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Financial Tips & Articles

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As part of the free Financial Counseling benefit offered to UK employees, financial counselor Michael Pelfrey contributes a monthly budgeting tip or financial idea. Check back for more ways to be budget-smart! 

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Back to School - for you and the kids!by Michael Pelfrey, 07/12/2013

As we head toward mid-August, school is in the air. Some elementary and high schools have already started while the rest will be very soon. Even college students are looking at those mini-fridges and other things so vital to college life. Retailers are fighting hard for your dollars by offering pencils and notebooks for a penny and computers for less than $300. Smart shoppers can save money on items they need, while others may spend money they don’t have on those same products.

Employees paid bi-weekly have a bit of a reprieve as they receive three paychecks in August, but I still encourage you to be careful and spend wisely. This extra income can help you get stocked up for school, but also needs to be saved for those things not in our regular budget such as car taxes and holiday gifts. Making the distinction between a want and a need is one of the most critical steps in being wise with your money. Sit down beforehand and make a list of needed items and stick to it.

This is also an excellent opportunity to start giving teenagers some financial responsibility. As your children reach high school, rather than taking them shopping and just paying for what they want, give them the amount you plan to spend on clothes and other school supplies. They can get what they want (within reasonable limits), but when the money is gone, it’s gone. This will help them understand the value of money before leaving home and having to do it on their own. Having to wear last year’s clothes because they spent $100 on shoes can go a long way towards making a teenager understand financial decisions.

Finally, as your kids head back to school, think about heading back yourself. Regular employees (0.75 or greater full-time equivalent) can take 6 credit hours per semester at any state college or university at no cost. You do not have to be working toward a degree and the class does not have to be related to work. Or, if you have worked at the University of Kentucky for more than a year, your child can get a discount on tuition. For details on both programs, go to

Take time to breathe and enjoy the last bits of summer between shopping trips. Having some fun in the midst of the chaos will help you relax and provide memories for those times in the future when you no longer have the back-to-school shopping to do. At least that is what empty-nesters standing at the side chuckling at our craziness say.

Expecting an Increase in Income?by Michael Pelfrey, 06/06/2013

An increase in income is a happy event. Whether it is from a salary increase, new job, or some other source, we enjoy celebrating when we get that first increased check or bank deposit. It is important to acknowledge and celebrate these times as it is a validation of what we have done in the past. The real test comes when the celebration is over.

It is good for people to take the extra income and go out to eat, take in a special event, or even take a weekend getaway as a personal reward. But after the food has settled, your ears have stopped ringing, or car is unpacked, it is important to have a plan for this income in the future. Without a plan the money is likely to disappear without a noticeable change in lifestyle. This is why families that make $20,000 a year and families that make $100,000 a year can both struggle with monthly finances. It is known as lifestyle creep when consumption increases as income increases. The consumption increases are spread over time and often are not realized.

Consumption creep can be avoided with a few simple steps:

  1. Increase investing: If you have a percentage taken out of your paycheck for investing, this is automatic. If you have a set dollar amount taken out or wish to increase your savings, changes will need to be made manually.
  2. Adjust your budget: If you have a budget, this is an extra opportunity to review it. Things like gas, utilities, and food go up over time, so an adjustment in the monthly budget may be in order. If you are comfortable with your current budget, add the extra income to savings or pay off debt.
  3. Make conscious decisions: Using the extra money for a new TV, saving for a car, or taking regular vacations are all valid goals. The choice just needs to be made purposefully. Rather than putting the TV or vacation on a credit card, or going out and getting a new car loan, start putting the "payment" into a savings account. By delaying the purchase a short time you can pay cash for the item or have a good down payment for the car. This technique (or something) will prevent you from being upside down in the car loan or having the vacation follow you home with credit card payments.

Congratulations on your increase in income. Go celebrate then get back to work. Do more than you are paid to do today, so that you will be paid more for what you do tomorrow.

Tax Time is Here Againby Michael Pelfrey, 04/03/2013

April brings both the joy of warmer weather and blooming flowers and the pain of the IRS tax deadline. For those receiving refunds this may be happy time and the forms were filed long ago. For those facing a payment or simply avoiding filling out the tax forms, April 15th is an ominous day. The good news is that there are ways to make it less painful.

For those dreading filling out paper tax forms or paying a fee to have someone else do their taxes the IRS provides free online filing for many taxpayers with an adjusted gross income of $57,000 or less through the freefile program. For a list of companies providing this service and additional details go to A few of these programs also offer free electronic filing of Kentucky state taxes as well. To view a list of companies participating in Kentucky’s freefile program along with qualifications go to For those that do not want or are unable to use the software available there is also free tax assistance available at various locations that can be found by dialing 211 in the central Kentucky area.

Those facing a payment to the IRS can reduce this amount next year by adjusting the number of W-4 exemptions claimed. The IRS provides a very good online calculator that can help determine exactly what exemptions need to be claimed to eliminate the payment on next year’s taxes. The most recent pay stub for all jobs held will be needed to use this calculator. This calculator is located at

For those receiving refunds: WOOHOO! An income tax refund can be a big boost to a tight budget or a fast way to fund a major purchase. The danger is that without a plan, that extra money can disappear before it is realized. Taking a vacation, buying that new TV, or taking a shopping spree can all be acceptable things to do provided it fits in a spending plan. If bills are late, the car needs maintenance, or there is no emergency fund those things need to be made a priority. Everyone needs to have at least $1,000 in savings for those unexpected expenses with an eventual goal of having an emergency fund with 3-6 months of expenses.

For those living paycheck to paycheck it may be wise to increase the number of deductions on their W-4 so that more money is coming in on every paycheck. The first step is to understand what money is coming in and where it is going. Creating a spending plan can help reduce the fear and stress of living paycheck to paycheck. Remember, a budget is simply the process of you telling your money what to do rather than wondering where it went. If an increase of exemptions is needed, the IRS calculator at is an excellent tool to make this adjustment as well. University Of Kentucky employees can adjust their W-4 withholdings at any time through myUK or by submitting a paper W-4 form to the payroll office. The W-4 can be printed at

While specific investment and tax advice cannot be given, free counseling is available to all employees to help set up a spending plan, get out of debt, or answer other financial questions. Contact Michael Pelfrey to get started.

Magic Month Budgeting Tipsby Michael Pelfrey, 02/28/2013

Employees who are paid every two weeks will receive three paychecks in March. This occurs two times per year and is sometimes thought of as magic months due to the extra income. The fact is that there is nothing magic about money and without making a plan, this extra income can disappear by the time April arrives.

This extra paycheck is an excellent time to start thinking about how our money is being spent. Do we have a spending plan to know where our money is going or do we always have too much month at the end of the money? Below is a list of simple steps to begin getting a better handle on how our money is spent:

  1. Track your spending – We don’t think about what running through the drive-thru, getting a snack from the vending machine, or buying a drink to treat ourselves really costs us over time. Start writing down on a piece of paper or in your phone every time you spend money. $4 a day on cappuccino or a soda and snack adds up to over $1000 a year. Know where your money is going.
  2. Create a spending plan – We all hate budgeting because we have to face reality and tell ourselves no. While this is painful at first, gaining control of our money will give us more security over time. Doing this step will help us understand if our expenses exceed our income or if we should have money left after paying all of our bills.
  3. Understand our debt – Many of us do not really know how much we owe. Put together a list of all debts such as car loans, credit cards, and mortgages. Include the minimum monthly payment amount and the total amount owed. A great way to start paying down debt is to pay off the smallest debt first which provides encouragement and the emotional boost to start getting the next debt paid off.

If you are behind on any payments, the magic month provides an excellent opportunity to get caught up and hit the reset button on controlling your finances. If you are not behind, the extra paycheck can be used to set aside funds to make car repairs, replace an appliance, or save for a vacation or other spending. Just paying attention to our money is the first step to financial security.

Whatever situation you may find yourself in, employees can now get free and confidential help with personal finances. The MPM Group, which supplies supplemental benefits for University of Kentucky employees, provides a financial counselor in the employee benefits office who can meet one-on-one with employees or provide group education on personal finance issues. All information is free and completely confidential for regular faculty and staff (0.50 FTE or greater), and spouses. If you have questions or to schedule an appoint, contact:

Michael Pelfrey
Financial Counselor
115 Scovell Hall
Lexington, KY 40506
Phone: 859-257-9487