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What are ancillary products (and are they really worth it)?
If you’ve ever purchased a vehicle, you’re probably familiar with the same old spiel – the finance guy (or gal) at the dealership sits you down and begins offering you product after product to protect your interest, and if you’re like most people, you end up feeling overwhelmed and confused. So, the question is, what are ancillary products and are they really worth it? Ultimately that decision is up to you, but we’ve highlighted some features and benefits about different loan protection options to help you make an educated choice the next time you’re faced with the decision to add ancillary products. Check them out below.
GAP insurance (or Guaranteed Asset Protection) is protection offered by finance companies, either through a dealership or through your credit union, to cover any difference on your loan (that your insurance doesn’t pay) if your vehicle is totaled and/or stolen.
- The cost of GAP can range from $300 to as much as $900 depending on where you purchase this coverage (e.g., through a credit union versus a dealership).
- If you are upside down (meaning you owe more than the vehicle is worth), GAP can be a huge money-saver. For a relatively small investment of $300 (competitively priced GAP), you could save thousands down the road. On the other hand, if you end up paying $900 (on the higher end of GAP coverage), your margin of savings will be much less.
- The key is knowing your Loan-to-Value (LTV). LTV is a percentage based on the amount you owe divided by the value of your vehicle. Example: if you owe $20,000 on your vehicle, but it’s worth $15,000, your LTV is 133%. Generally speaking, if you are over 90% LTV, you could benefit from GAP coverage. On average cars depreciate roughly 19% in the first year, and as much as 50% in the first 3 years – unless you plan on paying off your car in 3 years, GAP could be a huge money saver.
- Another factor to consider is some GAP policies will also pay your insurance deductible, so instead of paying $500 or $1,000 or higher (depending on your deductible), you pay nothing out-of-pocket.
Mechanical Repair Coverage
Mechanical Repair Coverage or extended warranties are offered in addition to the manufacturer warranty. The cost of extended warranties varies greatly depending on the make and the model of the vehicle, and who you purchase the extended warranty through.
Here are a few key questions you should ask yourself before considering the purchase of an extended warranty:
- How many years/miles does my manufacturer warranty have left on it? Most manufacturers offer a 3-year/36,000-mile factory warranty.
- What is the difference between the basic manufacturer warranty and the powertrain warranty? The basic warranty typically covers everything bumper-to-bumper, whereas the powertrain warranty only covers the powertrain and the associated parts.
- How long do I intend to keep the vehicle?
- How much will repairs cost if I encounter them down the road?
Most extended warranties cover you well over 100,000 miles – if you plan on keeping your car for longer than that, an extended warranty could be a great money-saving option. Some institutions will allow you to extend the term of your loan in order to absorb the cost of coverage while keeping your monthly payment the same. Of course, doing initial calculations and analyzing your budget and needs is necessary before making any financial decision.
Loan Protection is just like it sounds: protection that covers your payments or the entire loan balance following a significant life event, such as loss of life, unemployment, disability, and family medical leave. Some institutions, such as Georgia’s Own, provide additional protection for accidental dismemberment, terminal illness, hospitalization, and loss of life of a non-protected dependent.* The cost and coverage vary from institution to institution, so it would be wise to do your homework. Most institutions have a cost per hundred dollars of the current loan balance.
Highlights of loan protection programs:
- The events covered by most loan protection programs are: loss of life, disability, unemployment, and family leave.
- Most institutions offer various loan protection packages that can cover one, two, three, or all four of the life events mentioned. Some institutions offer additional coverage.
- Loan protection programs are available for most types of loans.
- There is typically a cap of coverage over a certain dollar amount.
Benefits of loan protection programs:
- Loss of Life protection can ease the burden on your family, and your debt can be completely cancelled.
- Disability protection could cover your payments for you when your income might be drastically reduced due to a disability event (most competitive employers only offer as much as 60% of your salary for a short-term disability).
- Unemployment protection could be invaluable in a time where you’ve lost your job unexpectedly and are unable to make your loan payments.
- If you are unable to work for an extended period of time, family leave coverage can help you maintain the same level of income.
The bottom line: There are a number of loan protection options available to help protect you when faced with the unexpected. Although these services come with a cost, it may be worth investing in the peace of mind these protection programs offer.
*Beginning August 1, 2017, Life Protection under Members Protection Plus will include even more. We’ve added accidental dismemberment, terminal illness, hospitalization, family medical leave, and loss of life of a non-protected dependent to our coverage.
#MemberAppreciationMonday: Tin Lizzy’s Queso!
It’s the first Monday of the month which means we’re bringing members another great deal thanks to #MemberAppreciationMonday and Tin Lizzy’s! Love queso? So do we – that’s why we’re treating our members to a free cheese dip at any Atlanta-area Tin Lizzy’s Cantina location*! Just show your Georgia’s Own credit or debit card through June 30th, and your cheese dip is on us! For more details visit georgiasown.org.
Millennials saving for uncertain future
How are millennials (we)Â saving for an uncertain future? According to an article by Michael Douglass from CNNMoney, millennials are saving earlier for retirement than their parents were. This is great news for us, but unfortunately the financial outlook is dimmer than in years past. In fact, recent figures from the Employee Benefit Research Institute state that millennials may need to DOUBLE how much we areÂ saving for retirement. This is due in part toÂ expert projections of howÂ the stock market will perform in years, and decades to come. Experts have stated they expect to see a steady decline in average stock gains. In addition to the declining stock market, Social Security might not be available for us when we turn 67.
What to do with such a glum outlook? Well, first things first, you need to have a plan. Do you know how much money you need to save for retirement? Does your job offer a 401k plan with a match? If not, have you considered opening an IRA and investing in mutual funds? Experts say you should beÂ saving roughly 10% to 15% of your income to live comfortably in retirement.Â Some expertsÂ suggest as much as 25% to ward off the potential financial woes of the future economic climate. Starting earlier is better, so the sooner you can start saving, the better off youâ€™ll be. Even a few years can make a substantial difference.
Here are a few quick tips to help you along your path to retirement:
- Have a plan
- Know your retirement savings goals
- Pay yourself first â€“ set aside a planned percentageÂ of money from each paycheck (preferably at least 10-15% or more, if possible)
- Talk to a financial advisor about your situation (they can be free of charge)
- Perform regular assessments of your retirement accounts and contributions to make sure that you’re on track for your goals
- Adjust your contributions as necessary to meet your goals
- Donâ€™t live beyond your means â€“ if you are living paycheck to paycheck, reassess your situation and find ways to make cuts or, better yet, increase your income earning potential
RetirementÂ savings plan
Investment expertsÂ suggest you should save double your annual income by the age of 35.Â The chart below is an â€œestimatedâ€ projection based on a starting annual income of roughly $35k at age 21, with regular 3%Â annual cost of living raises, a regular contribution of roughly 10% of your paycheck, and aÂ 3% rate of return from your retirement account.
*The retirementÂ chart isÂ forÂ illustration purposes only, and not to be used as a guidepost.Â
Note: This blog post is intended as informational only, and is not investment advice, consult a financial advisor before making any financial investment decisions.
6 tips on how to travel cheap
Memorable vacations can come with a price tag you’d rather forget. But with proper planning, smart research and a flexible attitude, you can travel cheap and still have an experience worth remembering. Here’s how.
1. Cut transportation costs
Before planning your trip, have a rough budget in mind. A vacation calculator can help. If you know how much you’re willing to spend on airfare, this map can give you ideas for destinations that are within your budget.
Traveling cheaply isn’t just about cutting costs — it’s also about getting the most out of what you spend. You may discover, for example, that the $400 you thought could pay only for a flight within the U.S. can actually take you to Paris and back.
If your travel dates are flexible, you may find an even bigger selection of places you can afford to visit. If you’ve already picked a destination, changing the departure dates could lower your airfare.
Setting up alerts for when prices drop should also be a part of your strategy. Try apps such as Yapta or Hopper, which will send you price notifications on flights you’re tracking. (Booking fees may apply.) You can also follow Twitter handles like @theflightdeal or @FareDealAlert for limited-time deals. If you find a price you like, scrutinize the airline’s baggage policy before booking. Some offer cheaper ticket prices, but have strict carry-on requirements or tack on sizable fees for overweight and oversized luggage.
If your destination is within driving distance, consider hopping in a car instead of on a plane. Use a trip calculator, like this one, to make sure it’s worth the tradeoff. Add in the cost of renting a car, if necessary.
2. Compare lodging options
Finding a cheap hotel room can be tricky and takes a bit of effort. Start by shopping around on sites like Expedia, Priceline.com and Kayak to find hotels in the area, and then search for hotel promotion codes online. Contact hotels directly to negotiate a lower price. Also consider staying in a hotel outside the center of the city and looking for last-minute deals.
If you’re open to alternatives, skip the hotel and book a room through a site like Airbnb, Homeaway and OneFineStay. Not only could those be more affordable, but often you’ll stay with a local resident who can point you to cheap restaurants and activities that aren’t in travel guides. Hostels can also be a money-saver if you’re OK with bare-bones accommodations and potentially sharing a room. Keep in mind that they may have age restrictions.
3. Eat wisely (and not just healthy)
Many travelers underestimate the costs of meals, snacks and tips, says guidebook author James Kaiser. He advises bringing your own food or buying it at a store when you arrive at your destination to save money.
That doesn’t mean you have to skip restaurants altogether and haul groceries around. Dining out is one of the most enjoyable parts of travel. The trick is knowing when to indulge and when to save.
Start by looking at your itinerary. Break down your meals each day and identify the times you want to splurge. Then look for ways to save money on the other meals. For example, you can avoid inflated prices at the airport by bringing food and an empty water bottle that you can fill once you’re past security (passengers are prohibited from bringing more than 3.4 ounces of liquids, per container, in carry-on bags at U.S. airports). For breakfast, pack energy bars so you can save time and money in the mornings.
Your spending will likely fluctuate from day to day, so remember to adjust your budget to avoid overspending.
4. Research your currency options
If you’re traveling abroad, find out if the country you’re visiting is plastic-friendly. If so, a debit or credit card that doesn’t charge foreign transaction fees could be your best bet. Otherwise, research your currency exchange options to avoid the poor rates and numerous fees common at airport kiosks. Those will shrink your vacation fund before you’ve even had the chance to unpack.
Visiting your bank or credit union to exchange money before you leave may be the best option. Assuming it has that currency, you’ll likely get better exchange rates and lower fees. And, just in case you end up needing more cash once you’re abroad, ask if your financial institution has international branches or a partnership with a bank overseas. If so, you may be able to withdraw cash from those ATMs with low or no fees.
5. Get a prepaid phone or SIM card
A cell phone can be useful for navigating new cities, as well as staying connected to travel companions and life back home. But for international travelers, it may also come with data roaming fees. You’d save the most money by ditching the phone during your trip, but that may not be realistic. Your best option will likely be buying a prepaid phone once you arrive or having your carrier unlock your phone, if possible, so you can use a foreign SIM card when you land.
6. Keep souvenir spending in check
Like everything else, set a budget for souvenirs. Also consider doing some research on the best souvenirs and shops, so you’ll have a sense of what you might buy and the prices to expect.
If you find yourself on the verge of an impulse purchase, try an abbreviated version of the 72-hour shopping rule, in which you put off buying something for three days to see if you still want it. That amount of time is probably impractical when you’re on vacation, but if your schedule allows you to return to the store the next day or even later that same day, you may find that you can easily live without that $150 wool sweater from Iceland. You were only going to wear it once, anyway.
Graduation gifts that won’t empty your savings account
With your mailbox overflowing with announcements and party invitations, there’s no denying that graduation season has arrived. Whether it’s high school or college, you’ll want to choose a gift that’s both thoughtful and appropriate for your graduate, but also doesn’t break the bank. Here are a few ideas to offer your congratulations:
A share of stock
A share of stock is a gift that can appreciate over time. To make it a little more personal, you may want to put some extra thought into the company you choose. Do you have some great memories of visiting Disney World together? Buy a share of Walt Disney Company. Mac lover? How about a share of Apple, Inc.? Car enthusiast? A combination of the Big Three, General Motors, Ford, and Chrysler would be a fun choice.
A financial planning consult
Planning, budgeting, and having to stretch your last $20 over the next week is always a challenge. Whether they’re college-bound or heading off into the working world, graduates likely have little experience effectively managing their finances. This is the time when they’re most susceptible to making some huge financial mistakes. Why not put an expert in their corner—other than Mom and Dad—who can offer some professional guidance and warn them of the consequences of poor financial management? It may not be the most exciting gift, but it will be one of the most valuable.
An annual subscription
Is your graduating senior an avid reader? An annual subscription to a specific area of study, personal finance or money magazine could be an excellent idea, especially if it’s digital! How about the WSJ or your hometown newspaper? Not only will they think of you each month when it arrives, they might learn something, find another interest, or just be able to ward off a small bout of homesickness.
A gift card
Gift cards are a great way to go if you don’t want to commit to a specific item. Does your graduate need something practical? Choose a Walmart or Target gift card. Are they headed to work? Maybe they need some new interview attire. Want to make sure they eat more than just pizza and french fries seven days a week? Their favorite restaurant gift card would be perfect. The choices are endless!
Money for groceries, books, gas, school supplies, clothes…cash will never go unused and is always appreciated regardless of the amount. It may not seem as personal, but let’s face it, these graduates are entering a new chapter of their lives, and they’re not sure what to expect or how much it will cost. On the bright side, not having to use a credit card will allow them to manage their debt more effectively and will reduce their chance of accumulating astronomical interest charges!
Whether you decide to give a practical gift, something smart, fun or completely off the wall, we’re sure your graduate will absolutely love it. They’ve worked hard to achieve their success and will appreciate just being celebrated. On to a new adventure, they’re going to need all they help and guidance they can get, and your encouragement and support will mean the world to them!
4 reasons to buy a home instead of renting
The financial benefits of buying a home compared with renting have yoyoed over the years, especially of late. If you’re sitting on the fence, here are four circumstances in which it may be a better bet to buy.
If interest rates remain low
From a financing perspective, if this isn’t the best time to buy a house, it’s pretty darn close.
The average interest rate on a 30-year fixed mortgage, the most common variety, has hovered below or near 4% for several months now. For comparison’s sake, if you bought 10 years ago, the average interest rate was 6.41%. In 1996, it was 7.81%, and in 1981 it was a whopping 16.63%.
Although the Federal Reserve has begun to inch rates upward, it is likely that it will do so slowly and that it will be a while before the cost of borrowing to buy a home stops being historically low.
If home prices level off
Home prices rose steadily in the 1970s, ’80s, ’90s and 2000s before plunging around 2007, and in the past few years they have been climbing again. Different markets have seen different trends, of course, but generally what’s at play is supply and demand: More potential buyers than houses available means sellers can dictate terms and get top dollar.
But something interesting is happening: The oft-told story that millennials are renting for longer or living with their parents nowadays is not entirely accurate. No, people in this age group (born between 1981 and 1997) want very much to own a home, but they are putting it off because of real and imagined difficulties in affording it.
That could mean fewer potential buyers and a cooling of the upward surge in home prices. While others wait, you could pounce.
If rental costs continue rising
Real estate researcher Reis Inc. reports that apartment rents rose 4.6% in 2015. In hot housing markets such as California and the Pacific Northwest, rents are going up by about 14% per year. According to Zillow, the median asking price nationwide for a rental was $1,575 per month in early 2016.
The monthly payment on a $200,000 mortgage — about the average in the U.S. — with a 4% interest rate would be just over $950. Even with taxes, insurance and maintenance, it’s tough to make a financial case in favor of renting.
If you want to save money
Home values over the past 70 years have generally tracked with inflation. Yes, you could make more money in the stock market. But we’re talking real life, not investment advice. Consider two things:
- Your rent is locked in for a year or two, then will go up. Your mortgage payment can be the same for 30 years.
- If you are raising a family, it seems all but impossible to save money. But when you sell the house after 30 years (or 20 or 10), someone will hand you hundreds of thousands of dollars, money that could put the kids through college or finance your retirement.
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