We’re all looking for ways to put money back into the family budget. Sure, you can eliminate streaming services, cut back on snacks, or eat out less often. But, one of the often-overlooked ways of reducing monthly expenses is to refinance your auto loan. Here’s how to know if a refinance could work for you. You Recently Bought Your Vehicle at a Dealership Did you buy your current vehicle using dealership financing to get special incentives or cash-back offers? Chances are your rate was higher to offset those special deals. As long as today’s rates are lower, you could save money every month. Additionally, by extending the terms of the loan (the total number of monthly payments), you could lower the amount you spend every month. You Have Less than 12 Payments Remaining Paying off your vehicle feels great and can be a boost to your overall financial life with one less car payment. But, if you’re looking for ways to add money back into the budget, refinancing to a longer term might help, even if rates haven’t changed much. That’s because you’ll be spreading out the remainder of what you owe over several more years. In some cases, your monthly payments could be cut in half. Your Credit Has Improved Anytime your credit score improves, it increases your chances of securing a better rate—especially with an auto loan. If your credit score has risen dramatically since you first financed your vehicle, check with your credit union about a better rate and extending the term of the loan. You could see a reduction in your payments. Additionally, you might not spend much more on interest. When to Avoid a Refinance As long as the savings on the monthly payments are worth the cost, refinancing can help with the monthly budget….
By Carl Trevison and Stephen Bearce Risk, and the role it plays in a portfolio, can be among the most difficult concepts to understand fully. Sometimes our view of risk isn’t something we consider until there’s a sharp market downturn or other activity that compels us to question our tolerances. To help bring the positives and negatives of risk into clearer focus, here are four important risk-related considerations for investors. Risk has many faces The term “risk” usually refers to investment risk: the idea that you could purchase stock at $50 a share and it could be worth $25 a year later. This kind of risk is relatively easy to understand, and it’s measurable based on the ups and downs in an investment’s price. The more volatile the price has been, the more risky the investment is considered to be. Investment risk is only one risk investors can face. Others include: Market risk. This is the risk that the entire market will decline and pull your investment down with it. This happened to stocks during the Great Recession, as well as during the market decline due to the initial impact of the coronavirus pandemic. Inflation risk. Inflation is the overall increase in prices in an economy. There’s a risk that an investment’s return won’t be enough to overcome inflation’s impact. For example, if inflation runs 2% a year and your investment returns only 1%, your investment will buy less at the end of the year than at the beginning. Opportunity risk. Some investors believe you can avoid risk by investing conservatively. Opportunity risk is the possibility of missing out on the chance to earn better returns because you aren’t being more aggressive. There are other types of risk, too, including some specific to certain investment categories. For example, bond investors…
There is a direct correlation between financial literacy and better overall financial happiness, according to the Global Financial Literacy Excellence Center. However, there has been a steady decline in overall financial literacy among U.S. adults based on findings from FINRA (Financial Industry Regulatory Authority). Whether you call it financial wellness or money literacy, continually striving to learn something new about money and your overall finances can help reduce stress, build wealth, and live a better financial life. Next month, April, is Financial Literacy Month and Transportation Federal Credit Union has some tips to help you jumpstart your journey of becoming lifelong financial learners. What is Financial Literacy Financial literacy or wellness is a lifelong process of learning about money, from savings to budgeting, debt management, credit card use, understanding interest rates as well as spending, giving, sharing, and planning. Other topics include rate environments, economic shifts, market news, and more. Students of lifelong financial wellness range in age from children to retired adults. In other words, YOU are a student of financial literacy, whether you know it or not. By paying attention and being open to learning, you can help live a happier, healthier financial life. Boost Your Money GPA: 5 Money Courses You Should Continually Revisit The basic idea behind lifelong financial literacy is to always strive to boost your overall money intelligence. Here are five money basics that can help you improve your overall financial well-being. Budgeting and Expenses: The goal is to spend less than you earn, with a portion of your income going toward savings and retirement. When was the last time you reviewed your household budget? Savings and Investments: When you go beyond simple savings, you’ll discover the wonders of compounding interest, money market accounts, certificates and more. Always strive to invest in your own…
By Carl Trevison and Stephen Bearce To have less stress and more confidence about the future, taking the time to review account statements is helpful. But it can be even more meaningful to have a single place where you can see the total picture of all of your assets and liabilities — and how it may fluctuate over time. Building a comprehensive account summary or net worth statement can make it easier to connect the dots. As more dots are connected, you get a more meaningful picture and see a clearer, more actionable path. As individuals build wealth, it becomes more challenging to keep track of one’s overall financial picture. There will likely be household cash accounts, investment accounts, retirement plans, real estate, loans, and a number of credit cards. Executives may have stock options and other equity-based benefits that vest over time, and deferred compensation plans. Business owners often have multiple entities related to their core business, along with real estate holdings connected to the business. You may have private investments as well. So gathering financial information and documents from different sources can become a bit of a chore. How do successful people do this? Don’t get overly complicated. Build something that works for you. Remember that the goal is to see the big picture, not to focus on the microscopic details. Let technology do some of the work for you. Many credit cards offer very useful spending summaries. And increasingly, financial institutions are offering account aggregation tools that make it easier to see all your accounts, even at various institutions, in one place. After you take a little bit of time to set this up, you don’t need to wait for a monthly statement or quarterly review to get a broader view of your finances. Values are updated…
By Sharmaine Bucknor While many Americans might consider themselves financially fit, the numbers paint a different story. According to the Federal Reserve, an astounding 40% of families don’t have enough in savings to cover a $400 emergency. Instead, they go deeper into debt when faced with a car repair, outrageous energy bill, or other unexpected expenses. Sometimes just the idea of trying to save can feel overwhelming. How can a person focus on their financial fitness and build money muscle? One change at a time. Here are some simple savings strategies to get you started. Let Your Employer Boost Your Retirement Savings If your employer has a matching retirement plan, maximize the opportunity as much as possible. To make saving for the future easy, enroll in automatic payroll deductions so you pay yourself first with every paycheck. Build Emergency Savings If you can save $10 a week, in one year you’ll have over $500 in savings. That’s a solid start to being financially fit. Better yet, treat your personal savings like a monthly utility bill and set aside a percentage of every paycheck to automatically go into savings. Then, when you’re faced with an emergency expense, you can pull the money from that account. Take a Look at Your Withholdings Adjust yours using the IRS Tax Withholding Estimator at IRS.gov. This tool can help you keep more of your money now instead of getting a refund from the IRS every year. The goal is to avoid a large return without paying additional taxes in April. Find Better Rates Shop around for lower rates on loans, higher rates on savings, and lower costs on your insurance policies (car, home, life). Insurance companies often offer premium discounts when you bundle your insurance policies. Those savings can add up quickly. Focus on Saving…
By Carl Trevison and Stephen Bearce A dividend is a portion of a company’s profit that’s paid to shareholders. That means dividend-paying stocks may provide a source of income. But they can also carry some degree of risk. So, what do investors need to consider when it comes to dividend-paying stocks? In this Q&A, Austin Pickle, senior wealth investment solutions analyst with Wells Fargo Investment Institute, provides important information for investors to keep in mind. What are the potential benefits of dividend-paying stocks? “One of the big benefits is that these stocks may provide a more reliable income stream compared to some other investment options,” Pickle says. Companies tend to issue dividends on a routine basis, such as quarterly or semi-annually, which may create a dependable income stream. Another benefit? The stocks can yield some favorable tax treatment. “It’s going to depend on your tax situation,” Pickle says, “but in general, you may have a relatively lower tax rate for dividends compared to income gained by selling investments.” As long as the dividend-paying stock meets IRS requirements for a qualified dividend, the dividend is taxed at the lower long-term capital gains tax rate instead of being taxed as regular capital gains income. “So an investor could receive income from a dividend-paying stock without selling the stock and have a lower tax bill compared to that of a non-dividend-paying stock, which must be sold to receive income,” he says. Who should include dividend-paying stocks in their portfolio? Many types of investors have the potential to benefit from dividend-paying stocks. “But these stocks may be more valuable for investors who are a bit older — maybe those in retirement or close to retirement who really value a more reliable income stream,” Pickle says. “I think they’re typically beneficial from a diversification perspective,…
By Carl Trevison and Stephen Bearce When the stock market is on the rise, investors can fall into the trap of believing the good times will never end. But in all probability, market volatility will return, and chances are it’ll be when it’s least expected. Rather than waiting for it to happen and risking the possibility of panicking and making costly investment decisions, you may want to think about volatility during those good times. That way, you can be strategic rather than emotional about dealing with it, which may lead to better outcomes. What type of investor are you? What you should be considering now depends on which of these describes your current situation: You have an investment plan. You don’t have an investment plan. Let’s begin by addressing type two investors. Quite simply, if you don’t have an investment plan, you should think about creating one, and here’s why: A well-thought-out plan is built around what you’re investing for (goals), how long you have until you need to tap into your investments (time horizon), and, most important for this topic, the amount of market volatility you’re comfortable with (risk tolerance). Taking these factors into consideration, your plan should include a strategic asset allocation, which is how your portfolio is divvied up between different types of investments — primarily stocks, bonds, and cash alternatives. You may be the type of investor who takes market volatility in stride. In that case, you likely have a relatively high risk tolerance. On the other hand, volatility may make it hard for you to sleep and cause you to panic, which would mean your risk tolerance is probably rather low. If you’re the second type of investor, a larger portion of your asset allocation would likely be in bonds, which historically have been more…
By Carl Trevison and Stephen Bearce You might not need these services until later in life, but consider planning well in advance. You don’t want to be developing a plan to pay for long-term care after you already need it. Here are four considerations to keep in mind as you develop a long-term care plan: Know the different levels of care and their costs. Aging in place often refers to services being delivered to you in your home and can include aid rendered by visiting nurses, family and friends. It can also mean living in a continuing care community that has different facilities, each providing increasing levels of care. You move into the facility that matches the level of care you need and move to higher levels of care as you require them. The benefit of residing in such a community is that you “age in place” as you progress through the facilities that offer the level of care you need. It can be comforting to know that you will not need to seek a new care facility each time your care requirements change. You just progress through the stages within the same community. An assisted living facility is often a residence that provides staff who can assist with daily needs (showering, dressing, taking medications). Moving into assisted living may also add a level of security knowing that you are not alone if a fall or a health event occurs. Skilled care refers to a residential facility (or nursing home) that includes on-site medical care. These facilities often include short-term rehabilitation services following a hospital stay as well as 24-hour nursing care for full-time residents who require extensive assistance and supervision. Memory care units may also be provided in these facilities for residents with cognitive challenges such as Alzheimer’s who…
By Carl Trevison and Stephen Bearce “How much cash should I have now?” It seems like a simple question, but the answer can be complicated — especially in times of market volatility. Apart from an emergency fund, the amount of cash or liquid assets you need depends on many factors, including the current state of the market and major life events. “There isn’t really a general rule in terms of a number,” says Michael Taylor, CFA, Vice President – Investment Strategy Analyst at Wells Fargo Investment Institute. “We do say it shouldn’t be more than maybe 10% of your overall portfolio or maybe three to six months’ worth of living expenses.” Taylor notes that the number could change depending on what’s going on in the economy and markets. “You should make sure your emergency fund and cash reserves can meet your current needs,” he says. Taylor shares five events that should prompt a conversation with your financial advisor about how much cash to have on hand. 1. When the market is in flux The state of the market can have an impact on how much cash you should have on hand, how long you decide to hold an asset as cash, or when to convert assets to cash. This can be especially true when you foresee a large discretionary purchase such as a vacation home or a luxury vehicle. “Plan for those purchases or defer them so you don’t have to liquidate assets at a loss during market uncertainty,” Taylor says. 2. When your job status may change If you’re contemplating a career move such as starting a business, retiring soon, or facing a possible layoff, consider meeting with your financial advisor. “If you don’t have enough cash on hand during those transition periods, you might have to dip into…
Financial Focus By Carl Trevision and Stephen Bearce Wells Fargo Advisors asked colleagues and friends what they would tell someone who has just graduated and/or is starting a new phase in their lives. Here are some of the thoughts they shared. As you enter a new stage of your life, it makes sense to give some thought to how your money factors into your routines and habits. Take a close look at your money attitudes and behaviors. Maybe you have saved every dollar you ever received for every birthday and holiday since you were young. Or maybe you’ve spent every one of those dollars and do the same with every paycheck. This may be a good time to recognize and perhaps start to change any behaviors that may be contributing to a less-than-optimal outcome. It is never too late to start paying yourself first. Be intentional in your money decisions. It is tempting, if starting out with a new job with a steady income higher than you’ve ever had before, to want to go on a spending spree. Before you start spending, give careful thought to ALL the jobs that money can do for you. Money can buy things, but it can also, depending on how you use it, create stability or help you reach goals you set for yourself. Devote some time to think about the role money will play in your life. Your decisions about money can have very positive or very negative results. (Will money be your friend or your enemy?) Have a plan. Some people have a clear plan for their entire lives and start to work that plan upon graduation or at the beginning or completion of a life milestone. If you are not one of those people, at least create a one-year plan for…
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