Mind the GAP: Understanding the Value of GAP Coverage

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Picture the following scenario: After months of research and planning, you take the plunge and buy a new car. Once the financing is secured and your auto insurance is in place, you’re ready to hit the road. You’re so excited about your sparkling new ride that you’re not even worried about the fact that most new cars depreciate by as much as 10% the moment you drive them off the lot—and up to 20% in the first year.

Now, imagine that after just a few weeks, you’re involved in an accident that badly damages, or worse yet, totals your car. (Don’t worry—unlike your car, you emerge from this imaginary situation without a scratch). Fortunately, you did the responsible thing and secured good auto insurance. Once all the proper claims have been filed, you find out that insurance will only cover your car’s market value—which, due to the depreciation, is several thousand dollars less than the amount you actually owe on your auto loan. If only there were a type of loan protection that would help you make up that difference. Fortunately, there is. It’s called Guaranteed Asset Protection—or GAP, for short.

What is GAP?

GAP coverage is an optional protection plan offered with auto loans or leases, and depending on the plan coverage limits, it effectively waives most of, if not all, the remaining balance on your loan. While your auto insurance plan’s comprehensive and collision policies cover your vehicle’s value in the event that it is totaled or stolen, GAP coverage is designed to ensure you don’t get stuck making payments on a car you no longer own.

How do I know if I need GAP coverage?

While the product makes good financial sense for some, not everybody needs to get a GAP policy. According to the financial experts at NerdWallet, there are a few basic guidelines that will help you decide whether GAP coverage is right for you. You should strongly consider adding a GAP policy to your auto loan if you:

  • Made a small down payment on a new car, or none at all.
  • Agreed to a loan term longer than 48 months.
  • Drive a lot, which reduces a car’s value more quickly.
  • Lease your car.
  • Bought a car that depreciates faster than average.

Where do you get GAP coverage?

While a variety of companies provide GAP coverage for consumers, it often makes the most sense to obtain the protection plan from the same financial institution that will be financing your vehicle purchase in the first place (which is hopefully your local credit union). If you already financed your vehicle through a dealership, keep in mind that many GAP programs are refundable up to a certain number of days. This means that should you decide to refinance your auto loan through a credit union, they may be able to help you get a refund on your original GAP plan and secure a new plan at a lower cost.

Not only are credit union GAP plans traditionally less expensive than those available through finance companies, they can typically only be added to your loan at the time of closing (vehicle age and mileage limits also apply). Securing coverage through the financial institution that services your loan reduces the need to coordinate communication between multiple parties. It also increases the likelihood that you can put a frustrating accident experience behind you sooner rather than later—and that peace of mind is priceless.

If you have questions about Guaranteed Asset Protection or want to know how to add it to your auto loan before you close, contact a financial representative at First Financial. They can help you review your current financing situation and determine whether GAP coverage is right for you.*

*Your purchase of MEMBERS CHOICE™ Guaranteed Asset Protection (GAP) is optional and will not affect your loan application for credit or the terms of any credit agreement you have with us. Certain eligibility requirements, conditions, and exclusions may apply.

3 Habits of Highly Effective Savers

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When life changes, adjust.
Whether it is having babies, job changes, or the purchase of a new home, life is constantly changing. Every life changing event leads to an increase or decrease of your available funds. People who save effectively will look at these situations as opportunities to adjust the way they save. This may mean a temporary hold on saving, but always make sure you plan for a time when you can begin saving money again.

Play for keeps.
People who are great at saving don’t look at their paychecks as something to spend. They look at their paychecks as something to keep. Center your financial decisions around the question: How do I spend less, save more, and still obtain the things I need?

Set aside part of any extra earnings.
While your yearly income is (hopefully) predictable, we sometimes receive money we did not expect or budget for. This can be a tax return, bonus at work, birthday money, credit card rewards, etc. A great saver will put at least a percentage of each windfall they receive into their savings account.

If you’re looking to save, check out your local credit union like First Financial! We offer a great variety of options in savings accounts and savings certificates, which are Federally Insured by the NCUA.*

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.

Article Source: Robbie Young for CUInsight.com

10 Life Events That Require Financial Planning

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Sometimes even the best events in life – a birth, new job or dream relocation, need a financial plan. They might require more insurance coverage, a new budget, or guidance from a financial advisor. Here are 10 life events that should inspire you to do some financial planning:

1. The opportunity to buy a vacation home.

Summer rental homes can represent bliss, that great escape you have every year. Summer homes are often bought as emotions rise at the end of the season. But purchasing a vacation home can be a complicated long-term commitment. A financial planner, not a real estate agent, can tell you what to consider.

2. You got that big raise you’ve been counting on for years.

Pay raises are typically small and incremental, so getting a big raise is cause for celebration. They also mean it’s time to do some financial planning to determine how much you should be saving for the future, too. It might be time to bump up your retirement savings. Talk with your financial advisor ASAP!

3. Wedding bells are ringing, finally.

Couples might be marrying later these days than they used to. So when they finally do tie the knot, combining finances can be even more complicated. Prenups might be a buzzkill, but they can help protect each person’s savings and prevent any misunderstandings. They are especially important if either member of the couple is bringing children into the marriage.

4. You got your diploma.

Graduates might not think they have enough money to talk to a financial planner, but they face key money choices as they start repaying their share of the overall $1 trillion in college debt with “starter” jobs. They could certainly use help prioritizing payments for credit cards and student loans.

5. You’re relocating.

The 50 states can be as different as moving to another country. Tax rates differ and cost of living can shift dramatically. There are scores of moving-related expenses too. Make sure you do your homework and are prepared.

6. You just got an inheritance.

Baby boomers stand to inherit significant wealth in the coming years, and receiving lump sums also carries with it financial responsibility. It can raise questions about spending habits, charitable contributions, tax payments and a multitude of other concerns. You might want to get help from a professional as you figure out how to handle this money.

7. You’re expecting a new arrival in the family.

When a baby arrives, life inevitably gets way more complicated. It could be worth it to factor in some financial planning alongside baby naming or stroller shopping. You might want to open a 529 savings account (for future college), as well as take out additional life insurance policies.

8. You got your first real job.

Your college grad may act like they just want to have fun, but they often need guidance during this key life transition. Consider sending your child to a financial planner before they enter the workforce.

9. You get offered a generous severance package.

Emotions often run high when your employer offers a big severance package. It’s important to understand the complex financial issues associated with severance packages. You want to make sure you understand all the fine print before you sign on the dotted line.

10. You retire.

Retirement is considered the pivotal financial moment in a person’s life. If you haven’t already worked with a financial planner to figure out your plans and budget, then now is the time. In fact, financial advisors urge even clients in their 20s and 30s to start planning for this major life transition, to make sure they’re saving enough during their peak earning years. It’s also a good time to reflect upon what you’d like to do with your retirement.

To set up a complimentary consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings goals with a Financial Advisor, contact us at 732.312.1500 or stop in to see us!*

 *Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and The Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using The Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or The Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

Not Insured by NCUA or Any Other Government Agency Not Credit Union Guaranteed Not Credit Union Deposits or Obligations May Lose Value

Article source: U.S. News Staff for money.usnews.com

Don’t Make These Tax Filing Mistakes

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From math errors to missing Social Security Numbers to forms that aren’t signed, there are plenty of common tax mistakes that taxpayers can make when filing their returns. These mistakes can lead to delays in processing returns and issuing refunds. If serious enough, they might even lead to an IRS audit. Fortunately though, the IRS does allow do-overs. You can usually file an amended return if you realize that you’ve made a mistake. But that’s the problem — you might not realize you’ve made a mistake. Brush up on the following tax fails before you file, so you can avoid making the same errors this tax season.

Waiting Until the Last Minute to File

Although plenty of people put off doing their taxes, waiting until the last minute to file a tax return can backfire.  Do you really want to be scrambling to make the tax filing deadline (April 15th)? In a rush to file, you may forget to actually pay your taxes if you owe – which can result in a late payment penalty from the IRS (0.5% of taxes owed each month the payment is late). File as early as possible and avoid this headache altogether.

Forgetting to Pay Taxes on a Cashed-Out IRA

Did you cash out IRA money last year or plan to roll one over and then never did? If you forget to do this, the amount that has been cashed out is taxable. You also need to report any IRA changes on your tax return. If you forget to do this, it could result in a tax audit. And once that happens, everything will be checked with a fine tooth comb. The moral of the story: don’t forget to report any retirement account changes you made in the last year.

Mailing the Tax Check to the Wrong Agency

If you owe taxes or have a situation in which you have to pay taxes on an employee during the year (you hired a nanny to watch your children and are paying taxes on the nanny’s wages), be sure your payment is going to the right place. Failure to do this can again result in late fees and a giant headache. The same goes for electronic payments. Double check the mailing address and then check again.

Not Knowing the Filing Deadline for Businesses

Are you an S corporation? Typically, an S corporation business must file a return by the 15th day of the third month — not the fourth month, according to the IRS. Failure to file by the correct deadline could result in a file penalty fine of $450.

Not Making Estimated Tax Payments

Because self-employed workers don’t have employers to withhold taxes from their paycheck for them, they have to make estimated tax payments to the IRS throughout the year.  A good habit to get into here if this pertains to you, is to set aside money each month and try to estimate as accurately as you can – should you owe more on taxes when you file.

Forgetting to Make Tax Payments

This is a pretty straightforward one – don’t forget to make your tax payments if you owe this year. And if you are self-employed, don’t forget to send in your estimated tax payments. If you are required to send in estimated tax payments and you forget, you could receive an underpayment penalty fee.

Trying to DIY Tricky Tax Returns

If your tax situation is simple enough to file the 1040 form, you don’t need to hire a professional to prepare your return. But if you don’t have a simple tax situation and have multiple sources of income, own a home (or two), have investments, a military pension, etc. – it might be a good idea to let a professional handle filing your return for you.  A tax accountant can help you identify expenses you hadn’t previously been claiming as deductions, which can ultimately lower your tax bill. They’ll also look at your withholding with you, and see if it can be adjusted if you always seem to owe the IRS money come tax time each year. Sure – you’re going to have to pay for this service, but if you have a complicated tax return it will probably end up saving you money (and aggravation) in the long run.

More sound advice: it’s best to prepare for tax season all throughout the year. As you collect receipts, paperwork, statements, and so forth during the year – put them in a file and take them out and go over them right at the start of each new year. This way you stay on top of any changes that come up throughout the year, and aren’t digging for items at the last minute. Be prepared and organized, and filing your taxes each year will become second nature.

4 Tips to Keep Your Money Goals on Track this Year

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Even if you feel you’re doing pretty well with your finances, you could probably stand to make a few changes to your financial habits. If you’d like to stay a little more on track with your money this year, here are a few things to consider …

Be cautious with credit: A credit card can be a valuable tool, but if it’s abused, it can quickly create a mountain of debt. Try to only use your credit card for purchases you will pay off each month. Credit cards can be a great way to improve a credit score, but always make sure you’re being careful when paying with plastic.

Be on the lookout for savings:  It doesn’t matter what you’re buying, you can probably find it cheaper somewhere else. Have you looked online? You’ll probably find exactly what you’re looking for on the internet, and usually for less. If you don’t feel like waiting for something to be shipped, see if the store will price match your online price. If shipping isn’t free – see if you can order online and ship to your local store to pick up, which is usually always free.

Stop forgetting to pay bills: Have you mapped out your monthly bills and their due dates? If you’re not a very organized person, it may be time to design an auto pay schedule that will keep you from missing any payments this year. Paying your bills on time is must if you want to keep your credit score up.

Embrace frugality: No matter how much money you make, you should always try to spend less than you want to. You’ll be glad you filled up that savings account when an emergency arises.

Article Source: John Pettit for CUInsight.com

3 Things You Should Do With Extra Money ASAP

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According to a recent report by CareerBuilder, 78% of Americans who work full-time live paycheck to paycheck. Thinking about the long term is hard, especially when it comes to finances, but life does get easier the earlier you start laying the foundation for good financial habits. Whether you have $100 or $1000 to spare every month, investing extra funds wisely can have a significant impact on your financial future.

1. Pay Off Your Debt

First and foremost, consider putting part or all of your extra income every month toward paying off your debt. Being in any kind of debt can definitely loom heavily over your life and finances. Instead of spending any extra cash, it’s smart to chip away at that mountain to become debt-free. You should start with your highest interest debt first and work your way down, though some people find more motivation to tackle their debt by focusing on paying the smaller debts first.

2. Put it in Your Emergency Fund

Having an emergency fund is not just a smart idea, it’s a necessity. Life is unexpected and you never know what can happen. Having an emergency fund can help you in life’s hardest situations, such as a car accident or the loss of a job. Begin putting money toward an emergency fund, any little bit helps. It’s ideal to have six months of expenses saved up just in case.

3. Invest in Your Retirement

After you’ve paid off your debt and put money in your emergency fund, it’s now time to think about the future – which means retirement. While it’s still years or maybe decades away, saving for retirement as early as possible means you reap more rewards later. And that can start with a 401k. Surprisingly, many full-time workers are unaware that their employers may match up to a percentage of your contribution to the company’s 401k plan. Find out what your company’s policy is and get started with contributing to your retirement as soon as possible.

A Roth IRA is another popular retirement savings account that allows your money to grow tax-free. When you’re ready to withdraw at retirement, you do not pay taxes on these funds. If you’re under the age of 50, the most you can contribute to a Roth IRA is $5,500 yearly. This basically means that those who have earned income, can put in just over $458 monthly to reap the most benefits in their retirement future.

If you have extra income at the end of every month, start with these three steps. It will set up a healthy financial foundation for you and your family. Going forward if you still have money leftover after that, you might want to start looking into investments or perhaps spending a bit on yourself.

Need help with retirement planning? To set up a complimentary consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings goals, email mary.laferriere@lpl.com or maureen.mcgreevy@lpl.com, or stop in to see us!*

*Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

Article Source: Connie Mei for moneyning.com