Financial tips from Select FCU, San Antonio area credit union
Among the many challenges that parents face is how can a parent raise financially savvy children in the digital world we live in now. Today’s kids have access to an enormous amount of marketing information through social media and the internet that can make an impact on their financial choices. Below are several strategies that concerned parents can follow to pass on smart financial practices to your children as they grow up.
Be a Role Model
When it comes to teaching smart financial practices to your children, the best way is to practice smart finances yourself. Teach your kids the importance of spending less than you earn and working towards debt elimination. Be an example to your kids by setting financial goals and then working towards meeting them. The reality is that you can’t expect to pass on smart financial lessons if you’re not practicing sound financial behavior yourself. Walk the walk before you talk the talk.
Have a Consistent Allowance Practice
There are varying arguments that can be made in regards to giving your children an allowance or not. Some would argue that an allowance teaches your children some basic ideas of managing money. Others argue that it comes down to paying kids for household chores they would do anyway. Regardless where you stand on the notion of allowances, the key here is to be consistent in your approach. If you do decide to give your children an allowance then use the allowance as an opportunity to teach your children basic smart money management.
Teach the Importance of Saving
Whether your children receive an allowance or work to earn their money, it’s critical to teach the importance of saving some money for future use. As mentioned before, this requires that you model this behavior if you expect your child to truly learn the lessons of saving money. Putting money aside is a great opportunity to learn lessons around setting financial goals such as saving for college or perhaps saving for an expensive item such as a computer.
Look for Entrepreneurial Opportunities
Encourage your children to develop an entrepreneurial mindset. One approach is to encourage your kids to launch a micro-business such as a lemonade stand or lawn mowing business. The basic lesson here is that in order to earn money you have to invest money first. Another idea to consider is to create a “job board” that is different from the typical household chores. Children can take on jobs as they choose and earn extra money when the job is completed.
Lessons for Teenagers
As your children grow into teenagers, it’s a good idea to introduce them to the realities of adult finances one piece at a time. The main lesson here is to teach your teenager how adult finances actually work. One approach is to initially introduce them to bills that are associated with themselves such as the internet bill or the cell phone bill. Sit down with your teenager and explain to them what amount needs to be paid each month in order to have that service. Another approach is to share the monthly budget with your older teenager. This gives them a visual of how the household finances are being managed and the importance of living within the household income. This approach works to emphasize that you have to spend less than you earn in order to build a solid financial future.
Communication is Key
If you’re not talking and actively engaging with your children about financial ideas, then none of the strategies listed above will matter. The simple practice of talking with your children about money goes a long way in ensuring that your children understand the value of sound financial practices. Explain to them why you are saving money, why having a budget and sticking to it is important, and why it’s important to live within your means. Children will listen and pay attention to you if speak with them and not to them.
Passing on financial lessons to your children is one the most important responsibilities that parents need to be mindful about and consistently practice. The road to financial success for your children starts with you as responsible parents.
Tips from Select FCU in San Antonio, TX
Have you ever been asked to be a cosigner on a loan or considered offering it as an option to a friend or family member? Being a cosigner on a loan has value especially when cosigning helps people obtain a first-time loan. However, there are risks to being a cosigner.
For further information about cosigning or obtaining a loan, please feel free to contact Select FCU at (210) 223-6561.
Cosigning on a Loan: Reasons Why it’s Useful
While many experts will tell you to never cosign a loan, it isn’t always a bad idea. Here are a couple of sound reasons when cosigning makes sense:
1. It Aids in Obtaining Financing.
Often times applicants for a loan are rejected for a loan because of poor credit history.
But sometimes, creditors and lenders will take a second look at an application if there’s a cosigner. By taking a chance and cosigning, it can give someone the opportunity to obtain reliable transportation, attend school or buy a large ticket item.
2. It Helps Build Credit.
The reality is that credit is needed to build credit. Unfortunately, it can be a challenge for people without a credit history to qualify for a loan. As a cosigner on a loan, you can help another person establish or build a better credit score and credit history.
When Not to Cosign a Loan.
Before agreeing to cosign a loan, you need to be aware of and understand the risks involved. While it makes sense in some situations, many times the risks greatly outweigh the benefits. Before agreeing to cosign, understand the possible risks:
1. It Increases Your Debt-to-Income Ratio.
Your debt-to-income ratio is the percentage of your debt payments in relation to your income. Calculating your debt-to-income ratio (DTI) is relatively simple. Divide your monthly debt payments by your monthly income. For example, someone who earns $6,000 a month and has debt payments of $4,500 has a debt-to-income ratio of 75 percent.
Often times people fail to realize how cosigning impacts their own debt-to-income ratio. As a cosigner, you are legally tied to the loan. You’re required to attend the loan closing and sign the loan documents. A loan that you cosign appears on your credit report, and the monthly loan payment factors into your debt-to-income ratio – even if the primary applicant makes the payment each month. You are liable for this balance in the event of default by the primary applicant. Being a cosigner can also decrease your ability to get new credit.
There are consequences of having a higher debt-to-income ratio. Cosigning a loan can lower your credit score because the amounts you owe makes up 30 percent of your FICO score. The more debt you have, the lower your credit score. Realistically, your debt-to-income ratio should be no higher than 36 percent. Your credit score will drop as your debt approaches or exceeds this percentage. As you can see, being a cosigner is a serious commitment.
2. You Can’t Remove Yourself as a Cosigner.
Once you accept the responsibility as a cosigner and sign the loan documents, you are tied to the debt until it is paid off. You cannot negotiate with the lender to take your name off the loan. In some instances, the lender may include a cosigner release clause in the loan agreement, which removes you as cosigner once the primary applicant demonstrates a history of timeliness. These clauses are common with student loans.
Otherwise, the only way to remove your name as cosigner is for the primary applicant to refinance the loan and re-qualify on his or her own.
3. You Could Ruin Your Credit.
Often times deciding to cosign on a loan is driven by a willingness to help a loved one or a friend but emotions shouldn’t guide your decision. There is a reason why this person can’t qualify for a loan on their own. If the primary applicant doesn’t have a prior credit history, then that is understandable. However, if the person requesting a cosigner has a history of defaulting on loans or paying bills late, then you need to be very cautious. If the primary applicant defaults on the loan, then your credit score will take a hit.
Keep in mind that this loan appears on your credit report. Therefore, any lateness or skipped payment will be noted on your credit report. So, while being a cosigner on a loan has some benefits you need to seriously evaluate whether cosigning is worth the financial and credit risk.
4. Your Relationships Could Become Strained.
In the beginning, most people co-sign a loan because they have a good relationship with the person they are cosigning with whether it’s a family member or good friend. However, if the person you cosign with should default on the loan and you become liable to make the payments, bad feelings can quickly follow and lead to a damaged relationship. So, be sure to prepared emotionally that you will accept this risk and happily make the payments if the other person is unable to - without holding a grudge.
When does cosigning make sense?
While there is really no valid financial reason to cosign a loan, cosigning is ultimately a personal decision. In some situations, your personal reasons for cosigning may outweigh the financial risks. For example, you might consider cosigning on a credit card application or an apartment lease for your child to help them become financially independent quicker. The bottom line: always proceed with a great deal of caution when considering cosigning on a loan.
Source: Money Crashers
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Tax season has arrived and many us will receive a refund from the IRS. When this occurs, you might be tempted to go on a vacation, buy new clothes, etc. While sometimes these things are much needed, there are several other things you can do with the money that can make you even more money over the long run.
To help guide your decision on how to use the refund, here are four ideas:
1. Start or build an emergency fund. According to a recent Bankrate survey, nearly 3 out of 10 Americans have no emergency savings. Financial advisors recommend that you have at least 6 months' worth of expenses saved in a savings account. Having an emergency fund can provide a strong financial cushion should an unexpected expense come up, such as an expensive car repair or an emergency room visit. If you have the funds available, you will avoid having to get an emergency loan with higher interest rates.
2. Apply the refund to clear credit card debt. This is particularly helpful if you are paying high interest rates. Eliminating this type of debt can save you countless dollars in interest and give you room in your budget to begin working on paying off other lower interest debt.
3. Save for retirement. It’s common knowledge that many of us aren't saving enough for retirement. Using your tax refund towards funding your retirement will allow you to earn interest and create more money for your future. If you don't have a workplace retirement plan, you can open a traditional or Roth IRA. A financial planner can help you determine the best route to take to maximize your money’s growth.
4. Open a 529 college savings plan for your children. The contributions aren't deducted from income for tax purposes, but when the money is withdrawn to pay for college costs, the distribution is tax free, as long as it is used for educational purposes.
If you have received a tax refund and are looking for a place to start an emergency fund, Select FCU has several options including savings accounts and share certificates(CD) that earn a higher interest rate. To learn more, just give us a call at (210) 223-6561.
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The beginning of a new year is traditionally a good time to set goals or resolutions to improve our health by starting on a healthy diet and getting in shape physically. As we start a new year, we should also be setting resolutions to improve our financial health. Whether you are a member of Select Federal Credit Union in San Antonio or banking in another locating around the world, setting financial resolutions is an excellent strategy that can lead to increasing your wealth and giving you peace of mind. Below are 10 resolutions that you can make for the coming year.
1. Educate Yourself About Personal Finance
Studies indicate that less than 60 percent of adults in countries with major economies like the United States are financially literate. Resolve to take that step to learn as much as you can about improving your financial wellness. You can start by searching the Internet. In this era where digital information is easily accessible, you can find an enormous amount of expert financial advice online regarding budgeting, saving, investments and retirement planning. If you like to learn in person, there are also classes available through churches and community organizations.
2. Create and Stick to a Realistic Budget
A budget is simply a spending plan. Lay out your spending priorities for the week, month and year focusing on necessary expenses as well as savings for retirement and emergencies like car repairs. Setting up a budget is the easy part. Sticking to a budget is the real challenge. The key is to make sure your budget is realistic and then resolve to stick to it. It can also be helpful to make a plan to reward yourself for sticking to your budget.
3. Spend Your Money Wisely
According to numerous studies, one of the top financial resolutions in this country is to spend less. The reason this is a top resolution is because it is relatively easy to spend money recklessly. The best way to cut spending and spend wisely is to track the flow of where your dollars are going to each month. This should help you visualize how much you are spending on unnecessary things. Avoid the temptation to keep up with the Joneses. If you are truly serious about cutting back on your spending, then try to connect with individuals who are trying to do the same.
4. Increase Your Income
Realistically, you can only curb your spending so much. If you’ve reached a point where you have cut back on unnecessary expenses as much as possible, then think about finding ways to boost your income. Be realistic about finding additional flows of income. It may require you to work extra hours or invest time to educate yourself for a higher paid position. Another recommendation would be to build a side business around something that you love doing.
5. Start an Emergency Fund
It’s a well-known fact that Americans in general are not good savers. A large percentage of Americans has less than $1,000 in their savings accounts. This indicates that the majority of people most likely do not have enough dollars saved for unexpected expenses. If you fall under this group of people then you need to resolve to build your emergency fund. Financial advisors recommend setting aside enough money for six months of expenses. This money should be kept in an interest-bearing account such as a Money Market. To begin building your emergency fund, look for areas in your budget where money is “leaking” out (such as eating out) that can easily be controlled or eliminated. Resolve to stick with this strategy. Unexpected expenses can spell trouble if you’re not prepared.
6. Boost Your Retirement Savings
Financial experts recommend setting aside 15 percent of your income in order to have a comfortable retirement. You can start by contributing enough in your 401k plan to get the matching contribution from your employer. You should also resolve to increase your contributions to your 401k plan every year. A one percent increase every year will get you to the ideal contribution of 15 percent. If you receive a raise in 2017, put that extra amount in your retirement fund.
7. Pay Off Debt
Paying off credit cards should be one of your top resolutions for 2017. Begin by focusing on paying down high interest credit card debt. This debt is typically more expensive than your mortgage or student loans. If you start by paying off debt accounts with the lowest balance, you will see results faster and it will motivate you to keep at it as you tackle debt with higher balances.
8. Plan on Tackling Other Debt
If your credit card is relative small or non-existent, then resolve to tackle other debt that may be creating pressure on your finances. Other debt may include your mortgage, student loans or a car loan. For example, you can work towards paying down your mortgage by paying a little more towards the principle of the loan each month or year. You may have to cut spending in other areas of your budget or perhaps find ways to earn more money. In the end, you will be rewarded by reducing your debt significantly.
9. Consider Starting a College Fund
If you have kids that may be heading to college at some point, then you should start a college savings fund. You can start a savings account through your credit union or bank. One good option for college savings is a 529 plan. These state operated plans allow you to with draw money tax free as long as the money is used to pay for qualified educational costs. A great source of information on 529 plans is SavingforCollege.com where you can research the various plans available as well as having tools you can use to help guide you to the best options available.
10. Resolve to Develop Common Goals with Your Significant Other
If not managed well, household finances can be the source of conflict between couples. If you are married or in a long-term relationship, then you need to work on creating a financial plan and goals together as a couple. Sadly, when couples try to manage their finances separately, it usually doesn’t work. To resolve this, you can start by combining finances under a joint bank account. Next, it’s helpful to work together to create a monthly spending plan or budget based on your shared values and goals. If this ends up being a real struggle for you, there are classes available at local churches that can help you learn to work together on finances.
As always, Select FCU is a great source of information to help you reach your financial goals in 2017. Please feel free to get in touch if you need have any questions or are looking for solutions to challenges. Just give us a call at (210) 223-6561.
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For many people, the holidays are the most joyous time of year with parties to attend, beautiful decorations to admire and extra time with friends and family. While all this wonderful, it can also be a time of extra stress especially when it comes to gift giving and finances. If you’re looking for ways to manage holiday stress and finances, check out these tips.
Keep in Mind What's Really Important
It’s easy to fall into the notion that shopping for gifts is what is expected during the holiday season. The holiday season is really about family, friends and religious/spiritual activities. The focus should be on non-material things. It’s easier said than done especially if you have children or perhaps friends and family with relatively high expectations around gifting. The best advice is to keep in mind what really is important during the holiday season, avoid worrying too much about material things and take some time to reflect on the values that are most important to you.
Keep Things in Perspective
Gifting is a huge part of the holidays and you may feel disappointed if you can’t afford to buy that iPad or Wii for your kids. The best advice is to not fret or worry too much about that. Keep in mind that fashionable or the latest cool gadget comes with a relatively high cost. If you think about it, most children don’t remember many of the gifts they receive or who gave them the gift. Think back to your own childhood. The gifts you remember the most ones are the ones that were made by your grandmother or the journal your mother gave you. If you have young kids, limit your gift giving when they are small so their expectations are reasonable when they get older. Make sure to take some time to talk with them about the true meaning of the holiday.
Avoid Spending the Holidays Alone
If you decide to limit your gift giving or totally not give gifts, you may feel like staying away from family gatherings. The best advice is to disregard that urge. The holidays are truly a time to spend with the people you care the most about. Being around family or good friends is really an important aspect of the holidays.
If you don’t have anyone to spend the holidays with, consider volunteering at a shelter to serve meals. You will feel much better if you are focusing on others rather than yourself.
Create a Budget
Good basic planning for holiday expenses can go a long way in coping with the stress that invariably comes along the holidays. Once you’ve decided on a spending plan, look for other ways to help you stay within your holiday budget and maintain your financial security for the long term. For example, try to pay cash for your holiday shopping, use your debit card rewards points to buy gifts, look online for specials/discounts and avoid opening department store credit cards.
Get creative with your gift giving
If you have artistic or creative skills, then use those skills to make hand-made items. People always appreciate hand-made gifts and it is a good way to limit your holiday expenses.
If you feel that you don’t have the ability or skills to produce hand-made items, then consider giving the gift of time. Just about everyone is stretched for time during the busy holiday season and the gift of time is an excellent gesture to help others through the holiday season or even after the holidays. Offer to baby sit for a friend or family member so they can go shopping. Or offer your time to help a friend with a holiday party. Search the internet or local newspapers for opportunities to lend your time at a homeless shelter or a non-profit organization in need of volunteers. Time is a precious gift you can give and the financial costs are minimal.
Stay clear of stressful shopping situations
For those gifts that you need to go out and buy, holiday shopping can be stressful especially if you wait to the last minute to actually do your shopping. Try to avoid situations that where deadlines create stressors. The best strategy is to shop early before the holiday season starts. An added value for shopping early is that it will help you stick to your budget without the stress that comes with last minute shopping decisions.
So if you find yourself stressed about the holidays this year, take some time reprioritize and focus on the real reason for the season. Whether it’s creating a budget, finding creative ideas for your gift giving or coming up with a plan to bless others with your time, you can rework your holiday season to reduce emotional and financial stress and have the best holiday ever.
The holidays are fast approaching. Are you ready? Consumer data shows that consumers spend more money on gifts, entertainment and travel during the three months before New Year’s than any period of the year. Much of that spending is done on credit - often times with high interest. Using credit to pay for major holiday expenses can lead to major debt and possible financial problems for months perhaps years to come.
To help you survive the holidays financially and spread some cheer without getting into a financial crisis or burden, we offer the following tips.
1. Cut your gift list. The best way to reduce your holiday spending is to give gifts to fewer people. Let your family and friends know in advance that you will be reducing your gift exchange list. It takes some planning but if you are upfront about your reduced holiday gifting, people will understand.
2. Get creative and find alternatives to purchased gifts. For example, homemade treats are always welcomed or you could give a coupon for your services (such as babysitting, yard maintenance or whatever your skills include). A tax-deductible contribution to a charity is also a thoughtful gift that will help you save money at tax time.
3. Make a budget. After you've decided who you want to buy gifts for, make an overall budget and decide how much you want -- and can afford -- to spend on each person. This will help you avoid the temptations of last-minute impulse buying.
4. Stick to your budget. This takes some discipline. It may be helpful to take someone when you go shopping to provide a voice of reason and help you to not over spend.
5. Get started early. This takes some planning but in the long run, you have more time take advantage of specials and not end up spending more because you got in a time crunch. Many stores offer good deals before the official holiday shopping season starts, which is traditionally the day after Thanksgiving. Prices are typically lower and you have more time to take advantage of online or mail order bargains.
6. Look for bargains. Studies have shown major price variations -- often 50 percent or more -- in the same geographic area for identical products, especially audio-video and computer equipment. Don't assume that prices are always lower in catalogs or on television shopping channels, no matter what their ads claim.
7. Do your research! Especially if you are looking for nice quality gifts, you can save a lot of money, time and heartache by doing online research before you hit the mall because you can compare prices and features in a non-pressured environment. This is particularly helpful for expensive items such as cameras, video equipment, sporting goods, stereos and computers.
8. Avoid buying unnecessary warranties. Resist the temptation to buy an extended warranty or service contract for products. Extended warranties tend to duplicate the existing warranty and are rarely worth the extra expense.
9. Make sure you know the return policies and keep the receipts for all your purchases. That way, if you find a better deal, you can return your first purchase and get the better deal.
10. If you’re short on cash and need a loan, check with your local credit union to see what kind of special programs they have to help you get a better interest rate on purchases or to save up points to use to buy gifts.
The last word: Be Smart When Paying for your holiday expenses. The best possible strategy to pay for holiday shopping is by cash, check, or debit card. This is the best way to avoid finance charges from credit card bills. Use your credit card or loans only when absolutely necessary. If you have to use credit, pay it off quickly so you can avoid large interest charges. If you can't do that, pay as much of the bill as you can each month.
We hope you find these tips helpful and welcome you contact us at (210) 223-6561 if you have any questions.