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

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

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

4 Wise Ways to Spend Your Tax Refund

Will you be getting a tax refund this year? Rather than loosing track of it in your checking account or spending it all right away, why not try one of these ideas. Down the road, you just might be glad you did. 


Get Rid of High-Interest Debt 
If you're currently carrying a balance on high-interest debt like a credit card or payday loan, using your refund to pay off some or all of that debt off can save you thousands in the long run. 

While high-interest debt can be a quick and easy way to get by in the short term, carrying a long-term balance on these credit products will have a serious (and negative) impact on your finances.


Start an Emergency Fund
The extra cash from a tax refund is a great source of funds to jump-start an emergency fund, if you don't already have one. Whether it's unexpected car repairs, home maintenance, or a medical emergency, you're more likely than not to run into an unplanned expense this year. Building up an emergency fund with your tax refund is a smart way to get ahead of those financial pitfalls.


Get a Will
If you've been procrastinating hiring an estate planning attorney to draw up the legal documents you know you need to take care of, now is a good time to move forward. Having a current will, revocable living trust, power of attorney, and advance directive documents may cost up to $2,500, but the peace of mind you'll have makes this a good way to invest your tax refund.
 

Treat Yourself, Within Reason
Maintaining balance between saving and spending is difficult, but never spending money to treat yourself or your family can actually make it harder to save. The key is to determine how much of your refund will go to leisure purchases in advance. Before you spend a dime of your tax refund, make a plan for where the money will go. For example, you might put 80 percent of it toward your debt and other finances and spend 20 percent on yourself. Another strategy is to immediately divide your refund by 12. That gives you the amount you can spend each month and can remove some of the temptation to splurge.

Starting an Emergency Fund: ‘How to’ and ‘Why to'

64% of millennials said that starting an Emergency Fund was their top financial goal for 2016.  (Source) 

When you have an Emergency Fund set up with 3-6 months worth of expenses in it, life is less stressful. Having that safety net means you don't need to worry about a vehicle emergency, job loss or other financial problems. You've got it taken care of and are free from the pressure and stress of the unknown. 

How do you start? 

Some experts recommend setting up a Money Market Account for this. They will earn some interest and usually give you check writing options. Having the funds in a separate account will make it harder for you to accidentally spend it. 

Once you have the account set up, set a goal and determine the amount that you will put in every pay period. This will vary for each person, depending on the situation. Experts recommend having 3-6 months worth of expenses set aside. The faster you can get it saved up, the better. 

What if you struggle finding money to set aside?

It's always hard to find extra money to set aside. If you can, pay yourself first. As soon as the pay check comes in, put an amount in the Emergency Fund.

If you really have nothing to spare, it's either make more money or cut an expense.

Here are a few ways to make extra moolah: 

• Pick up more hours at work
• Look into odd jobs: dog walking, baby-sitting, farm chores, cleaning, etc.
• Sell some stuff: clothes you never wear, extra toys/household items, etc. at garage sales or online buy/sell sites
• Have a hobby? Make it pay! Photography, woodworking, crafts, garden produce, flower bouquets, etc.

Or, a few ways to cut expenses:

• Quit TV (or call and see if loosing a few channels could cut your bill) 
• Cook at home more, it's cheaper than eating out
• Call your phone provider and see if they'll give you a better deal
•  If you have a membership that you never use, cancel it
• Get movies/magazines/books from the library for free instead of going to the theater, renting, buying and subscribing

Any extra money made or saved gets put into the Emergency Fund right away before it gets spent on other things. 

Do you have other ideas? Share them in the comments!

Peoples State Bank, Member FDIC

Starting Your First "Real Job"? Retirement Savings Accounts Explained.

Millions of Americans will graduate from college this spring, ready to enter the workforce. Are you going to begin earning wages from a "real job" for the first time?  Don't overlook saving for retirement. 

Saving early gets you the most out of the money you set aside for retirement. Because of compounding interest, the money you save now is worth more than money saved at a later time.

Saving for retirement is more important than ever. Pension plans are becoming rare. On average, Americans live 22 years longer than they did at the creation of Social Security in 1937.

Today's youngest members of the workforce will be responsible for most of their own retirement income. So, start saving.

Here's a quick overview of the most common investment accounts used to save for retirement:

 

 

IRA

If your employer doesn't offer a company retirement plan, start your own nest egg. Open an Individual Retirement Account (IRA). 

These accounts provide tax advantages that a regular savings account does not.

The maximum contribution to an IRA is $5,500 per year if you're under age 50. The company or bank managing your IRA account will invest your money for you, so you receive interest.

It is easier to withdraw from an IRA than a 401(k). But, both have fees and penalties if you take money out before retirement. 

401(k)

 

Your employers will direct this type of retirement account. You'll just chose how much is taken out of your paychecks, before taxes. This money is taxed when you withdrawal it. 

The current maximum annual contribution to a 401(k) plan is $18,000. Many employer plans include a matching contribution. Then, your employer will put money in your account on top of what you put in. 

For example, say the company you work for has a program where they will match 50% of your contributions up to 3% of your paycheck. If you contribute the full 3%, you'll receive an extra 1.5% from your employer. That's free money for your retirement!

Roth vs Traditional 

There are two types of both IRAs and 401(k) plans, Roth and Traditional. The basic difference is when you have to pay the taxes on the account.

With a traditional retirement account, you pay the taxes once you're retired or taking money out of the account. With a Roth account, you pay the taxes upfront when the money is put into the account. 


Roth accounts are especially valuable to young workers. You'll most likely climb into higher tax brackets as you get older. So, you'll owe more in taxes on the same amount of money later in life.


Notice that keeping cash under your mattress isn't on this list. Money that isn't invested or placed in a bank account earns no returns or interest. And, because of inflation it will likely lose value over time.

Make your hard-earned money work for you. Invest in an IRA or 401(k). At the least, deposit it into an interest-earning savings account. 

If you have questions about how to get started saving for your retirement, ask your employer's Human Resources personnel or talk to your local banker.

Peoples State Bank, Member FDIC

How to Survive a Job Loss

A disruption in work can happen at any time and without warning. A job loss could result from a company layoff or when an individual  becomes unable to work.

A job loss is not only emotionally devastating, but obviously affects your finances.

Here are a few tips for survival if you have suffered a job loss:

• Don’t panic. Your focus needs to be on productive solutions not dwelling on worst-case scenarios.
• You should be open to seeking new kinds of work but remember what your strengths are.
• Live within your means. You’ll need to watch expenses weekly, focusing on necessities like food and shelter.
• Don’t drop all fun, but find low-cost or free activities.

For those who have not suffered a job loss, plan now to get through such an occurrence. 

The rule of thumb is that you should have six months of your income set aside in savings.
At the least, have three months available. 

It's not easy, but here are a few steps you can take to reach the goal of having six months of savings:

• Pay yourself first by saving at least 10% of your total income every paycheck.
• Save a few dollars each day. Either reduce a daily expense (expensive coffee, going out for lunch, etc.) or put pocket change aside in a jar. Then, make sure what you're saving gets put in the bank, not just used elsewhere.
• Identify “needs” versus “wants”. Only buy the “wants” with your extra cash.
• Compare your actual spending against your budget every month and make adjustments as needed.
• Focus on eliminating your high-interest debt.
• Pay more than the monthly minimum on your credit card bills to reduce the balance you owe faster.

While a job loss can stressful and shocking, it doesn’t have to be overwhelming.

Peoples State Bank, Member FDIC