Child Care Expenses Straining Family Budgets

Baby Sitter

According to a recent MarketWatch article, child care is placing a great strain on family budgets in the US. The July 2, 2016 report indicates that the accelerated cost of raising children is placing additional pressure on the family budget, causing the strain to spill over in day-care parking lots and even in the election debate of 2016.

The report states that child-care costs have doubled over other prices since the end of the recession in 2009. Along with the fast-rising costs of housing and minimal wage gains, families, who have young children, are focusing their attention on the current presidential candidates.

For example, the Democratic presidential candidate, Hillary Clinton, introduced a proposal in her campaign to limit the costs of childcare to 10% of a family’s income. The proposal represents a substantial cost reduction to families who currently pay one-fifth of their take-home pay on babysitters and nannies or to child care facilities.

Clinton has also proposed to expand access to a universal public preschool for children 4 years of age and the Head Start program. She also wants to offer child-care scholarships for parents who currently attend college.

Republican presidential candidate, Donald Trump, has not made any definitive child-care recommendations. However, he has indicated his interest in helping the middle class by initiating a simplified tax code and proposing lower taxes.

The major drawback for families, when it comes to paying for childcare, is the fact that the increased expenses have offset any income gains. Therefore, young families who have managed to meet other expenses are finding it hard to cope with the increased rates associated with childcare.

Often both parents have to work in order to meet their financial obligations. However, they often feel frustrated when they also must try to keep pace with the ever-increasing costs related to placing their child in a day-care center or securing a nanny. Therefore, along with international issues, child care expenses are also considered a campaign item in the 2016 presidential campaign.

August 8, 2016

Posted In: Personal Finance

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Payday Loans the Next Job Perk?

job perks

Governments across North America have tried to come up with ways to restrict, rein in or prohibit payday loan stores. Non-profit organizations, anti-poverty advocates, consumer groups and think-tanks have all released reports, launched protests or lobbied their public officials to accomplish the same feat. The results have been a mixed bag thus far.

The question ultimately is: what about the private sector? What have businesses done?

Over the last year or so, some startups and small businesses in the United States have incorporated payday loans into their employee benefits package. In other words, payday loans have become a job perk for the entire workforce, which may prove helpful in today’s economy.

The idea behind this move is that when employees are facing pecuniary difficulties in their private lives, then they may drag those problems into the workplace. This, according to some companies, could reduce overall productivity levels and have a case of presenteeism.

Well, one startup is joining the fray and making payday loans a perk for staff members.

For the last 18 months, Doug Farry, the co-founder of Employee Loan Solutions, has been having meetings with corporate human resources managers. This includes chambers of commerce and public officials with the goal of outlining one important fact: a large portion of workers live paycheck to paycheck, and they oftentimes turn to companies who offer same day loans online to pay the rent and light bill.

Some may view his plight as a way to raise wages. However, he is trying to get businesses to offer short-term, small-dollar loans, high-interest payday loans to their employees. According to Farry, employers know their workers can have financial matters clouding their minds at work.

“There’s a misperception among some business leaders that this is somehow a problem of the unemployed or homeless,” said Farry in an interview with the Los Angeles Times. “If you are a CEO making a seven-figure salary, this concept may not register with you.”

So, how does this program work exactly? Employees log in to TrueConnect and find out if their employer participates in the platform. Once they see the company they work for on the list, they can apply for an online payday loan that ranges from $1,000 to $3,000. These payday loans would be either approved or rejected immediately and would be available to all borrowers.

Essentially, this would be an add-on to all employees’ benefits packages.

Would this initiative please some consumer advocacy organizations? Not quite. Most efforts today want payday loans to have some form of underwriting, and the TrueConnect payday loans do not have this. For instance, many initiatives want payday loan businesses to be mandated to determine a borrower’s ability to repay. TrueConnect does not have this function.

Farry dismissed this concept, saying it would deter employees borrow from their employers.

“It has to meet the needs of the borrower,” he said. “We have talked to borrowers, and what they say is, ‘We need to know quickly. If I need to wait two weeks for an underwriting decision, I am screwed.'”

You may think that this would be a great opportunity for financial institutions. However, many banks in North America and Western Europe remain frightened of entering the small-dollar loan business. However, many financial institutions in Asia have embraced this market.

August 7, 2016

Posted In: Personal Finance

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How to Claim Job Search Deductions on Your Taxes

Looking for a job

While the job search costs incurred by a new college graduates are not usually deducted, they can be deducted if you worked enough in school to definitively establish an occupation. That information was recently presented in a recent MarketWatch article. According to the report, you have to show you have established an occupation in order to deduct expenses. Therefore, the costs involved in looking for first-time work are usually not considered deductible.

Deductible Expenses

You can also deduct the costs to look for a new job in the same industry when you are working temporarily in another job to meet your bills. For instance, maybe you lost your job as a software engineer but have taken a temporary job as a waiter. You can deduct the costs you incur while looking for employment in the software engineering field.

Common examples of job search expenses, considered deductible, include –

  • Employment agency fees
  • Employment counseling charges
  • Travel expenses (including 50% of meals when out of town)
  • Resume preparation fees

Also, if you drive your car locally in connection with a job search (or for job interviews), you can deduct the mileage allowed by the IRS, which is 54 cents per mile, as of 2016. The same holds true if you drive out of town when seeking employment.

However, keep one thing in mind – out-of-town transportation costs (whether by plane, auto or train) can only be deducted if the main reason for the trip is to search for a job. For example, if you fly out of town to stay at your sister’s house in Denver for a month and throw in some random employment searches, you cannot deduct the airfare to and from Denver.

Also, you cannot deduct the cost of a makeover, gym membership, haircut or new clothes, claiming they are related to searching for a ob. The same holds true for Internet access fees and mobile device services charges. Even if you use these serves to look for a job, the IRS will still say they are personal expenses that cannot be deducted. According to the IRS, you would have incurred these charges even if you had not been looking for a job.

Here is the major catch when it comes to employment search expenses – you must treat the entire amount of the costs as a miscellaneous itemized deduction. In other words, you receive no tax-saving advantages unless you itemize. Even when you do this, miscellaneous itemized deductions are only permitted when they exceed 2% of your AGI (adjusted gross income). They also have to be included with other specific miscellaneous deductions, such as fees for tax preparation and investment costs.

August 6, 2016

Posted In: Personal Finance

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