How to Manage Money in Your 30s

Posted on June 5, 2014 by Chief Marketing Officer Jessica

Your 30s can be a pretty significant decade. You might be transitioning from the more carefree days of a post-collegiate lifestyle and hitting major life milestones, such as buying a home, getting married, or having kids. Or you could also be planning major life adventures, climbing up the career ladder, or all of the above. Whatever your path, you likely face some significant money decisions, and the choices you make can end up impacting your finances for years to come.

A recent report released from the Pew Research Center shows that millennials, the oldest of whom are just entering their 30s now, face higher student debt and unemployment levels along with lower income and wealth levels compared to previous generations at the same age. At the same time, they are optimistic about their economic futures, with most (80 percent) saying they have enough money now or will one day to “lead the lives they want.”

To increase the chances that such an optimistic outlook comes true, here are six money moves that financial experts say you should consider in your third decade:

1. Save when you can.

“If you’ve gotten your salary up to the point where student loan debt is not wreaking havoc in your life anymore, but before you have a lot of responsibilities, that’s a great opportunity to super-charge your savings,” says Jean Chatzky, financial editor of the Today Show and author of “Money Rules: The Simple Path to Lifelong Security.” When parenting responsibilities and mortgage costs take off, for example, it can be hard to save more. “You want to take advantage of the opportunities you have to sock away some money so when the leaner years come around, you don’t beat yourself up,” she adds.

2. Create solid habits.

It’s also time to establish financial habits that will serve you well for the rest of your life. Kerry Hannon, personal finance expert and author of “Great Jobs for Everyone 50+,” says in her 30s, she maxed out her retirement savings accounts and even set aside a portion of her extra freelance income for retirement. “Those funds have served me well over the years as money to help pay for vacations and more. I still save outside of retirement accounts religiously in my 50s, too. It’s a habit I started back in my 30s,” she says.

3. Plan out your goals and priorities.

Trent Hamm, founder of the personal finance website “The Simple Dollar” and a U.S. News “My Money” blogger, says at age 35, he’s now reflecting on his career goals for the next 30 years. “What would I like to be doing with my time and my life? I don’t want the rest of my life to be a repetition of what I’m doing now and then an abrupt retirement. I have dreams and goals, and right now is the best time to get started on them,” he says.

For many people, a financial advisor helps with that. Bart Astor, author of “AARP Roadmap for the Rest of Your Life,” says your 30s is the ideal time to sit down with a financial advisor and talk, which is what he started doing in his mid-30s. He says he and his advisor met once a year to review savings and other financial goals, especially since he and his wife were meeting their goals. “When I hit 40, the plan showed that we should have about $188,000 in assets based on our salaries, and we had over $200,000, and boy, did that make us feel good,” he says.

4. Talk about money with your partner.

If you have a spouse or partner, then getting on track together and working out any disputes can prevent conflicts later, open communication is key. Talk about your finances and life goals with your partner, and align on how you will get there – together.

5. Be a good role model.

For those 30-somethings who are already parents, Beth Kobliner, author of “Get a Financial Life” and member of the President’s Advisory Council on Financial Capability for Young Americans, says it’s important to model smart financial choices for the little eyes watching you. “You lose all credibility lecturing your kids about not needing every new toy or tech gadget if you, behind closed doors, have loud arguments with your spouse about not being able to keep up with your credit card bills,” she says. You don’t have to be a money genius, she adds, but it’s important to talk about money – making financial discussions as commonplace as soccer practice or Sunday dinner.

6. Shore up your cash reserves.

While many experts emphasize long-term investing and retirement savings, it’s also important to give yourself a buffer for unexpected needs and expenses. Real estate can be a great way to build wealth and you should start saving as early as possible for retirement, it’s the unexpected changes in life that often derail 30-something households – and you need to be prepared for the short-term too or a financial emergency.

Article Source: Kimberly Palmer for Money.USNews.com, http://money.usnews.com/money/personal-finance/articles/2014/03/19/how-to-manage-money-in-your-30s

How to Pay Down Credit Cards to Boost Your Credit Score

Posted on June 3, 2014 by Chief Marketing Officer Jessica

If you know anything about credit scores, you know carrying high credit card balances is a problem. In fact, your debt-to-credit ratio (how much you owe vs. your total available credit) makes up about 30% of your overall credit score. And revolving debt, like credit cards, weigh heavier than other outstanding debt – like your mortgage or a car loan. So if you’re carrying a bunch of maxed-out credit cards, your credit score is likely not great.

The most straightforward way to improve your debt-to-credit ratio is to simply pay down those balances. But chances are if you’re in a lot of debt, you can’t pay off all the balances right away.

Here’s the good news: You don’t have to pay your credit cards off to boost your credit score. But to get the most credit score traction out of every extra payment, you do need to come up with a plan for paying down your credit cards in a certain way.

The Snowball Method

The snowball method is excellent for paying off debt quickly and efficiently. Basically, you throw extra money at one debt, and when it’s paid off, put the extra plus the old debt’s minimum payment toward the next debt. Repeat this until you’re debt-free.

This is an excellent way to get out of debt, if just getting out of debt is your goal. But what if your goal is to get out of debt while also boosting your credit score as quickly as possible? Maybe you’re hoping to apply for a mortgage soon, or a car loan?

In this case, the snowball method probably isn’t how you want to start. Eventually, you might switch to that, but you may want to begin by evening out your credit card balances instead.

Lowering Your Debt-to-Credit Ratio

When your credit score is calculated, your overall debt-to-credit ratio is reviewed, but also the individual debt-to-credit ratios of your various credit cards and other revolving debt accounts.

Here’s an example:

•Card 1: $5,000 balance/$10,000 limit = 50% debt-to-credit ratio.

•Card 2: $4,500 balance/$5,000 limit = 90% debt-to-credit ratio.

•Card 3: $500 balance/$1,500 limit = 33% debt-to-credit ratio.

•Overall: $10,000 balance/$16,500 = 60% debt-to-credit ratio.

In this case, your overall 60% debt-to-credit ratio will ding your credit score pretty severely. A “good” debt-to-credit ratio is around 30%, and you’re nearly doubling that.

But since your score also accounts for individual credit cards, you can see that Card 2 is hurting you the most — it’s nearly maxed out, which is not good. Card 3 is posing the smallest problem, since it is nearly in that “good” range.

In a situation like this, you’ll boost your credit score if you focus on paying down Card 2 first. Depending on the interest rates of each of these cards, you might choose to pay that card down all the way.

Or if it’s a card with a lower APR, consider putting money toward the balance until it’s at or near $1,500 to reach the 30% debt-to-credit ratio. Then move on to Card 1 or whichever card has the highest interest rate.

Now, this strategy isn’t guaranteed to add hundreds of points to your credit score. But because you’re improving individual debt-to-credit ratios for each of your credit cards, you will make progress more quickly than if you just snowballed your debt in this situation.

Still, you need to combine this with some aspects of the debt snowball, including the intensity with which you pay down your debt. After all, the only way to try to achieve credit score perfection is to pay your credit cards off completely, and refuse to carry a balance again.

Why Not Just Spread It Around?

Why not just transfer some of the balance from Card 2 to Card 3? Or get another credit card to transfer some of that balance?

You could. In fact, moving balances to lower rate cards can be a good strategy for both boosting your credit score and getting out of debt. But just shifting your balances around isn’t going to help much here, partially because the credit limit on Card 3 is so low to begin with.

What if you do have a $0 balance card in the mix? In this case, you still don’t want to transfer another card’s balance. This is because one part of your credit utilization mix is the number of accounts that carry a balance. So having three accounts carrying a balance and one with no balance is better than having four accounts carrying a balance, even if that move improves one card’s debt-to-credit ratio.

You Can’t Game the System

In the long run, you need to focus on getting your credit card balances paid off. In the meantime, bringing cards below a 30% (or even 50%) debt-to-credit ratio may boost your credit score more quickly than simply snowballing your debt. This is especially true if your debt snowball would leave a maxed-out credit card in the mix for months to come.

The Hidden Costs of Buying a Home

Posted on May 16, 2014 by Chief Marketing Officer Jessica

You’re looking for a house and see the perfect listing. And it has a big number on it, say $300,000. If you’re like most prospective homeowners, you imagine you will soon be talking to a lender and getting a loan for this amount.

But as veteran homebuyers may already know, you are going to pay much more than $300,000.

Yes, almost everything we buy has a hidden cost. You buy a toothbrush for a few dollars, and since you’ll have to purchase toothpaste, the ownership cost of a toothbrush is more than $2 – especially if you throw in a toothbrush holder. Obviously, the hidden costs of buying a house are far more complex. And if you aren’t prepared for them, you may come away from the experience feeling as if you’ve had the wind knocked out of you.

So if you’re thinking of buying your first house, be alert and prepared for these hidden costs that you need to keep in mind:

Home inspection costs. Before you close on a house, your mortgage insurer may require a home inspection, which can run several hundred dollars. But even if an inspection is not required, it’s worth paying a professional to evaluate the house so you can avoid spending hundreds of thousands on a train wreck disguised as a house.

Survey costs. Your lender may want you to have a professional survey of the property, so everyone knows exactly where your land’s boundaries are. That’s another several hundred dollars.

Taxes. You probably know you’re going to be paying taxes, but it can be easy to forget that you’ll likely need to pre-pay those taxes at closing. At the beginning of your mortgage, it can be a shock when you’re saddled with paying a couple months’ worth of property taxes, maybe a year’s worth of homeowner’s insurance, and possibly homeowner’s association dues as well.

Fees. Maclyn Clouse, a finance professor at the Reiman School of Finance at the University of Denver, rattles off a list of fees you may also pay at closing:

Government recording charges: The cost for state and local governments to record your deed, mortgage, and loan documents.
Appraisal fee: The cost for an appraiser to decide how much your house is worth.
Credit report fee: Your lender had to pay to get your credit report, so oftentimes you will cover that cost.
Title services and lender’s title insurance: Fees related to your home’s title.
Flood life of the loan fee: The government tracks changes in your property’s flood zone status, you’ll pay a small fee.
Tax service fee: Another pretty minor fee – this service ensures the taxes previously paid on the house are up to date (if your home was previously owned).
Lender’s origination fee: The charge for processing your loan application.

Moving costs. Will you be gathering friends and family to help you move your furniture and possessions into your home, or do you need a moving truck? Don’t forget about the cost of movers, if you are hiring them.

Total cost of ownership. Someone will have to mow the lawn with the mower you’re fated to buy, or you’ll hire a service. You’ll also probably need furniture and maybe a major appliance, like a washing machine. Even paint and paint supplies costs money and adds up quicker than you think.

Be ready for anything. Some houses (previously owned) come with propane or oil tanks, and at closing buyers have been asked to reimburse the sellers for the fuel remaining in the tank – in certain cases.

Looking for a mortgage? Check out First Financial’s mortgages, featuring great rates and low fees. We also have a 10 year mortgage as well – great for refinancing!*

First Financial also offers a Mortgage Rate Text Messaging Service so you can receive updates on our low Mortgage Rates straight to your mobile phone. You can subscribe to our Mortgage rate text message service by signing up for text alerts, and receive instant notification when our mortgage rates change.**

*APR = Annual Percentage Rate. Subject to credit approval. Credit worthiness determines your APR. Rates quoted assume excellent borrower credit history and are for qualified borrowers. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. Higher rates may apply depending on terms of loan and credit worthiness. Minimum mortgage loan amount is $100,000. Available on primary residence only. The Interest Rates, Annual Percentage Rate (APR), and fees are based on current market rates, are for informational purposes only. Rates and APRs listed are based on a mortgage loan amount of $250,000. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. See Credit Union for details. A First Financial membership is required to obtain a Mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**You must check the Text Message Signup box when registering in order to receive rate change text messages.⁺ If you do not receive an automated confirmation message after enrolling, please text “Yes” to (201) 808-1038

⁺The Text Message Signup box must be checked in order to receive text messages. Standard text messaging and data rates may apply.

Article Source – Geoff Williams of Money.USNews.com: http://money.usnews.com/money/personal-finance/articles/2014/03/12/the-hidden-costs-of-buying-a-home

6 Ways to Freshen Up Your Finances for Spring

Posted on May 14, 2014 by Chief Marketing Officer Jessica

Spring has arrived, and so have the inevitable seasonal cleaning duties. In addition to packing away the winter clothes, washing windows, and cleaning out the fridge, spring is the perfect time to evaluate your financial situation and tidy up your budget, accounts, debt, and investments.

Here are six ways to spruce up your finances for Spring:

1. Refresh your budget. If you’ve been promoted, transitioned from two incomes to one, or are starting a family, this is the perfect time to revisit your household budget. Consider using online personal finance tools to help you set a budget and keep track of your accounts. You’ll see where your money is going and can adjust spending where needed to help you attain your financial goals.

2. Pay off holiday debt once and for all. Clear up your credit lines, and pay off the purchases you made over the holiday season. Put yourself on a stricter debt payoff plan specifically to pay off the debt you accumulated over the holidays. Cleaning up this debt quickly will put you in a much better financial position for the rest of the year. It’s easy to fall back in to debt, so put a plan in place while you’re at it to maintain a zero balance.

3. De-clutter your countertops and go paperless. A good way to cut down on clutter is to opt for electronic bill payments. It decreases the amount of print mail, helps the environment, and can even help prevent identity theft. Secure your online bill payment with strong passwords that you change on a regular basis. Signing up for your financial institution’s online automatic pay system, (helpful for fixed-payment bills such as cable and Internet) usually even allows you to set up payments as “recurring” so the bills are automatically paid. This can help you avoid forgetting to pay a bill, and it keeps your countertops paper-free. And don’t forget about switching to e-statements instead of paper statements too!

4. Clean up your credit score. Boosting your credit score is always important, but before you do, it’s imperative to learn about your credit history and the various accounts that affect it. To make sure your credit report is free of errors, get a free credit report (you’re entitled to one free copy from the three credit bureaus every year). Check for any errors or accounts listed that aren’t yours. Companies do make mistakes, and it’s your responsibility to make corrections when you catch them, so your credit score isn’t accidentally lowered.

5. Set up an emergency fund. Life is full of unexpected surprises. A car repair, illness, or unemployment can catch you and your family off-guard and leave you financially stranded. When the unexpected happens, it’s important to have some cash set aside in an emergency fund. At a minimum, it should hold three months’ worth of your living expenses. If you pay $2,000 a month to cover the basics such as housing, utilities, and food, then put aside $6,000 in your emergency fund. If you have dependents, your emergency fund should consist of six months of your living expenses.

6. Dust off your financial statements. Review your bank and credit card statements as well as bills, to make sure you’re not being charged fees you don’t recognize or paying for subscriptions or services you never use. This is also a great time to look at your insurance policies.

Whether it’s putting money aside to pay down debt, planning for the future, or just getting organized, the changing season is a great time to change up your financial habits.

Article Source: Holly Perez of Money.USNews.com, http://money.usnews.com/money/blogs/my-money/2014/03/26/6-ways-to-freshen-up-your-finances

7 Smart Ways to Take Advantage of Your Tax Refund

Posted on April 17, 2014 by Chief Marketing Officer Jessica

Tax season is often a time of stress for many, but it can be a joyful time for the roughly 75 percent of Americans who do receive income tax refunds.

While the refund really means you’re getting back money you loaned to the government at no interest, in practical terms it often means an unexpected infusion of cash into your wallet or bank account. It’s a great problem to have, but what should you do with your windfall?

The best choice for one person may not be the best choice for another. But experts agree on one thing – if you have debt, apply your refund to paying it off, whether it’s credit card debt, student loan debt, or other consumer debt.

If you’re getting a big refund – a check in the ballpark of $1,000 or more for taxpayers who don’t have a side business – consider adjusting your withholding so that you’ll have that money available to you during the year.

Here are the seven smartest things you can do with your refund:

Pay down debt. If you have any consumer debt – student loans, credit card balances or installment loans – pay those off before using your refund for any other purpose. Car payments and mortgages aren’t in this category, but you can also consider paying extra on your principal.

Add to your savings. Can you really ever save enough? You can use the money to build up your emergency savings, your kids’ college fund, or put it toward a specific goal, such as buying a house or a car, or financing a big vacation you’ve been dreaming about taking.

Add to your retirement accounts. If you put $2,500 from this year’s tax refund into an IRA, it would grow to $8,500 in 25 years, even at a modest 5 percent rate of return, TurboTax calculates. If you saved $2,500 every year for 25 years, you’d end up with more than $130,000 at that same 5 percent rate of return!

Invest in yourself. This could mean taking a class in investing, studying something that interests you, or even taking a big trip. Think about doing something that might add value to your life, such as taking a photography class or purchasing a special camera that could become a new hobby and potentially a side business in the future.

Improve your home. Consider putting your refund to good use by adding insulation, replacing old windows and doors, or other improvements that are more energy efficient. Or perhaps it’s time to remodel your bathroom or kitchen. You’re adding value to your home, and at the same time you’re improving your living experience too.

Apply your refund toward next year’s taxes. This is common among self-employed taxpayers, who are required to pay quarterly taxes since they don’t have taxes withheld. By applying any overpayment toward upcoming tax payments, you can free up other cash.

Splurge on something you’ve always wanted to do. If you’re out of debt and have substantial savings, this may be the time to take the cruise to Europe or trip to Thailand that you’ve always dreamed of taking. Such an experience can be life-changing, and you never know what impact it will have on your future until you actually do it.

Article Source: Teresa Mears for US News, http://money.usnews.com/money/personal-finance/articles/2014/03/28/7-smart-ways-to-take-advantage-of-your-tax-refund

8 Foolproof Ways to Grow Your Savings

Posted on March 26, 2014 by Chief Marketing Officer Jessica

A typical emergency fund should contain at least six months’ worth of net income (up to a year is recommended if you have kids or other dependents), and you should only touch it in a true emergency (no, under no circumstances is your dream vacation to Tahiti a true emergency).

Here are five examples of situations that qualify as actual financial emergencies:

Emergency 1: You’ve lost your job and need to continue paying rent, bills, and other living expenses.
Emergency 2: You have a medical or dental emergency.
Emergency 3: Your car breaks down and it is your primary form of transportation.
Emergency 4: You have emergency home expenses. For example, your air conditioning unit breaks down in 100-degree weather, your roof is leaking, your basement is flooded (no again, a kitchen in need of redecorating doesn’t count, no matter how much you hate that wallpaper or your “outdated” cabinets).
Emergency 5: You have bereavement-related expenses, like travel costs for a family funeral.

Here’s another reason why you should always have money in an emergency fund: If you don’t, and one of these five situations occurs, you’ll most likely be stuck using a credit card to handle it, leading you into (or deeper into) credit card debt. In fact, medical expenses are the leading contributor to credit card debt, with low-to moderate-income households averaging $1,678 in credit card debt due to out-of-pocket medical expenses.

Plus, paying for emergency expenses on your credit card (if you don’t pay off your bill immediately) will end up costing you more over time, when you rack up interest payments as you try to dig yourself out of debt. Having an emergency fund will not only save you more money in the long run, but it will also give you peace of mind in knowing you have the safety net to catch those unexpected curveballs when they arrive.

If getting six months of take-home pay together seems daunting, here are eight useful tips that might better help you boost your emergency savings:

1. Direct Deposit into Your Savings

Think of yourself as a regular monthly bill you have to pay. All you have to do is arrange to have a set amount of money directly deposited from your paycheck into a savings account each month. The savings account is recommended because if you use your checking account, you may be tempted to spend the money you are trying to set aside. It might hurt a bit at first to take home a little less every month, but after awhile you won’t even notice it’s gone. Here’s a moment when the “set it and forget it” strategy works wonders!

2. Never Spend a Bonus Again

It feels great to be rewarded for your hard work. And it feels even better to spend that hard-earned bonus on something you’ll enjoy, like a trip to the Caribbean or a new tablet. At the same time, the pleasure of a vacation or new gadget is short-lived compared to financial security.

So make a pact with yourself to put every bonus you get from here on out to good use. If you direct 90 percent of your bonuses straight into your savings account as a rule, you’ll still have 10 percent to treat yourself with (plus the comfort of knowing that you’re building a well-earned safety net).

3. Cut Unnecessary Costs

This seems like an obvious one — and is easier said than done. Actually, most people spend money on more unnecessary items than they think. So take time to look at where your money is going in detail and begin to cut back. Saving $10 here and $5 there could help you put a lot away in the long run – you’d really be surprised.

4. Open a Seasonal Savings Account

Many financial institutions offer seasonal accounts meant to save for the holidays. These accounts give you reduced access to your accounts, charging a penalty each time you withdraw more than permitted. Since emergencies (hopefully) don’t occur often, a seasonal account could make sure you’re touching it only when needed.

Check out First Financial’s Holiday Savings Club Account – don’t put yourself into debt over holiday spending, save ahead and come out on top (and not in debt)!*

Open at any time
No minimum balance requirements
Dividends are posted annually on balances of $100 or more
Accounts automatically renew each year
Deposits can be made in person, via mail, payroll deductions, or direct deposit
Holiday Club funds are deposited into a First Financial Checking or Base Savings Account

5. Sell Unused Items

Rather than throwing these unused goods away, start selling them, and put that money into your emergency fund. All you need to do is post them to a site like eBay, Craigslist, or Amazon and you can get rid of items from the comfort of your home. You can also take your clothes to a consignment shop to have them sold for you.

6. Stop Spending $5 Bills

Instead of saving your pennies, put aside any $5 bills that come your way. Never spend a $5 bill again, and you’ll be surprised by how quickly this little trick will help you come up with a few hundred dollars to add to an emergency fund.

7. Earn Extra Income

You could pick up odd jobs to help do things for other people, freelance writing/blogging, or babysitting via websites like TaskRabbit.com, DoMyStuff.com, Elance.com, FreelanceSwitch.com, or Sitters.com. Or if you have the time – go out and find an additional part-time job as a cashier, server, or utilize your hidden talents in web design, catering, and so on.

8. Use Cash Back Rewards

If you get a cash-back reward for any spending on your credit card, just make it a rule that those dollars will be dedicated to your emergency fund. It may only add up to $100 extra each year, depending on your spending, but every little bit counts!

*A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. All personal memberships are part of the Rewards First program and a $5 per month non-participation fee is charged to the base savings account for memberships not meeting the minimum requirements of the program. Click here to view full Rewards First program details. Accounts for children age 13 and under are excluded from this program.