Lessons Of Powerball


With the Powerball jackpot eclipsing one billion dollars, an unprecedented lottery fever is sweeping the nation.  Around watercoolers, in person and virtually, the entire country is consumed with conversations about how to spend a hypothetical windfall.  While you didn’t win, it’s been fun to think and fantasize about.  Some observations from listening to our members talk about the jackpot: 

1.) Never take the annuity. 

The average return on the annuity comes out to less than a 2 percent annual yield. Historically, that’s less than inflation, meaning you’re better off stuffing cash in your mattress than taking the annuity. Side note: Do not stuff several hundred million dollars in a mattress; aside from the financial and security concerns, your mattress will be incredibly uncomfortable and scrape the ceiling. 

If you were to put your money into one of our savings products, you would get a much better return. Again, we wouldn’t recommend putting a few hundred million dollars into your savings account and calling it a day, but spreading your money around in a variety of financial products could yield much better results. For example, our money market accounts, savings certificates and similar savings products all offer returns with low risk, much better than leaving your money in an annuity provided by the lottery commission. 

2.)  No one seems to understand what a billion dollars is. 

One billion dollars is not a lot of money. It’s an impossible amount of money. It’s easy to forget that one million dollars is one thousand times larger than one thousand dollars; it’s even easier to forget that one billion dollars is one thousand times larger than one million dollars. In other words, if you currently owe $250,000 on your house, one billion dollars would pay your mortgage, the mortgage of every family in your neighborhood (100 houses at $250,000 is $25 million), the whole neighborhood’s car notes (200 cars at $40,000 is $8 million), put everyone’s kids through college (200 children at $250,000 is $50 million) and still have enough money left to do the same for 10 more neighborhoods just like yours. 

3.)  One billion dollars is so much money, it’s enough to rethink our happiness. 

As long as we’re all having trouble pretending to spend the jackpot, it’s a reminder that joining the one percent doesn’t have to be the goal. If you can’t think of a way to spend one billion dollars, you probably don’t need to make one billion dollars. If you were to hit a jackpot big enough to pay off your debt, fund your retirement and set up a fund to take care of your family for the next century, would that be enough to satisfy you financially? If so, you could probably do so for a fraction of the Powerball jackpot. Each individual’s experience will vary, but for most of our members, a few million would be enough to hit all of those goals. 

So what would you do with the rest of the money? Who cares? Everything after that point would be fun, but meaningless. We’d all love to own an NBA team, but most of us would be almost as happy with season tickets. A lot of us would rather watch the game at home, anyway. Would you really like to drive a nicer car? That’s great, but how much time would you spend in your Bentley if you weren’t commuting to work every day? 

The other side of the coin is true, too. The horror stories about lottery winners who ended up alone, broke, and miserable have given a lot of people reason to pause. It seems like every conversation about the Powerball jackpot has to bring up the curse of the lottery. Whenever that happens, people talk about putting aside enough to make sure they’re happy, but instead it seems like having so much money is what causes the curse. With one billion dollars, you could give away 99 percent of your winnings and still have enough money for everything in the last paragraph, so why not just give it all away at the outset? Then, no one is coming around with their hands out, you never have to wonder if people are after your money, and you’ll still be set up well forever. 

4.)  Figure out your retirement number. 

One of the most interesting things underlying these conversations is that people don’t seem to know how much they’d need for the rest of their lives. While it’s not likely to ever come up because of lottery winnings, knowing how much money you need to live on for the rest of your life is important. It lets you plan your savings, investments and schedule your retirement.  If you don’t know your number, it’s time to make serious plans.  Stop waiting on a lottery windfall. We’ll help you come up with a reasonable, achievable plan so you’ll eventually be able to retire.  It might not be a retirement in the Bahamas, but even on your salary, you should be able to retire someday.

Three Questions, Then Three Questions


As 2015 draws to a close, it’s time to figure out if you’re in your best possible financial shape.  While performing a self-audit can seem a daunting task, we’ve created a simple way to get started. Below, we ask three questions about where you are now compared to where you were a year ago. Your answers should help you understand if you made the right choices in 2015.  After that, we’ve got three more questions to help guide your 2016. 

2015:  Do you have less debt than a year ago?

2016:  Could you pay off your credit cards this year if you had to do so? 

December can be a rough month for our credit card statements, so you might already be dreading the daily arrival of the mail just as much as your kids eagerly anticipate it.  But debt is part of life, and the kids can’t unwrap a copy of the family credit score, so you grit your teeth and swipe.  Don’t let the fact that you have credit card debt be a source of guilt or shame, and definitely don’t assume that burden even if you are carrying some credit card debt into 2016. Instead, take a look at where you are now, then compare it to where you were a year ago.  Have you reduced your debt in 2015?  If not, why not?  Maybe you had an emergency you needed to cover.  Maybe this was the year you installed the home theater you’ve been wanting.  The important thing to ask yourself is whether you’ve reduced your credit card debt, and if not, is what you bought with that debt worth it to you now?

With other forms of debt, the questions can be more complicated. While you’d like to have a smaller outstanding balance on your mortgage or car note, reducing the amount you owe might not be the best idea.  After all, mortgage rates are incredibly low right now, so turning your credit card debt into a home equity loan is a smart move (provided you don’t rack up new credit card debt!). You might have a new debt balance that you didn’t have at this time last year if you bought a new car, upgraded the kitchen, or went back to school. 

If it’s time to clear up your debt, try one of our home equity or personal loans. Or, if you have higher rate credit cards, transfer the balances to a lower rate Destinations Credit Union MasterCard Credit Card.  If you reduce your rate and make the same payments, your debt will dwindle more quickly. 

2015:  Do you have more money saved than you did a year ago?

2016:  What would happen if you didn’t get paid next month? 

Again, the best way to determine your financial position today is to compare it to where you were a year ago, and savings is important.  If you have more saved this year than you did last year, it means your budget is working and you’re headed in the right direction.  If you have less saved than you did a year ago, try to determine why that is.  Did you have to dip into savings to pay the down payment on a long-term purchase?  Did you have to cover a gap in employment?  Just like with debt, figure out how much less you saved, compare it to what you bought, and determine whether or not the purchase was worth it.

Just like with debt, however, simply looking at the bottom line probably isn’t enough to tell you if you’re making the right moves.  Having an emergency fund that represents six months of your income is incredibly important for easing your family’s mind and protecting them if something unfortunate happens. But having an emergency fund much larger than that isn’t necessarily better.  You don’t want to be a dragon, sleeping on a hoard of gold simply because it’s pretty. Instead, put that savings to work for you in the form of a retirement fund, college savings or even the down payment on a second home to use as a rental property.

If you’re looking to add to your savings, check out our savings plans (hint: if you want to earn a really high rate, attach a Kasasa Saver to a Kasasa Rewards Checking and earn more every month you qualify!). To save for a child’s education, take a look at our Coverdell IRA Plan. 

2015:  Is your credit score higher than it was a year ago?

2016:  What will you do this year to improve your life? 

These questions might not look like they go together, but they do.  This is the section where you take a big-picture look at your financial world. If your credit score is improving, then you’re probably making the right choices overall.  If not, it would be good to find out why that is the case.  Make sure all of the charges on your credit report are accurate, work to tackle your debt, and try to bring in more income.  If you work to improve your credit score, you’ll almost certainly have to improve your overall financial standing. Destinations Credit Union Members can get unlimited free financial counseling to help you with this through our partnership with Accel.

But your credit score isn’t your life.  What are you going to do this year?  Are you going to take a trip to Europe?  Get started in a new career?  Buy a vacation home on the lake?  Learn a new language? What is it you’d like to actually do?

Once you know what you want to do this year, figure out what it’ll take to make it happen.  Can you save for it?  Will you need a loan?  Is your credit score too low for a second mortgage?  Whatever is in your way, make that your next financial goal.  Get your savings and debt into good positions, and then try to live your life.  After all, that’s what the money is for.  

Holiday Spending Is Getting Smarter, But You Can Be Smarter Still


The average American will spend nearly $900 on holiday presents this year. If you have two adults in your household, that’s almost $1,800. The odds are good that you’ve already spent a good chunk of that on Black Friday, Small Business Saturday, and Cyber Monday specials.  In looking at the sales numbers from the weekend, Americans are getting smarter about how they spend that money.  Brick and mortar stores suffered about a billion-dollar decrease in sales from 2014, largely avoiding many of the big-ticket items that lure customers into waiting overnight in cold parking lot lines.  Instead, consumers pushed online purchases to a record high of $4.45 billion, roughly 20 percent more than last year. At the time of this writing, Cyber Monday sales had not yet been released, so we can’t compare those. 
In addition to this, sales numbers indicate earlier spending, more diversified spending and shopping carts that were more full at fewer locations.  All of this points to people purchasing items they had selected before the big weekend sales, then spending less time browsing and far less time in the harsh winter conditions and occasional inhuman violence that only cheap electronics and toys can provoke.
Even with the transition to warmer, quicker and more pajama-clad shopping, the money being spent is astounding.  The odds are also good that you don’t remember everything you bought for the holidays last year, and even if you do remember what you were given, it probably doesn’t add up to hundreds of dollars worth of things you still use.  If you don’t remember or use what you were given, the people who received gifts from you probably don’t either.  So why do we insist on spending so much of our hard-earned money on cheap plastic junk? Is there a better way to spend that money?
Yes, we’re getting smarter about how we spend on the holidays. But let’s set up a plan today to be in an even better position at this time next year. 
Step One:  How much did you spend or will you spend this year? 
Consider how much you’re going to spend this year.  If you’ve finished your shopping, then you can use your receipts.  Otherwise, you can estimate what else you plan to buy or just use the $900 per person national average.
Next, add to that how much you’ll spend in interest on credit cards while you pay off the balances.  If you’d like to avoid the math, you can estimate that the total cost is $1,000, because that’s a nice round number for this exercise. 
Step Two:  Putting away that money for next year. 
To use this money as intelligently as possible, it’s a good idea to save as much as possible ahead of time.  That way, compound interest is in your favor instead of working against you.  Start with one of our savings plans. A great option is our Holiday Club, which offers easy automatic deposits and doesn’t let you withdraw prior to the due date without a penalty. If you are more disciplined and not worried about using the money prior to the holidays, another option is our High Yield Account, which will pay a higher dividend if you’re ready to put the money into savings today.  
Step Three:  Paying off this Christmas. 
It’s time to get those credit card payments down so we can move into the new year with a clean ledger.  If you’ve got the extra income, pay them down with that, but we also know times are a little tighter for many of us.  Luckily, your credit union has a variety of solutions for paying down credit card debt: 
  • Home equity loans are great for high balances, because they turn high interest credit card debt into low interest home equity debt.  Also, if the Federal Reserve raises the prime interest rate early next year, you’ll be protected by a fixed-rate loan.  If you don’t want all the math, a home equity loan reduces the interest you pay, so you can pay off your loan more quickly.
  • If you don’t want a home equity loan, your credit card debt isn’t that high, or you don’t own a home, you could also consider transferring your higher rate balances to a Destinations MasterCard Credit Card.  We offer incredibly low rates, so you can transfer your higher interest balances onto a lower interest card, which will let you pay off the debt more quickly. Plus, there is no fee for balance transfers and no annual fee for the card.

Step Four:  Cutting costs. 

Make a list of everyone for whom you’ve bought gifts and how much you spent or will spend.  Then, go through and imagine what would happen if you got them nothing.  Would life be worse?  Would it be embarrassing?  Do you really need to give everyone something?  For those you feel an obligation to gift, keep them on the list for next year. For those you don’t, send them a card.  For anyone about whom you’re unsure, how about a gift of home baked cookies? Simply cutting out a few people can save you several hundred dollars every year.  Ask yourself:  would I rather avoid a potentially awkward situation or have a new … well, you probably know what you’d rather buy with several hundred dollars.
If you’re worried about last minute awkwardness in case someone gets you something, there’s a really simple solution:  Buy a few cards, write a general inscription inside, sign them, and add a gift card to a big store you’d shop at anyway.  Would anyone be upset at an Amazon gift card?  Then, if you need it, you can write the name of the person in question on the envelope and hand it to them.  If you happen to have any of these standby gifts left at the end of the holiday, the gift cards are yours to keep:  call it profit. 
Step Five:  What will you do with your money? 
At this point, you’ve paid off holiday 2015, and by the time holiday 2016 rolls around, you’ll have saved more money than you need since you saved enough for this year but cut costs for next year. Interest has worked in your favor, and suddenly your next December is one in which your pockets will be full.  That gives you 12 months to decide what to do with your money.  Reinvest it in a savings plan? Buy supplies to open that web store you’ve always wanted? Take a class or learn a language? Maybe your dog needs a little brother or sister.
Whatever you do, it’s probably going to be better than that necktie you got for Bob in accounting this year, and it’s all for you. 
Sources: 

10 Facts About Credit Unions

In preparation for International Credit Union Day, October 15th, we thought we would share a few facts about credit unions. Being a member of a credit union is a coup for your finances for many reasons. Here are just a few facts that make credit unions a great option. 

Fact #1: President Roosevelt signed the Federal Credit Union Act in 1934 to promote thriftiness and prevent usury during the Great Depression. 
Fact #2: Credit unions are insured. Most credit unions are insured by the National Credit Union Administration (NCUA), which provides essentially the same coverage on funds as does the FDIC. If the word “federal” is in the name, they are insured. If not, check with your credit union. It may be state-chartered and/or have private deposit insurance.  Destinations Credit Union is chartered by the state of Maryland and Federally insured by NCUA.
Fact #3: Eligibility is fairly flexible at most credit unions. Most require residency in a certain community, city, or state, or that you are employed by the credit union’s sponsor company, also known as a Select Employee Group (SEG). But requirements are pretty broad on most, making eligibility at a credit union a possibility for almost anyone. 
Fact #4: Credit unions are not-for-profit institutions and are owned by the people they serve, not by a few shareholders. 
Fact #5: Credit unions can offer better rates on savings accounts, lower interest rates on loans, and little or no fees on accounts because they return their profits to the member/owners.
Fact #6: The credit union’s board of directors, which is elected by members, can set loan limits in an effort to help the credit union grow. 
Fact #7: Credit union members have democratic control of the credit union and can attend and participate in regular and special membership meetings. 
Fact #8: Nonmembers benefit from credit unions too. Competition for low rates keeps banks’ fees in check, thereby benefiting nonmembers. 
Fact #9: With more than 5,000 credit unions across the globe and access to tens of thousands of ATMs, credit unions are increasingly convenient on a national scale.  Destinations Credit Union is part of a national shared branching network, giving you access to your accounts all over.
 

Fact #10: Once you are a member of a credit union, you stay a member for as long as you maintain your deposit account (share), regardless of whether or not you continue to meet the original eligibility requirements.

It’s Almost Halloween, So Let’s Talk Christmas


Football has begun, the leaves are changing and the kids are back in school. Clearly, it’s time to start thinking about Christmas.  Some of you are reading this on your phone while waiting in line at Starbucks, preparing to buy your first Pumpkin Spice Latte of the season, but it’s time to start thinking of peppermint mochas instead.  Even if you’re the “Bah, Humbug” type of person who regularly posts Facebook rants about the neighbors putting up their lights before Thanksgiving, making financial plans for the holiday is still a really good idea.  It might be too early to hang a stocking, but it’s never too early to sock money away.

Question: How much will I be spending on the holidays this year?

Answer:  Recent studies have pegged the price of the holidays at roughly $300 per child, while one in 10 shoppers admit to spending over $500 on gifts for their children.  Overall, Americans spent about $600 billion on Christmas last year, which comes out to around $2,000 per person. This includes decorations, hams, ugly sweaters, and whatever else you tend to buy.  That’s a lot of money.

Question:  Ugh.  Why are we even talking about that money now? It’s not even Halloween!

Answer:  Halloween is exactly why we should make plans now.  Since 2005, American spending on Halloween has spiked.  Last year, we spent about $7 billion on Halloween, including $350 million on costumes for our pets!  It’s easy to overspend in October, let that lead into an indulgent Thanksgiving in November, and then find ourselves putting all our Christmas spending onto a high-interest-rate credit card.  Planning ahead is a necessary step to prevent you from a holiday hangover in the New Year.

Question:  How bad is it to put Christmas on a credit card?

Answer:  It might be worse than you think.  It’ll cost you about $200 per month to pay off an average Christmas debt in time for next year if using a typical high-interest credit card. And if you don’t pay it off by next year, you’re suddenly trying to pay off two holidays at once. That’s bad news.  Even if you think you can handle the extra debt load, remember that the Fed just raised rates, and it may do so again. Whenever it does, you can expect your credit card bill to go up.  On top of all that, paying around $400 in interest charges and fees over the course of the year is still $400.  That’s probably enough money to turn your average Christmas into something worthy of a televised Christmas special.  If you have to use a credit card, make sure it’s a low rate card like your Destinations MasterCard.

Question:  Is it too late to get ahead for this year?

Answer:  Not at all.  You have a lot of options to save yourself from your own spending.  You can sign up for a Holiday Club account, a High Yield Account or a variety of other plans.  But that’s not the only approach.  You can also get ahead of the rate hikes by moving all of your credit card debt into a home equity loan (check out our rates) or signing up for one of our low-interest credit cards.

But even all those options don’t represent all the various ways to save money. Remember that Christmas spending doesn’t have to be an all-or-nothing proposition.  You can combine savings, credit cards and budgeting to attack the holiday from several angles.  Start now, and by Christmas you’ll have a well-stocked war chest, or in this case, toy chest, to give you a variety of options.

Question:  What about the holidays between now and then?

Answer:  Between Halloween and Thanksgiving, Americans spend around $150 per person on average, which is far more affordable than Christmas. But that can still add up quickly, especially in larger families.  It can also be difficult to tighten the belt at this time of year, because it can mean less candy and less family time for the kids.  If you’re worried about this spending, one way to rein it in is to make a combined holiday budget you pay into every month.  Figure out how much you plan to spend on birthdays, holidays, anniversaries and the like, then divide that by 12.  That’s how much you need to put away every month.  Does that sound like a lot of money?  Then you can cut down all year long.  Maybe you don’t need to send birthday gifts to as many people or your anniversary can be a smaller occasion this year. The bottom line: If you start planning ahead, you can keep your holiday spending from being an obstacle to your financial future.

Sources:

http://theeconomiccollapseblog.com/archives/guess-how-much-americans-plan-to-spend-on-christmas-and-halloween-this-year
http://www.today.com/parents/yes-we-spoil-our-kids-6-000-moms-come-clean-1C7397939

http://www.theatlantic.com/business/archive/2011/10/the-halloween-economy-2-billion-in-candy-300-million-in-pet-costumes/247531/

http://abcnews.go.com/WN/mailform?id=14998335

High Yield Investment Fraud


Whenever the stock market takes a hit, unscrupulous individuals will try to find a way to use the misfortune of worried investors to make a quick profit.  In light of this year’s problems on Wall Street, it’s no surprise that old scams are coming back, and like all of the classic scams, this one is based on the oldest premise there is:  make a lot of money, really fast, with no work.

High yield investment fraud is most commonly found on the Internet, where it’s much easier to put together a website that appears trustworthy and professional than it is to create the same appearance in person.  Such sites claim to provide amazing returns, sometimes as much as 40 or 50% per month, and are supported by dubious charts and testimonials from people who may not actually exist. Between a quality website, impressive charts, and some meaningless investment buzzwords describing a “magic pill” of an investing philosophy, unwary consumers can be easily fooled into forking over a chunk of their savings to an investment broker who is not licensed by the SEC and makes claims the SEC would call illegal.

The clearest warning signs of these scams are easy to remember, just like avoiding them should be simple to do: don’t trust anyone who offers to-good-to-be-true returns, dismiss cutting-edge investment opportunities if they come from anyone but an investment professional with whom you’ve worked before, and ignore any evidence of success that can’t be verified by an outside party.
Big returns are appealing.  You want to retire someday, send your kids to college, or start a business to get away from the morning commute, and the more money your investments make, the quicker you can do so.  But it’s important to trust the process.  Return on investment is tied to the risk involved in spending money on that investment.  The stock market offers better returns than treasury notes because it’s far riskier to bet on United Airlines than on the United States.  High-yield investment scams are successful because we want to believe that someone can beat the market so well and that we can have returns that are better than the stock market with risks that are lower than treasury bonds.  It just doesn’t happen that way.
At Destinations Credit Union, we believe we’ve created a nice sweet spot with our savings products. No matter what your preferences are, we can fit into your investment portfolio. In times that the market does well, the money you have with us will keep you moving towards retirement, but when the market slows down, you don’t have to worry about losing your financial security because the money your entrust us with is safe.
To put it another way, the U.S. economy has traditionally done three things very well:  lower prices, create jobs, and price risk.  The last recession was caused by doing a poor job of pricing risk, and that hurt our ability to do the other two.  But that’s exactly the point.  As an economy, we are so good at pricing risk that when we screw it up, it’s an enormous, world-altering event.  If you find someone who can price risk so much differently than every other investment professional in the world, you need to also be ready to bet that the economy is going to take a radical shift in an entirely new direction, because that’s what happens when we do a bad job pricing risk.
Finally, if you want to avoid all kinds of investment scams – and the SEC, FTC, and USA.gov all have many pages listing the variety and creativity of these scams – the best thing to do is remember why you bank with us.  We’re part of your community, not a giant multinational corporation.  We share our revenue with our members, not shareholders who may not even be connected to our local community. Our kids go to school with your kids and you can always come in to talk to us for helpful advice. 

Sources: 
http://investor.gov/investing-basics/avoiding-fraud/types-fraud/high-yield-investment-programs
http://www.investopedia.com/terms/h/high-yield-investment-program.asp\\
http://www.ncpw.gov/blog/dont-get-scammed-investment-fraud-internet

http://www.dfr.vermont.gov/securities/top-ten-investor-scams

It’s Not Time To Panic


It’s time to be calm, but you know that already.  The market has had a crazy week, filled with ups and downs flowing at a quick enough pace to ensure – if you were going into a meeting to discuss market forecasts – you really couldn’t write up an actionable plan.  You could have just as easily relied on an iPhone and a Magic 8 Ball.


Analysts don’t like that kind of uncertainty, so if you feel like the advice you’re getting on TV is aimed at making you panic, you’re probably right. However, don’t let other people’s panic make you panic.  In fact, when everyone else is panicking, it’s the calm person who can actually get something done.  


But the markets will open tomorrow and something could happen. Who knows? And if that something does happen, how do you keep from entering into a panic mode?  How can you resist the urge to pull all your money out of savings or rethink your entire retirement?  We’re going to explain why staying calm is the most important thing you can do, but let’s first play a game.  It’s really quick and it simulates the market using actual history.  

The rules: Start with $10,000.  You can sell once, you can buy once, and then it tells you how much you made or lost.  Open this link in a new tab by either copying and pasting or right clicking on the link (options will vary depending upon your web browser):

How did you do?  Did you play it a few times?  Did it go better when you sold your investments when the price dipped?  That game is based on market trends for the last 35 years or so, and the only real way to win is to just not sell.  Your money will go up and up and up.  The market rewards calm. Here’s why you should relax:


The Fed knows what it’s doing.  The new administration at the Fed has kept interest rates low, and many analysts have been expecting a rate hike throughout 2015, with some of them even predicting two increases.  A rate hike would be bad news for Wall Street, and the same market prognosticators who claim the sky is falling are pointing to an impending rate hike as “Exhibit A” that your retirement is doomed.  First of all, there’s no guarantee that a rate hike is coming. Even if the Fed raises the prime interest rate, it may be good for your stocks, because uncertainty over interest rates is part of the reason the market has taken a hit.  A rate hike, particularly a modest one, could calm fears about the uncertainty of interest rates in the future.


A rate hike also helps your savings.  Every dollar in your savings accounts – from money markets to IRAs – will get stronger when there is a higher prime interest rate.  So, if you’re convinced interest rates are going to take a bite out of your investments, your best move is to simply decrease the portion of your portfolio in stocks and put more of it into various savings products at Destinations Credit Union.
  We’ve always had very competitive dividend rates on our savings accounts.  If the Fed raises interest rates, that usually means good news for savers.


China’s problems won’t hurt us.  While their currency is in crisis, and that has spilled over into other market sectors, it’s premature to panic over market instability at the world’s largest manufacturer.  The economic interconnection between the US and China, the world’s two largest economies, is not the kind that allowed the 2008 financial crisis to spread so quickly. In fact, it’s the kind that prevents that type of spillover.  In general, they manufacture goods and we market/buy them.  The stronger our currency is relative to other countries, the cheaper we can find consumer products.

For example, if Walmart were an independent nation, it would be China’s fourth largest trading partner.  Our largest brick-and-mortar retailer stands to profit, as do their customers.  In other words, if you leave your retirement funds in your savings and trust your credit union to take care of you, you can probably find everything you were going to buy for less, so you don’t need as much cash to live on while you wait for the market to recover.  You can spend less without making sacrifices.


The other benefit to the US economy stemming from China’s hiccup is that it likely means durable goods will sell well. Families that have “made do” with a lukewarm refrigerator or the world’s slowest dishwasher can find replacement appliances at more affordable prices. To put it in simpler terms:  You’re finally going to replace that stove you hate, and so will your neighbors.  You’ll save money on it, and the American businesses that design and sell that stove are going to enjoy the profits.  Those companies will turn the profits into increased manufacturing, which will help stabilize the Chinese economy.  The durable goods sector is going to help buoy the stock market, which will help the overall economy in the process.


If you want to take advantage of this temporary window, talk to us about a home improvement loan.
Remember, if you want to make these kinds of household investments or take advantage of cheaper prices on the parts and supplies that go into other home improvement projects like patios and even driveways, lock in a fixed-rate loan now, before the Fed hikes interest rates.


In the end, market forces are driven by consumer confidence, and your household economy is no different.  Think back to that game you just played. Waiting out temporary market downturns or moving your money to safe savings programs are the only way to consistently grow your money in the long-term. Put your money with someone you trust, take a deep breath, and stay calm.

If you need a calming mantra, try this:  “New washer.  New dryer.  New washer.  New dryer.”
Sources:

http://www.thestreet.com/story/13264176/1/what-me-worry-why-you-shouldnt-panic-amid-market-crash.html

The Shoulds Of Retirement


When it comes to retirement, the variety of ways to save money can be so confusing that even the most diligent investors might wonder if they are looking at the right information, doing the right thing or if they’re even on the right track. Would you know if you should be using a fancy savings plan?  Should you put more in? Less?  Should you panic?  While we’ll get to the rest of the questions, the answer to the last one is no, you should not panic.  There is no retirement plan anywhere that does better when you panic.

For anyone confused about retirement, there are lots of sources that explain who, what, how, when and why, but very few places to turn for one of the most important questions – should.  This guide is meant as a quick reference to that really tricky word, with some of the most common “should” questions answered. Like any other guide, though, it can’t be as specific as you’d like, so if you have more questions, get in touch with us at 410-663-2500, or ask questions our Facebook pageAsk us your shoulds or see what shoulds other people are asking.  If you’ve got a question, it’s a safe bet you’re not alone. 
Question:  How much money should I have when I retire?
Answer:  This is the most common “should” question in America right now, probably because of its importance.  The answer that most experts give, “as much as you’ll need” isn’t particularly helpful.  A better, although still maddeningly incomplete answer involves some simple math you can do on the back of a napkin: take your annual income the year before you plan to retire and subtract your annual retirement income (Social Security, pension, trust, etc.) from it. Whatever that difference is, multiply it by the number of years you expect to live after retirement, probably 15-20.  That’s how much you need, give or take a bit.
For example, if your Social Security and pension pays you around $50,000 per year and you’re making around $150,000 before you retire, the difference is $100,000.  Multiply that by 20, and you’ll probably need around $2 million.  If that sounds like a whole lot of money, that’s because it is a whole lot of money.
Question:  How much should I be saving now?
Answer:  Another question that all-too-often results in a frustrating answer. You should save as much as you can, but not more than you can.  A better answer is that retirement should be your savings priority, ahead of college funds or other long-term savings simply because you can’t get a loan to retire, but you can for virtually everything else.  If you feel like your monthly contributions are just drops in the bucket, stop focusing on the bucket.  Instead, take a look at your monthly picture.  Make a pie chart with five big slices:  Bills, debt, spending, short-term savings and long-term savings.  This isn’t yet the time to go through and figure out how to trim your bills or refocus your spending, just look at those five. How much of your long-term savings is being used for retirement?  Could that number be higher?  If so, put more into retirement.  If you want to find ways to reduce your costs so you can save more money for retirement, look at those categories again and start making cuts from right to left.  First, cut some spending from other long-term savings.  Then short-term savings, spending, debt and finally bills.
Question:  When should I start saving?
Answer:  If you read the last two questions and have sharp pattern recognition skills, you might expect a frustrating answer, but this one is actually easy.  If you haven’t started, start today.  Like, right now. Seriously, either click this link for information on our IRA programs. It only takes a few minutes, and you’ll feel so much better.  Remember the motivational cliché: the best day to plant a tree was 20 years ago, the second-best day is today.
 
Question:  What kind of retirement account should I get (or get next)?
Answer:  There are three major considerations when selecting a retirement account.  First, how many years do you have until you retire?  The answer to that question should help determine your risk.  The second question is how much money do you make?  The answer to that question determines whether you’d like to be taxed on the income now or in retirement.  Unfortunately, you’ll have to pay taxes on it at least once.  Finally, have you maximized the benefits of another account?  If you’re past the point of getting your employer to match your 401k, look at all of your options.  If not, put in as much as you can that your employer will match. You’re not going to find a lot of retirement plans that pay more than the 100% rate of return your employer is offering by matching funds, and if you do find one that can consistently outpace your employer’s contributions, it’s probably illegal.

Once you have the answers to those questions, check the link above or drop us a line at info@destinationscu.org and we’ll set you up with the best plan we can.

There are a lot of retirement guides out there, but most of them aren’t very good at those “shoulds” that matter so much in our daily lives. Hopefully, this guide has given you enough information to know what questions to ask.  We’d love the opportunity to talk about these shoulds or any others you might have. For now, check out our Facebook Page and join in the conversation!

Sources:

http://www.savingforcollege.com/articles/coverdell-ESA-versus-529-Plan
http://money.cnn.com/retirement/guide/basics_basics.moneymag/index7.htm

http://money.usnews.com/money/personal-finance/articles/2014/12/19/7-retirement-savings-accounts-you-should-consider


Shop Local!


Your credit union is built on the idea of people helping people.  You already know we can do a better job looking after your money than a mega-chain bank that answers to shareholders, because we know you and our community.  So why give that up when you find a bargain online?  Shopping locally is better for the community, better for the environment and the best way to find something unique that can make all of your friends say “wow.”  

Shopping locally benefits your community. 

When you shop locally, the money you spend stays in the community.  Buying a new pair of shoes from a local shop takes dollars out of your pocket and puts them into the pockets of a local resident, of course.  What you might not consider is that those dollars get spent by the business owners as well, and they’re also likely to spend their money locally.

American Express estimates that about 68 cents out of every dollar spent in local shops stays at home, and if that dollar is spent locally three times, it means that – for every dollar you spend at local shops – $1.45 goes back into the community.  It’s what economists refer to as the multiplier effect, and it’s very powerful.

Fun fact:  The multiplier effect is why the government is still willing to make pennies, even though minting them costs more than one cent.  The multiplier effect is powerful enough to justify all that loose change in the jar next to your bed, and it’s powerful enough to make shopping locally a force for change.

Of course, that money doesn’t just go to shopkeepers and restaurant owners. The local government takes out its share in local taxes.  Even if you hate the idea of taxes, and we all may grumble in April, local taxes go to schools, firefighters, and other services in the area.  Buying dinner at a local bistro can be the reason the town has enough money to fix the potholes on your street. Not a bad dessert.

 Shopping locally is better for the environment. 

You already know about the danger of greenhouse gases and the effects of global warming.  If you don’t remember anything else, you probably remember Al Gore’s visual of a polar bear floating away. What’s easy to forget is that everything you buy had to come from somewhere.  If you’re drinking imported spring water from Fiji, that water flew halfway around the world.  If your new pants were made in China, they racked up frequent flyer miles, too.

It’s really hard to avoid foreign manufacturing, but many local businesses have locally made goods for sale, which eliminates at least one flight your product might take, saving on fuel and greenhouse gases.  Even if the product you’re buying was manufactured overseas, buying it locally can shave a flight or two off the product’s carbon footprint.

Shopping locally is the best way to find hidden gems. 

There’s nothing quite like the feeling of finding something your friends have never seen before. Whether it’s jewelry from a local metalsmith, a purse from a local boutique or pottery from a local artisan, local shops have the best potential for one-of-a-kind, where-did-you-get-that, I-love-it-so much uniqueness out of any shopping you can do.  Anyone can get on Amazon or check out a department store.  It takes a real connoisseur with a real eye for style to shop locally and find the best products.  Show off your personal style with buys from local artisans. The Parkville Towne Fair or the many ethnic festivals are great places to look for local crafts.

One final benefit of shopping locally is that many of your finds come with a story.  Those earrings might be from a local artist who got the inspiration from the nursery rhyme her mother told her, or those plates might borrow their pattern from the artist’s love of pop art.  Whatever the story, local artists will tell you how they came up with their unique designs.  Part of the fun of local shopping is the connections you can build with local artists, and hearing their stories is part of it.

San Francisco started recognizing the historic contributions of local businesses by listing important shops on its historic registry.  Looking around Parkville and Baltimore, which businesses would you nominate for historic status?


And, don’t forget to keep your banking local.  Destinations Credit Union (along with many other credit unions and local banks) is right here in Parkville offering world-class financial services and access wherever you travel.  We’re owned by our members and the money is invested back into our residents and our communities.

Check out the Parkville/Carney Business Association to see many local businesses who support our community.

Sources: 

http://money.usnews.com/money/personal-finance/articles/2011/10/28/how-consumers-and-communities-can-benefit-from-buying-local

The New Homeowner Diet


Saving money is a lot like losing weight. It’s no fun, requires sacrifices and no one at a dinner party wants to hear about your plan.  For many first-time home-buyers, trying to save enough money for the down payment on a house can seem like a diet that won’t end. It might even be tempting to click one of those email links that promise magical results, even though you know there’s no magic pill for weight loss and no magic plan for saving money.  

Fortunately, if you’ve ever tried to lose weight, you already know how to save money. While most weight loss results are temporary, buying a home is something that won’t disappear if you skip the gym for a week: You’ll be living in a home you own, building equity and moving closer to financial independence.  So, here are some tips to get you moving toward that down payment, based on what you already know about trimming your waist:  

Don’t bite off more than you can chew

One of the biggest mistakes new homeowners make is buying more house than they can realistically afford. At Destinations Credit Union, we want to get the right loan for you so that you can move into the home that’s comfortable and fits your lifestyle.  That doesn’t mean you have to use every dollar you qualify for. Let’s talk it through to figure out exactly how much you can spend every month and make sure you don’t get in over your head.  

A good rule of thumb when planning is that you want to put down around 20 percent of the sale price. Before the financial crisis, a lot of people were putting down 10 percent or considerably less – as much as 0%. It didn’t turn out well for many of those folks, nor did it for their lenders.

Even if you feel comfortable with the risk that comes with a low down payment, putting down more money now can lower your interest rate, so you’ll pay less money in the long term and have a lower monthly payment.  It’s easy to see the down payment as your goal and forget about the rest of the mortgage, but this won’t be the last purchase you make.  You’re going to want to save for college, retirement or your dream vacation.  If you don’t put the money in now, you’ll have to do so later, and you’re essentially taking a loan from yourself against those future purchases.

No matter how long you run, you can’t burn off that midnight cheesecake

You may be making sacrifices and saving as much as you can, but still not feel like you’re getting any closer to your dream home.  You’re not alone.  Unlike their parents or grandparents, today’s typical middle class family has more than one job, and a surprising number of those families has three or more sources of income. Even with the popularity and necessity of taking on a second job, some people are embarrassed to do so, as if having a working spouse or taking on extra work on the side is a sign of failure.  Don’t be that person who’s too embarrassed to go to the gym because they don’t want anyone to see them get healthy.  There’s no shame in working.

You can’t lose weight without a scale

Most people keep track of their weight every day while dieting.  Some keep a food log.  Some count calories, points, or carbs.  The bottom line: You need to be able to see how you’re doing so you know when you can splurge and when you need to cut back.  The same is true when saving for a home. Make a budget and stick with it.  If you have a bad month, don’t get frustrated. Instead, commit to doing better next month.

Everyone needs a spotter

When you save money every month, where does it go?  Do you have a series of Mason jars filled with crumpled singles?  Is it sitting in your checking account, looking pretty when you check your balance but not doing anything else?  Even if you keep your money in one of our savings accounts, there’s a lot more we can do to help make your money work for you.  Our Kasasa Cash Rewards Checking pays a really high rate when you do a few simple things to qualify.  And, you can attach a high rate Kasasa Saver account to that checking which sweeps all of the rewards into the savings automatically.  We have a variety of great savings plans, from low-risk savings certificates to High Yield Accounts, which earn a higher dividend rate for your savings. High Yield accounts share many of the same conveniences as our regular savings accounts, including no-penalty access to your money if an unexpected emergency occurs.  

If you want to own a home, you need to save money, but you don’t have to do it alone.  Think of us as your personal trainer for your financial health.  Call us at 410-663-2500 or info@destinationscu.org, and we’ll help you figure out what you can afford and how you can get there.  Our plans are always easier to swallow than a kale smoothie. But then again, what isn’t?
Sources: