Friday, May 27, 2016

Joint vs. Separate: The Checking Account Debate

Ahhh the debate over joint vs. separate bank accounts. It's been a hot topic among married, and engaged, couples. 

Some couples swear by separate bank accounts while others think joint accounts are the only way to go.

We don't believe either method is right or wrong. But, it is important that couples talk it out and decide together what works for their situation. 

Finances are often complicated by a variety of factors. (Previous marriages, child support, credit card debt and student loans.) Resentment over money can fester and ruin a relationship, so this is a conversation that should occur sooner rather than later.

Consider a few of the positive aspects of a joint checking account:
  • Less maintenance.
    • There is only one monthly statement to balance.
    • Checks, ATM and debit withdrawals all come out of the same account.
  • Promotes the notion that marriage is a team effort.
There are potential negatives to mingling money matters this way:
  • One person spends more than the other on “wants” rather than “needs.”
  • One person is bad at tracking checks, ATM or debit withdrawals.
  • There may be a feeling of a lack of autonomy and financial independence.

Other couples have a joint checking account but also maintain separate checking accounts. 

This joint account pays household bills so all income goes into this account first. 

Communicating with each other to  create a budget and ensure the correct amount of money goes into this account is critical. Each person then decides how to use the money in their separate accounts. Maybe they'll pay down previous debt, maybe they'll go on a shopping spree.

The positives to this approach include:
  • Good communication on financial matters
  • Each person retains his or her own autonomy and financial independence.
  • Money is less likely to be used as power in the relationship.
There are some negatives to separate checking accounts:
  • Requires agreement and discipline on what the purpose is for each account and how much money goes into the separate accounts.
  • There are now three bank accounts to balance each month vs. one.

Open & frequent communication is the key to determining which checking account option is right for you.

Peoples State Bank, Member FDIC

Friday, May 20, 2016

4 Essential Tasks for Financial Spring Cleaning

The weather seems to finally be warming up, which means it's time for spring cleaning! Time to air out the house, clean the basement or garage, and wash the curtains. AND it's time to give your personal finances a spring cleaning.

Here are four essential tasks to add to your spring cleaning to-do list:

 Sort Paperwork
Go through all your paper files and receipts from the past year. Place everything into either a "File/Save" or "Toss/Shred" pile. Shred items such as ATM receipts, bank deposit receipts, and credit card statements.

You can also discard paid utility statements. This helps protect you against identity theft and keeps the clutter away.

If possible, switch to e-statements to reduce the amount of paper lying around. Save PDF files or copies of the e-statements until they are paid, then archive or delete them.

Cash in Rewards

When sorting your paperwork, take note of any unused credit card points, airline frequent flyer miles, store credits, loyalty club memberships, etc. Schedule when you'll need to use these benefits before you lose them.

If you're currently paying a fee to participate in these programs (such as an annual fee for a credit card) do the math to figure out if the reward outweighs the fee. If it doesn't, consider dropping the program.

Reassess Savings
Once you've organized all your paperwork, take stock of your monthly budget. How much are you saving each month? What are you saving for? Spring (aka tax season) is a good time to annually reassess where your money is going. Then, determine if you're on track to meet your financial goals.

If you're putting money into a college fund, for example, there might a tax-deductible account you should be using instead of that CD. Wisconsin offers two 529 college savings plans: Edvest and Tomorrow's Scholar. Talk to your banker about which program is the best fit for your family.

Update Beneficiaries
Look back at insurance and retirement account policies to make sure the beneficiaries are current. It is especially important to update your beneficiary information if your marital status recently changed or you experienced the loss of a child.

Taking a little extra time this spring to work on your money issues will make budgeting throughout the rest of the year much easier.

Peoples State Bank, Member FDIC

Friday, May 13, 2016

Common Financial Mistakes to Avoid When You're Starting Out

Will you be graduating from college this spring? Ready to enter the workforce and begin your career? Here are a few mistakes to avoid when income starts rolling in:

Not saving for retirement

This one mistake can end up costing you hundreds of thousands of dollars over the course of your lifetime. Even if you only save 1% of your income, over the next 30 to 40 years of your career, the interest earned on that savings (especially if it's in a Roth IRA) really adds up. 

Retirement is one of the most difficult things to save for, because immediate needs and wants feel much more important. However, saving early can be the difference between retiring comfortably at 55 and needing to work until your 70. 

Living on credit cards

The benefit of credit cards is that they allow you to delay paying for items until weeks after the purchase (when the credit card bill comes due). The downside of credit cards is also that they allow you to delay paying for items until weeks later. The trouble with the flexibility that credit cards provide is how easy it can be to forget to keep track of purchases. You're not going to like the way that credit card bill looks. 

If you choose to use credit cards, monitor your current card balance frequently and never buy anything you haven't budgeted for. Most importantly, pay off your balance every month.

Buying too much car
Avoiding this mistake can save you hundreds each month, and not just in lower car payments. New cars often cost more to insure than used cars, and they sometimes have a higher interest rate on the loan as well. 

If you're worried about the cost of upkeep on an older vehicle, buy a certified used car that is only a few years old from a licensed dealership. You get the benefits of a modern car without worrying about ending up with a lemon.

Not setting financial goals
Thinking ahead about your finances is difficult when you haven't lived on your own before. Do you want to own a home in the next 5-10 years? How about get married? Have children? Write down your life goals for the next decade or so and then determine the financial goals that go along with them. 

This simple planning step will help you avoid needing to dig into your emergency fund in order to cover closing costs or an unexpected wedding expense. 

Not starting an emergency fund

Speaking of an emergency fund, starting one should be everyone's first financial goal. Even if you start out saving to set aside just enough to cover three months of expenses, it creates a stress-relieving buffer in your bank account.

Peoples State Bank, Member FDIC