everything I want.  But I do have everything I need, so I don’t fear that I won’t be able to meet the next month’s bills.

Jane doesn’t have the security of knowing she’ll be able to cover the bills when they come due.  She’s been prioritizing her wants over her needs.  And that gets in the way of her getting to where she wants to be.  It’s ok to treat yourself to some wants.  As long as it doesn’t get in the way of meeting your needs.

Don’t let the live you want get in the way of the life you currently have.  Don’t be a Jane.