Archive for the ‘ Personal Finance ’ Category

Retirement Planning 101

With the current economy, many individuals are worried about having enough funds to support themselves during retirement. Experts estimate that you will need between 70 – 90% of your pre-retirement income to maintain your standard of living when you stop working. In addition, healthier lifestyles are allowing us to live longer, resulting in the need to have your money support you for another 20 to 30 years. The average retiree will only receive an estimated 40% of their pre-retirement funding from social security benefits. 

Participating in a 401K plan through your employer is an excellent way to start saving funds to help your retirement funding. There are many advantages to a 401K plan through your employer.

Payroll deductions can make savings easier. You don’t spend the money if it goes into your plan automatically.

  • Immediate benefits from having the contribution pre-tax. This reduces your taxable income. While taxes are due when you withdraw the funds, you may be retired then and possibly in a lower income tax bracket.
  • Tax-Deferred Compounding speeds up your account growth. Your contributions and investment earnings can earn additional income without being depleted by annual taxes.
  • Matching Contributions – some employers provide matching contributions which help increase your retirement earning potential.
  • Retirement Tools – Many 401K participant websites have a variety of tools to help assist you with calculating funds needed during retirement, investment potentials and tracking to keep you on course for a successful retirement.

 By: Sara Bode, HR Director

Credit Cards

In my opinion, credit cards are a necessary option of payment in today’s highly technical world.  The key to credit cards is discipline in the use of the “plastic” (credit cards). You can hardly go shopping without being asked if you would “like to save an additional amount today by opening a credit card account” with XYZ Company.

An abundance of caution needs to be used with all the credit card temptations that are out there.  Remember that what you charge to the account still has to get paid for over time, typically, not at the most attractive interest rates.

Questions you need to ask yourself are:

1)     How am I going to use the credit card?

2)     Why am I going to put this purchase on a credit card?

There are many good reasons to use a credit card, if you have the discipline to pay it off when the monthly bill comes, there are many types of cards that have rewards tied to them, such as rebates, gifts or travel rewards offered from companies on the usage of their cards. An example would be where one to two percent of what you spend on the purchases you make, comes back to you in some type of a reward.  For someone who travels for their job and spends a great deal of money on gas, food and lodging, uses their card for payment and pays it off at the end of each billing cycle, a nice reward would be created at the end of the year. 

An example of poor use of a credit card would be to constantly charge day-to-day expenses to a credit card and not pay it off at the end of a billing cycle.  This creates a growing credit card balance at interest rates that are typically not attractive and would negate any reward that you would be receiving. 

When choosing a credit card, look at these areas and ask yourself some questions:

1)     How am I going to use this card?

2)     Why am I going to get a credit card?

3)     Is a reward card what I need or what I want?

4)     Is there an annual fee tied to this card that I am considering?

5)     What is the interest rate on this card if it is not paid off at the end of the billing cycle cut-off?

Credit cards certainly have their place in this world as a form of payment, whether you are reserving a hotel room, renting a car, buying something online or booking a flight, but I can’t emphasize enough the need for discipline in the use of the “plastic”. 

By:  Tim Hoscheit, Vice President

Preserving a Precious Commodity – Your Credit Report

We all have seen commercials on TV or in the media regarding identity theft and how that impacts you and your Credit Report.  Due to our busy schedules, many folks ignore the importance of checking their credit reports on an annual basis.  Credit reports contain your personal information and history on how you pay your financial obligations.  Obligations reported about you may vary; they could include your credit card activity, payments on your car loan, your home mortgage, student loans, etc.  More importantly, they include information about “bounced checks” written by you, that have been turned over to an agency for collection, unpaid medical bills or any other account you have incurred that has been converted to judgments against you. The report also shows if you have filed for bankruptcy protection in the past.

You may ask, “Why is this important to me?” This information is used to assist a lender in determining your credit worthiness when you apply for a loan, credit card or any other credit request you may have.  It will be used to determine if you get a preferred interest rate or if you are considered a higher risk, thus demanding you to pay a higher rate.  Your credit report may be reviewed by a potential employer when you apply for employment. A poor report certainly could negatively influence their opinion of you and the possibility of being passed over for the job.  Insurance companies use a credit report to determine how you will pay your bills – the higher your credit score, the cheaper your insurance premium may be.

It is widely recognized that a great percentage of credit reports contain incorrect information or information that is not yours.  Your credit report is yours alone. You need to monitor it closely and make sure that it accurately states your history.  If there are inaccuracies, it is your responsibility to get them corrected. The reporting agencies are Equifax, Experian or Transunion. Contact any one of them for the procedures to make corrections.  You may access your credit report online at www.annualcreditreport.com.

By: Bill Brennan, Sr. Vice President

Equal Housing Lender - larger

 

 

Investment and insurance products:

  • Are Not Insured by the FDIC or any other federal government agency
  • Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
  • May lose value

IRA – An Important Silo in Retirement Planning

Saving in an Individual Retirement Account (IRA) is an important way to prepare for retirement. A traditional IRA will grow tax-deferred and a Roth IRA will grow tax-free. The reason so may people are investing in IRA’s is that they realize personal savings will provide an important part of their retirement income. Personal savings and IRA’s are one of three silos in the retirement planning world. The other two are company sponsored retirement plans and Social Security. 

By: Cindy Lewis, Client Services Director

Money Management for Kids

Some common questions often arise when discussing the topics of money and kids. 

1)      When and how should kids start earning money?
2)      When should they start managing/saving their money?
3)      How do you encourage them to save? 

Kids should start to earn money as soon as they start wanting and needing things.

Adults have all heard from kids “I want this” or “I need that”.  We need to teach them how to earn those items, not just get them. Earnings could be an allowance from their parents for doing daily chores around the house, assisting grandparents, neighbors, birthday money and gifts.  The list could go on and on based on their abilities.   

With that in mind, kids should also start managing/saving money as soon as they start earning money.  Kids will naturally want to spend what they earn.  If they receive $5 from grandma for raking leaves, they’ll want to spend the $5 on something they think they really want or need, then wonder why they have no money.  

How do we get kids to save and manage their money?  We first need to help them put together a plan to earn money. That plan should be fun and workable for them.  Then we need to implement a plan based on the individual. What do they want to do with their earnings?  Do they have something specific they want that’s more expensive?  If so, spending what they earn on smaller, less expensive items will not help them save money to buy that more expensive special item someday.

I offer my children three options with the money they earn.  The first option is putting some money in there wallet to spend on those smaller items that give them immediate satisfaction.  The second option is to have a savings bucket at home to fill for more expensive items.  The third option is a savings account at the bank to save for their future. 

This concept has worked well because they compete with each other to see who saves more and where it’s stored.  If it’s in the wallet, it’s typically spent on junk.  If it goes to the bucket, it’s very likely to accumulate for that special item; and if it goes to the bank, it’s secure and grows interest so they someday have money for education, a vehicle or there first home. 

So parents find a plan that works for your kids and have fun with it! 

By: Brant Drill, Assistant Vice President

Building Your First Budget

As a recent college graduate, I was forced to answer a very difficult question:  How am I going to pay all these bills without any help from Mom and Dad?  I’m still working on answering that question, and admittedly have had to return to the “Bank of Mom and Dad” for a small loan to help cover some gaps in paychecks.  One thing I have done that has helped me through this process immensely is to build and maintain a yearly budget. 

If you are a recent graduate of either high school or college, it is very likely that you have never developed a budget before.  No worries!  I found an interesting article from MSN.com that had some great pointers for building your first budget, and I have pasted a link at the bottom of this entry to the article.  I have also attached an Excel file with an example budget (https://www.citizensmn.com/custom/citizensmn/pdf/Budgeting101-ExampleBudget.xlsx) for you to use.  Simply enter in the amounts you expect to pay up top, and the amounts you actually paid in the bottom (you may need to add or delete some rows to tailor the budget to fit the actual expenses you have each month).  This will help you determine whether you’re able to keep your budget in check, and will help you identify where you’re spending too much if your budget is going awry.  I filled in January with some example numbers to show you the idea.  Erase those, enter your own figures, and the worksheet should do the rest of the calculations for you!

Notice that the example budget calculates a “Budget/Actual” at the very end?  This is a calculation of the difference between the amount you planned on saving versus the amount you actually saved.  Positive numbers mean you were able to save more than you planned, and negative numbers mean you may have to make some changes to your spending habits in order to reach your financial goals. (Notice in the example budget, my Budget to Actual was a negative $61.89, meaning I saved about 62 bucks less than I had planned on saving – better make some changes if I’m going to be able to afford that Ferrari I’ve had my eye on by the time I’m 30!).

http://articles.moneycentral.msn.com/CollegeAndFamily/MoneyInYour20s/HowToBuildYourFirstBudget.aspx?page=1

By Joe Geistfeld, Marketing Intern

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