BECU Financial Advisor

 


Your Credit Report

When was the last time that you reviewed your credit report?

Not only will you be able to see what may be impacting your credit score so you can take steps to improve it, but it is also can be a good way to ensure that you have not been a victim of identity theft.

You may hear television and radio advertisements offering a free credit report or you may receive e-mails or on-line solicitations to give you a free report but be careful.

A site that will give you a free credit report is annualcreditreport.com.

When ordering your free report, if you are asked for your credit card number to obtain the report you are probably at the wrong website.

Remember “annualcreditreport.com”.
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Free Checking

Due to new federal regulations that limit fees financial institutions may charge, many banks are finding ways to make up for this lost income. In fact, several of these banks have or are considering eliminating free checking.

Banks may put in place conditions you must meet in order to get free checking. Such as, having direct deposit or requiring a minimum balance in the account.

It’s important to know the terms and conditions of your account so you don’t end up with a surprise fee for not meeting the requirements.

Financial institutions are required to notify you when they make certain changes to the terms and conditions on the account so pay attention to notices from your financial institution. And if you are unsure or in doubt about the terms and conditions on your account, ask for clarification.
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Your Kids' Allowance

Parents often struggle with how much and how often to give a child an allowance. Or if a child should even receive an allowance at all.

An allowance can be a great way to teach a child good money habits that could last a lifetime. It can teach them to save, spend and share wisely.

Here’s a rule of thumb for determining your child’s allowance: Give them a weekly allowance that is half their age. So if your child is 10, then consider giving them $5 a week. Knowing exactly how much to expect and how often to expect it can help your child develop a good budgeting and savings habit.

Do you want to motivate your child to save?  Consider offering to “match” a portion of each savings account deposit that he or she makes.

If you want to tie your child’s allowance to chores or not, is up to you. The most important thing to remember is to be consistent.
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Beneficiary Information

Do you think that just because you have an updated will that when you pass away your wishes will be carried out?  For your retirement, insurance policy, and other investment accounts it is actually your beneficiary designations that determine what happens to your money.

When was the last time you reviewed the beneficiaries on your retirement, insurance policy and other investment accounts?

Life events can change everything. If you were married, divorced, had a child, or a death in the family since you opened your account, then you definitely need to consider updating your beneficiary designations.

Take the time now to make sure that the parties you designated as beneficiaries on your accounts are who you want to receive your money when you pass away.
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Goal Accounts

There’s an easy way to experience holidays and vacations without going into debt and it means less financial pain when the fun is over.

Open a separate savings account or Certificate of Deposit account for your specific goal and add to it monthly at a level that will give you the money that you need.  To ensure you stay on track with your savings goal, set up an automatic transfer from your checking account.

With a Certificate of Deposit you’ll earn a guaranteed return on your money AND you can choose the term of your account anywhere from 3 months to 60 months.

The prospect of not having to endure high credit card bills when the fun is all over makes enjoying holidays and vacations a lot easier.

Planning, goal setting, and saving can get you in the habit of living on a realistic budget.
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Social Security Changes

Even if you did not get a raise this year you may notice that your paycheck it a little bit larger than it was last year.  As a result of the Tax Relief act for 2011 your share of the Social Security portion of the FICA tax will only be 4.2% instead of 6.2% on the first 106,800 of your earnings.

Now is the perfect time to take this extra money and put it to work for you.  If you do not have an adequate emergency fund consider saving it for a rainy day or paying off credit card balances.  If you are not already maximizing your pre-tax contributions to your retirement plan this is also another great option to consider.

At this time this relief is only for 2011 so take advantage of the opportunity while it is available.
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Rolling Over Your 401(k)

If you have or are preparing to change jobs, do you know what your choices are for managing the money in your previous or current employer’s retirement plan?

Although many people choose to take cash distribution, there are other options that may benefit you more.

Taking a lump- sum cash distribution may trigger an immediate 20% federal withholding tax and in addition, a 10% tax penalty may apply if you are younger than age 55.

Check with your current or new employer to see if you are able to roll over your previous retirement plan to theirs.  If this is not possible, you may want to consider rolling the money to a traditional IRA.
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What is a Mortgage Accelerator Loan?

On our last segment we had a listener who called in with questions about a “Mortgage Accelerator” loan and was wondering what the loan was all about.  I was not familiar with the “Mortgage Accelerator” loan and could not give a lot of detail on the pro’s or con’s but promised to give your more information on the product, so here you go.

What is a “Mortgage Accelerator” loan?  The best definition I could find comes from Investopedia. 

To quote:  “A type of mortgage loan popular in the United Kingdom and Australia that resembles the combination of a home equity loan and a checking account.  Borrowers’ paychecks are deposited directly into the mortgage account and the mortgage balance is reduced by that amount, then as checks are written during the month, the mortgage balance rises.  Any amount deposited in the account that is not withdrawn through the check writing process is applied to the balance of the mortgage at the end of the month as repayment of principal.” 

The concept behind the “accelerator” is that when your paycheck is deposited it reduces your average monthly outstanding balance on which interest is charged.  Additionally, it assumes that the amount of the paycheck that remains in the account at the end of the month and transferred is larger than what it would be under a traditional mortgage.  Two companies, Macquarie Mortgages USA and CMG Financial Services recently started offering this loan product in the United States, but is this loan for you?

Pro’s

  • It can reduce your average balance on which your interest is calculated.

  • It has the potential to offer a line of credit on which to draw in an emergency.


Con’s

  • It does not come with a “fixed rate” option.

  • You can accomplish the same reduction in your principal on a conforming loan by making additional principal payments.


This product is certainly something to keep and eye on to see if it catches on in the United States and it will defiantly require a different way of thinking about how we manage our finances.  With current “fixed” mortgage rates on conforming 30 year loans just over 4%, the variable nature of the interest rate is something that you definitely want to take into consideration before deciding if this product is in your best interest.
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Identity Theft - Avoid Becoming a Victim

On today's program R&R talked about how his home was broken into and the thief (s) may have stolen a bag containing some personal information (receipts, tax information, etc.).  A couple of weeks ago I had my car broken into and my wallet which contained my drivers license, credit cards, and checks were stolen.  With the tax deadline right around the corner, most of us are have, our currently are, working with personal information that if stolen, could put us at the risk of our identity being stolen.  The following are a few tips that can help you to avoid becoming a victim:

  • Never give your social security number, mother's maiden name or account numbers to someone you do not know.  Your bank already has your social security number so they should only need you to provide the last four digits for verification. 

  • Put additional passwords on your credit card, bank, and phone accounts.

  • Never carry your social security card or debit card PIN number with you.  It is a good idea to only carry the credit cards and ID that you need.

  • Protect your ingoing and outgoing mail.  If possible, have a locked mailbox and do not leave outgoing mail in an un-locked mailbox.

  • Shred personal information.  This includes but is not limited to charge receipts, copies of credit applications, bank checks and statements, and credit offers you get in the mail.

  • Get a copy of your credit report and review it at least once a year.  You can get a free copy from all three reporting agencies once a year at annualcreditreport.com.  One strategy you can take is to stagger your requests throughout the year.  For example, perhaps you order the Experian report today and then wait a few months to order a report from Equifax or Trans Union.  


In our next post we will talk about what you should do if you are a victim of identity theft.
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Overdraft Fees

Recently Bank of America announced that it would no longer be charging overdraft fees on debit transactions.  Rather, if the funds were not available they would simply deny the transaction.   I guess if I were purchasing a $3.50 latte I would rather have the transaction declined that pay the $35.00 fee (or more if I had multiple transactions in one day) however, it is possible to have it both ways, getting the transaction to go through and avoiding the fees.

While I advocate keeping a small cushion in your checking account to cover situations like this (we all make mistakes), you may also be able to link either a savings account or a line of credit to your checking account to cover a transactions where you do not have sufficient funds.  It would work something like this.  You purchase the $3.50 latte and you do not have the funds in our account.  Instead of denying the transaction the funds are automatically transferred from your saving account or line of credit to cover the transaction.  If you rely on your savings account just beware that REG D limits the number of transfers from your saving account to 6 a month.

Check with your financial institution to see what options you may have but also make sure that you know what your fees will be.  There are financial institutions that will not charge a fee for this service so if you are not happy with what you are being presented with you may want to shop around.
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Achieving Your Savings Goals

Saving for such things as retirement, a home, a car, or college can sometimes seem overwhelming.  Saving Made Simple we will talk about strategies that you can use to make sure that you achieve what you desire.
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