Welcome, SBG members! For more information or to log in to your Online Banking, click here.
What it means to have a “friend in the industry”
“I have a friend in the industry.”
It’s safe to say that in the world of mortgage, we have all heard this one before. When someone broadcasts this to you, the real question is, “What does having a friend in the industry mean?” It could mean, “A realtor lives down the street from me.” It could mean, “My son’s basketball coach is an appraiser.” Or it could even mean, “I know someone at church who works for the bank.”
We all have “friends” in the industry – not just the mortgage industry either, but in many industries. And working in the industry doesn’t make them all experts. Having a friend in the industry and having a trusted advisor to help you determine your mortgage options are two completely different things. Just because you have that “friend” in the industry, it doesn’t mean that you’ve shared your financial situation with them. Most people tend to keep their private business…well, private. However, by having a relationship with someone who is a trusted advisor, and who puts your interests above all else, that’s really having a friend in the industry.
If you’re looking for a “friend in the industry”, let us know because we are here to help!
How to make Valentine’s Day inexpensive
Valentine’s Day is tomorrow which means now is the time to start scrambling. If you’re anything like a lot of folks, you probably have yet to make plans for your special someone. The problem with putting it off until the day before is that when you start calling restaurants to get a reservation, the only available times are before 5:00 and after 10:00 pm. So what are you left to do? Luckily, you still have enough time to make Valentine’s Day inexpensive and plan a romantic evening without heading to a fancy restaurant. Here are a few quick ideas:
- Dinner at the house. This can make for a really special evening if you take the time to do it right. Try to pick out a main entrée that you know your significant other will enjoy, then utilize your favorite search engine for a recipe. If you’re not quite sure what you’re doing in the kitchen, there are tons of recipes available online and you can probably even watch a video on how to make it happen.
- Be at their service. Instead of spending lots of cash on expensive gifts, give up your time. Offer to give a massage or do errands that they might otherwise do. Suggest doing the dishes or another one of your partner’s dreaded chores for a month and you’ll really have made them feel special.
- Plan an activity together for a later date. Think about something they would enjoy doing (painting, hiking, watching their favorite show) and plan to do it together. Get a nice card, type out your proposed plan and insert it in the card. Although this activity may not be something you’re super excited about, if you know it will make them happy, it will definitely be worth it.
Valentine’s Day is supposed to be a day about the love and adoration you have for your special someone, so don’t make it stressful or expensive. If you haven’t planned out that special date yet, there’s still time – but not a whole lot.
Todd’s Mortgage Minute: Are you really ready to buy your first home?
In the mortgage industry, nothing is more rewarding than helping a client purchase their first home. The day is met with excitement, enthusiasm, and oftentimes photos to remember the day that someone has started “a new life!” That day can also be met with anxiety, worry, and wondering, “Did I make the right decision by purchasing this home?” At the end of the day, those of us in the mortgage industry should really be educating these first-time buyers so they’re prepared once the moving truck is gone and so they’re budgeting for the one-time/first-time expenses, as well as monthly bills, that come along with being a new homeowner.
From a monthly perspective, if you’re moving from an apartment or condo, you may not have had all of your utilities set up in your name — some may have been included in your rent. Cable, water, electricity, gas, internet, garbage pickup, and pest services are all monthly expenses that you’re going to have as a new homeowner. Oh, and by the way, many utility companies will not set up these services unless you pay a deposit. Did you have these costs in your budget?
First-time purchases should also be budgeted for, considering some of them are big-ticket items. Do you have a lawnmower? You’ll need a gas can, along with a weed-eater of some sort, as well. Does your new home have a refrigerator or a washer and dryer? Chances are if you’re moving from an apartment, those appliances stay in the apartment and you’ll have to buy these items. If your home is newly built, you’ll need blinds for the windows, or some sort of window treatments — not just for the front-facing windows of the home, but for ALL windows. And trust me, you don’t want to be known as the house on the street using Star Wars sheets as curtains.
The bottom line: there’s more to purchasing that first home than just having the funds needed for closing and being able to afford the monthly loan payment. Make sure you’re ready so you don’t stress after the move. Homes are meant to enrich our lives, not to stress us out!
How Much 20-Somethings Should Save for Retirement
Your 20s may seem like an odd time to think of saving for retirement, but it’s actually the perfect moment to start planning for your later years. That’s because the earlier you start saving, the more time your money has to grow.
Savers who begin setting aside 10% of their earnings at 25, for example, could amass significantly more by retirement age than those who wait just five more years to start saving. You can use a retirement calculator to see how much you should start saving now to reach your retirement goal.
Building a nest egg on a starter salary and a shoestring budget can seem daunting, though. Focusing on the incremental savings, rather than the goal, can help your savings objectives feel more manageable.
How much to save for retirement
For those earning around $25,000 a year, the median income for 20 to 24 year olds in 2015, saving the recommended sum of 10% amounts to a little more than $200 a month.
It may seem like a reach, but consider this: If you start saving $100 a month at age 25 and invest it to return 7.7% a year — the average total return of the Standard & Poor’s 500 Index of U.S. stocks over the past decade — you’ll have more than $378,000 available at retirement age. And it could be tax-free.
If you wait until you’re 30 to start and save the same monthly amount at the same rate of return, you’ll wind up with less than $253,000.
Several vehicles can help you build a retirement fund. A 401(k) plan, typically offered by your employer, is often the most convenient and easily accessible of these. Contributions you make usually aren’t taxed, which helps reduce your income tax liability.
Pre-tax 401(k) accounts make up around 80% of retirement plans offered by employers, according to the American Benefits Council. Roth 401(k) accounts are another option, though these are less widely available, and money contributed to a Roth 401(k) account goes in after it’s taxed. Money withdrawn from this type of account — including earnings — is usually tax-free.
Companies that offer a 401(k) plan often match employee contributions, up to a certain percentage. This is essentially free money toward your retirement.
If your employer will match your contributions, try to take full advantage and commit a large enough percentage to get the full benefit.
Beyond a 401(k), individual retirement accounts, commonly referred to as IRAs, offer another solid option. There are two types: traditional and Roth.
Money put into a traditional account is tax-deferred, similar to funds put in a traditional 401(k) plan. That means those funds aren’t taxed until they’re taken out. But typically any earnings you make with the money are also subject to income taxes on withdrawal.
Money put into a Roth IRA has already been taxed when you earn it, so there’s no immediate tax benefit. When it’s time to withdraw the cash, however, you usually don’t pay taxes on it. And anything the money earns also can be taken out tax-free.
Contributions to both types of IRAs are currently capped at $5,500 a year for those under age 50, and $6,500 for older workers.
How much to save for emergencies
In addition to retirement, it’s also wise to save for a rainy day. Ideally, your emergency fund should be enough to cover three to six months of living expenses.
Some experts suggest setting aside even more for savings and investments: 20%. That’s roughly $415 a month on an annual income of $25,000.
That’s not always feasible, especially if a big chunk of your monthly income goes to student loan and credit card payments. Consider saving what you can, even if it’s just $10 a month.
Making a habit of saving now could serve you well down the road. And, as your income increases, the percentage you save can as well.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved
4 Financial Resolutions for the New Year
Another new year is upon us, and with it comes a fresh start. Take a moment to shake off all the bad vibes from 2016 and start 2017 off right by resolving to get your finances in order. Below are a few financial resolutions to start you down the path to better money management in the New Year.
Set a Budget
Setting a budget is the first step to financial fitness. Without a budget, it’s difficult to know where you stand financially. Sure, you probably know roughly how much money you make each month, but do you really know where that money is going? Are you spending too much on your morning coffee or takeout or shopping? Could you be making greater payments on your debts or saving more toward retirement?
To get a better handle on your finances, you’ll need to create a budget. You’ll need to know your monthly income after taxes (net income) and your recurring monthly expenses, such as rent or mortgage payments, car payments, insurance, utilities, etc. Once you’ve gathered these items, you’ll add up your expenses and subtract them from your income. If you have money left over, you can allocate those funds for savings or other financial goals and toward things like shopping and entertainment.
Sticking to a budget is the tricky part for most. Budgeting apps like Mint can help greatly, and a quick Google search can provide you with printable worksheets if you prefer to go the pen-and-paper route.
Erase Your Debt
The average amount owed per household is nearly $8,400, making getting rid of debt another priority for 2017. Although $8,400 is a pretty daunting number, you can opt to set a goal for yourself that is more manageable. WalletHub suggests repaying 20% of your debt within a year. If 20% stretches you too thin, adjust it – try paying off 15% of your debt instead. Or, maybe you want to pay 20% of your debt off within six months instead of a year – that’s fine, too. The key is to set a goal that works for you and your current financial situation.
Don’t forget to look at other areas of your budget when you set goals. Are there areas in which you could reduce spending and then allocate those funds toward a credit card payment instead? Are there small lifestyle changes you could make to reduce spending? For example, using a reusable water bottle, walking to more places to save on gas or cab/Uber/Lyft fare, or reducing the number of times you eat out.
Save, Save, Save
Most of us know how unpredictable life can be, which is exactly why having a healthy savings account is so important in avoiding or lessening financial struggle in the case of emergency. Establishing an emergency fund is often advised before tackling other debts, and the ideal amount you should aim to save is three to six months’ worth of living expenses.
If you already have a good chunk in your emergency fund, start working toward your other savings goals. Maybe you’d like to save more for retirement, or maybe you’d like to take that trip to Europe you’ve been planning in your head for years. Look for areas in your budget that you can adjust to help you save toward those goals. Another good tip? Start saving all your $1’s and $5’s – it’ll add up faster than you think.
Plan for the Future
Even if you’re young and just starting out in your adult life and think you’ll start saving for retirement later, don’t – retirement is a huge expense! The average American spends 20 years in retirement, and experts estimate you will need to save 70% to 90% of your pre-retirement income to maintain the same standard of living after you stop working.
Take advantage of your employer’s retirement plan and contribute as much as you can. If you have a 401(k) plan, your employer will match your contributions, usually up to a certain amount based on how long you’ve worked for them. If you don’t have retirement benefits through your workplace, you still have options, such as a Roth or Traditional IRA, or if you don’t know what your best option for retirement is, we can help.
That 0% Auto Loan from the Dealership Might Not Be the Best Deal
In seeking the best deal on your next car, you might’ve stumbled upon advertisements or offers to get a 0% interest auto loan. As great as this sounds, you may not save as much as you expect with this type of incentive.
Since auto loans can come through either a dealer or a lender, such as a credit union, it’s important to note that a 0% interest loan generally, if not always, is obtained through a dealer. Automakers offer them to attract buyers to certain car models, especially ones that aren’t selling well. Here are a few things to consider about 0% financing and why it might not be in your best interest to use it.
You might be forfeiting a better deal
Typically, you can’t receive both reduced rate financing and a cash rebate when you buy a car, so you may have to choose one. Manufacturers’ cash rebates can range from a couple hundred to a few thousand dollars. The well-known auto research website Edmunds found that the cost of incentives that automakers pay to attract customers was around $2,300 per car industrywide, which includes cash rebates and cost of reduced financing.
While a 0% loan may sound appealing, a cash rebate might save you more money. If you buy a $20,000 car that has a $2,300 rebate, you are really paying $17,700 plus interest. If your interest rate for a five-year loan is 3%, a typical rate, you will pay a total of $1,383 in interest. That brings the cost of the car plus interest to $19,083, saving you $917 compared with what you’d pay with a 0% loan. (Check out our handy Auto Loan Calculator!)
Rate may not last as long as your loan
Some car models may have 0% financing for a limited term, such as five years, which could be less than the length of your auto loan. In the third quarter of 2015, the average loan term for a new car was five years and seven months, and the term for used cars was five years and three months, according to Experian’s State of the Automotive Finance Market report. These are the longest average terms calculated since the firm began collecting data in 2006.
You may even receive a longer loan if you want lower monthly payments than you were offered initially. If your term is longer than the 0% financing deal, you generally pay interest on the remaining months or years.
This offer can be limited
A 0% rate might only be offered for a handful of models, especially newer cars, and less for used cars or older models. But even if this deal is available for the car you want, qualifying for it typically requires a high credit score. Check on the eligibility rules for getting this rate before stepping onto the dealer’s lot if you can.
As you sift through car prices and incentives, remember that trade-offs are part of the process when buying a car. Although a 0% interest rate may save you money in some cases, you might also be letting a better savings opportunity pass you by.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved