Extension Educator, Consumer Economics
Extension Specialist, Consumer Economics
Extension Educator, Consumer Economics
June 19, 2012
In January 2012, as part of my ACES in Sierra Leone Study Abroad course, our University of Illinois students worked with World Vision of Sierra Leone to assess their project to develop inland valley rice swamps and farmer groups since the war ended. Sierra Leone suffered a horrific 11 year-long civil war through the 1990s but since 2002 the country has been working to rebuild, heal, and get the economy going.
As a part of the World Vision work in southern Sierra Leone we learned about their use of savings and lending groups to build trust among community members and to build some assets. Even a small amount of funds, on the order of $10, can make a huge difference in the life of a family in rural Sierra Leone. The way the savings and lending groups works is that each week the group has a meeting (a group consists of between 15 and 30 people) and each member contributes about 50 cents per week. The money is deposited into a wooden lock box with three padlocks on it: one controlled by the World Vision development facilitator; one by a teacher; and one by another local leader. This way all three people need to be in the same place for anyone in the group to access the money and no one person can divert the funds without others knowing about it.
Contributing weekly to build savings gives the group members an asset base and it also provides a sort of insurance, like an emergency fund. One group member related about how having access to the fund helped when his wife had an emergency hospitalization. This man said if the group funds were not available he would have had to sell a bag of cocoa at a very low price to a middle-man, thereby losing much of its value. Another person said the funds allowed a low-cost loan that permitted their family to pay school fees. The savings and lending group also helped create group cohesion and the group reported they are building plans to do agricultural businesses together with rice production and marketing.
What are some lessons we can take from the savings and lending group? First, save regularly! Even if it is a little amount. Little bits add up and accumulate into useful amounts. Second, check your insurance. For the savings and lending group members, their funds served first as a kind of insurance for health expenses and other unforeseen expenses. Third, build up your emergency fund. Finance experts recommend having between 3 and 6 months of funds in a readily accessible form saved. Last, check your credit. Make sure you have access to credit in order to make a needed large purchase such as a home or car or to take advantage of a small-business opportunity.
The people in the Sierra Leonean village along the dusty and bumpy road between Segbwema and Kono give us an inspiring example of building financial assets through workable, small steps.
April 18, 2011
Have you noticed your grocery bill increasing? In February 2011, food prices increased 3.9% over prices in January , and food prices continued to increase in March with the eighth straight monthly increase. Overall, world food prices have reached a record high this year. OUCH! Rising food costs are pinching our already tight budgets.
Why are food prices going up? Economists seem to agree that it is a combination of factors.
1) As populations grow worldwide, there is more demand for food. And, as countries develop, there is a tendency for people to want to eat more meat. For example, urban Chinese increased their consumption of chicken 219% per capita from 1983 to 2006. It takes more resources to produce meat calories than grain calories – something to think about the next time you order a roast beef sandwich versus a humus wrap.
2) Typically when the price of a commodity – like corn – goes up, the demand goes down. However, the current high demand for biofuels keeps demand and prices high.
3) Worldwide we have less stockpiles of food. When disasters affect food supplies we see prices increase.
4) Unusual weather patterns worldwide have affected these food supplies. We have seen floods in Australia and droughts in China and Russia. The droughts last summer started the crop price increase. Global wheat prices more than doubled during the second half of 2010. Unusual winter freezes this year in Florida, Texas and other southern U.S. states caused a decrease in our supply of fruits and vegetables, and prices to increase.
What does this mean in our neighborhood – and throughout the world?
Prices of staple food items like wheat, corn and sugar have risen by more than 50% in recent months. But our food prices haven't increase that much at all. Why? Food prices in the U.S. are largely driven by other costs (such as labor, marketing, and other overhead costs) rather than the price of the ingredients or commodity. For example, according to food economist Abdolreza Abbassian at UN Food and Agriculture Organization, 2% of the price of a loaf of bread in the US may be the flour price. In developing world countries, it might be 70% of the price.
The World Bank has reported that as many as 44 million more people have been forced into hunger because of the rising costs of food. This is fueling conflicts in Libya, Tunisia, and Egypt. Time magazine has a very cool image showing how much people pay (as a percent of their income) for food in different counties. Take a look and see if you notice any correlation between the countries in purple (those spending over 36% of household consumption on food) and headlines in the news.
People in the U.S. also feel the impact of food price increases. A study reported in the Chicago Fed Letter, found that those the hardest hit with food price increases are people in the bottom income quartile and food stamp recipients. People with low-incomes eat more food at home and less in restaurants, compared to other income groups. The food item cost affects the price of food more at grocery stores than at restaurants.
I think it's amazing how global changes become important when I'm shopping for food in my hometown grocery store. Stay tuned to future blogs about tips on how we can manage the increases in food prices, and keep our grocery bills manageable.
If you have tips to share, click on my name below and send them to me please. I will include them in future blogs.
October 16, 2009
This week I attended the Smart Women Smart Money Conference hosted by the Illinois State Treasurer's Office. There were numerous workshops going on including one by our own Karen Chan. To my surprise, my next door neighbor, Shundrawn Thomas, President of Northern Trust Securities, did a presentation on the State of the Economy. I decided to sit in on his session. He provided historical data, information on the current status and future outlook of our economy. I would classify his presentation as a lesson in macroeconomics, the study of the overall economy. Today, I want to speak with you about microeconomics, your personal economy.
By now, you have probably been overwhelmed with quarterly statements from your retirement and investment plans, your Social Security statement, your annual employee benefits enrollment booklet, and maybe even your Notice of Proposed Assessed Valuation from your county assessor's office. This is a great time to re-evaluate your personal economy. Are you financials in order? Is your economy in a recession? Let's look at your mail one piece at a time to see how things are going.
First of all, if you don't have any, that might be a problem. See Social Security section below. Otherwise, look at your statements. Generally, you will have performance data for the current quarter and year to date information. If you are not happy with your investment performance, consider rebalancing your portfolio. For more information on rebalancing, check out our website at Plan Well Retire Well. Are you saving enough? Do you have more month than money? Explore the Extension website to find out ways to get more for your money.
Social Security statements
Your Social Security statement was sent out recently. The two components that your need to review for accuracy are the estimated benefits and earnings record sections of the statement. The estimated benefits section provides vital information on your estimated benefits at retirement, disability, and death. You should verify your birthdate on file, estimated taxable earnings for 2008, and the last four digits of your social security. The earnings record is a running record of your earnings each year since you started working. It is important to verify this information for accuracy; benefits are determined based on this information. Note: if you had more than one job or had self-employment income in addition to regular income, your earnings for the year would be the total of both jobs. Will the estimated benefits be enough?
If you are depending on Social Security to get by in your golden years, think again. In case you didn't read ALL of your Social Security statement, one of the women in our workshop reminded us that on the front page of the statement, Social Security states that "in 2016 we will begin paying more in benefits than we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted." This statement explicitly says that someone's personal economy will likely turn into a depression if additional retirement resources are unavailable. Therefore, if you are not currently participating in your company's retirement plan, now is the time to join. If you are self-employed establish your own retirement plan, there are several to choose from. If you don't have an IRA, consider opening one. The more income options you have at retirement, the better off you'll be. To view your statement or apply for benefits, visit the Social Security website.
Property Tax Assessments
Your county assessor normally assesses your property every three years. This year, due to massive foreclosures and the plunge in the real estate market, many assessor offices are providing special assessments to adjust property values to reflect our current market. However, once you receive your notice, if you disagree with the assessed valuation proposed on your property, you have a small window of opportunity to appeal. In many cases your appeal can be filed online at the county assessor's website. You will need the property index number (PIN) of your property and likely other similar properties in the area that fall into your same property class. The deadline to appeal normally appears on the statement.
Employee Benefits Package
Sometime this month, you have likely received your open enrollment forms. Besides retirement accounts, this is a great way to reduce taxable income and protect your family against unexpected loss. Usually, you will be asked to choose between an HMO and PPO plan of one or more providers for health insurance. The HMO is normally more economical, while the PPO ordinarily offers more flexibility. Which plan you choose, depends on your family's specific needs.
Basic life, supplemental life and accidental death and dismemberment insurance plans are offered as well. Most companies provide basic life coverage equal to your annual salary for free. However, you can purchase additional (supplemental) life insurance coverage for up to several times your annual pay at relatively low group insurance rates. Check your current insurance needs. If something happened to you, would your family be able to survive on what's left? If not, in addition to private insurance, consider coverage with your employer.
Finally, are you taking advantage of your employer's flexible spending accounts? Many employers offer pre-tax withdrawals from your paycheck to set aside to cover health and child care costs. Some may even offer reimbursement accounts for transportation, which includes parking, tolls, and bus and train fares. Participation in these programs provides a reduction in your taxable income, and thus a tax savings to you throughout the year.
So, before your enrollment period ends, see which benefits will be to YOUR benefit.
Final Thoughts about Your Economy
Like the broader economy, your household economy is made up of more than just a few things. You have budgets consisting of income and expenses, savings, and many other factors to consider. However, I wanted to highlight some of the things that get overlooked or placed on the back burner because you feel that other matters are "more important." In retrospect, had we paid more attention to the "less important" contributing factors, our economy would have likely been a lot better off today. So, open your mail. You'd be surprised at how little things like verifying information or making slight changes in coverage can make a big difference on your long term outlook. Our economy will eventually turn around. Make sure you are prepared when it does.
Until we talk again,
August 12, 2009
May 11, 2009
Last week at a workshop I was giving, one of the participants asked me if it was a good time to buy stocks. This is what I know for sure:
But is this a good time to buy? Who knows! That's the nature of the stock market. As Burton Malkiel stated in the title of his book, it's "A Random Walk Down Wall Street." Today does not predict tomorrow. We can guess, we can try to look for indicators. But no one really knows.
For that question, I do have an answer. Do the same things that you should have been doing a year ago, or 10 years ago. Follow the boring, tried and true investment strategies:
Want to know more about sound investment strategies? Visit the Choose Investments section of our website, Plan Well, Retire Well: Your How-To Guide at www.RetireWell.uiuc.edu.
As I'm fond of saying in my workshops, investing is like horseshoes. In the game of horseshoes, you can score points by either throwing a ringer, meaning that your horseshoe lands encircling the stake (3 points) or is within a horeshoe's width of the stake (1 point). If you try to throw ringers, you can easily end up with nothing. Many games have been won by just consistently throwing "close shoes". In investing, consistently getting "close" will also probably garner you better results over time than trying to pick the winner. Therei s one difference between horseshoes and investing. In horeseshoes, practice and skill will increase the likelihood that you can throw ringers. But it's much less clear that the same is true of investing!
November 30, 2008
I have been thinking about financial wellness a lot in the last couple of months. On September 5th, I wrote a blog, "Financial Wellness ... What does it mean to you?" exploring the definition of financial wellness. Over Thanksgiving weekend, my husband and I had time to sit down and think through our financial situation. We talked about how financially secure we feel in some ways, and don't feel in other ways. Talking about it helped put the current financial situation in perspective. However, I imagine financial wellness and financial security are concepts most of us don't spend much time on until they're lacking.
Lately many people's financial security has been shaky. Overall, people's homes, jobs, and investments all seem much less secure than they did a year ago. I know many people are wondering, "What should I do about my investments?" And, "What can I do to manage a work layoff or a cut in work hours?" Or, "What are my best choices to prepare for this unusual economic time?"
University of Illinois Extension's mission is to help people make informed decisions about all kinds of topics, including finances. We recognize that this unusual economic time requires a special focus. Thus, we have initiated the Getting Through Tough Financial Times (GTTFT) initiative. The GTTFT resources are designed to help you identify ways to manage your resources wisely during this financial crisis.
The new Getting Through Tough Financial Times website provides timely resources, links to related money management resources, and a listing of events throughout Illinois. This is your "one-stop" shop for all University of Illinois Extension resources that will help you if your financial security is threatened. Currently, the website is organized around such topics as: Avoiding Money Traps, Setting Spending Priorities, Managing Your Debt, Talking with Creditors, Saving and Investing in Turbulent Times, and Spend Smart/Save Smart tips. New resources are added weekly as the economic situation evolves.
Another upcoming resource, "Saving and Investing in Turbulent Times," is a statewide teleconference seminar with campus-based professors and Extension educators (most who are regular contributors to this blog) to help answer questions regarding what to do with your money in today's market. U of I Extension provides factual information not motivated by sales of investment products. During the seminar, we will talk about:
In addition, the final half hour will be a Q & A session. Bring your questions!
The seminar will be offered at local University of Illinois Extension offices by teleconference on December 16, 2008 at 1:30 p.m. or 7:00 p.m., and repeated on January 20, 2009. Contact your local County Extension Office for registration information. This event is part of the GTTFT initiative.
I hope that our financial wellness – both for individuals and our nation – improves significantly in the next year. In the meantime, it's up to us to manage our financial resources as best as we can. Click on my name below to ask questions or add a comment related to this blog. I would love to hear from you :)
October 16, 2008
Many of us from University of Illinois Extension are involved with economics -- whether it's family economics or health economics or agricultural economics. Some colleagues of ours have recently posted a series of articles that you may be interested in. The article, The Current Financial Crisis: How Did We Get Here?, I found especially interesting.
Nick Paulson's description of the current economic crisis is an excellent summary of the mess we're currently in as a nation -- and the implications for households is obvious. For example, this piece from his article is mind-boggling, "It is estimated that at least 15.4 million U.S. homeowners (~30%) will have zero or negative equity in their homes by the end of 2008."
The publication series Illinois Farm Economics Update: Impact of the Current Financial Crisis on the Agricultural Economy is available at http://www.farmdoc.uiuc.edu/index.html.
Please see the main page here or click below for single articles: