How to Budget for Home Buying

Yes, the Federal Reserve raised interest rates, but mortgage rates are still near historic lows. It's a great time to buy if you've been considering a new home! 
So, how much house can you afford? This is a tough question, especially for first-time homebuyers. Here are a few important points to consider when setting your house-hunting budget:


Start with your Income & Interest Rate

There are two primary factors that influence how much you should spend: your income and your interest rate. Calculate your income by using your total combined pre-tax annual income. Include commissions, bonuses, overtime, income for both borrowers (if you are co-borrowing), etc. 
Here is a good starting point for your house budget: keep your mortgage no more than 5x your annual income. So, if you make $30,000/year, shoot for a mortgage less than $150,000.

The next big factor? Interest rate along with loan term (the length of the loan). Common mortgage loan terms are 30, 20 and 15 years. The interest rate you receive will depend on several factors. Your down payment amount, the loan term, and your debt-to-income (DTI) ratio.
A good DTI ratio is 20% debt to 80% assets, but that could go as high as 40% in some cases. Since determining your interest rate is complex, it's a good idea to seek advice from a licensed real estate agent or mortgage banker.
 
Factor in Recurring Expenses

Factor in other debt payments when calculating your ideal monthly mortgage payment.
As a general guideline, your total debt payments should be no more than 36% of your income each month. Also include recurring expenses, such as groceries, gym memberships, cell phone plans, etc. And, you'll need to have homeowners insurance, so factor in that monthly cost as well.

One major recurring expense that new homeowners sometimes forget to include is property tax. In most cases this is paid during the year and held in an escrow account. But, you'll need to estimate the total and add it to your mortgage payment. Since property taxes vary based on geography, check with a local banker or real estate agent to get an accurate estimate.


Leave Room to Save

Finally, leave your budget enough room to put some savings aside each month. Remember, your down payment probably impacted your savings significantly. You'll want to start rebuilding that rainy day fund as soon as possible.

Buying a home is a complex process and a significant investment, so don't go it alone. Choose a banker and real estate agent to guide you through the process and help you make sound financial decisions.

7 Tips for Choosing the Right Financial Caregiver

Does it worry you? Almost 90% of financial abuse against older Americans is done by someone they know and trust. That's a statistic from the National Center on Elder Abuse.

Don't take the decision of who will manage your finances lightly. We have seven tips to help older Americans choose the right financial caregiver:

1. TRUST. Almost everyone reaches a point where they can no longer conduct financial transactions on their own. At that time, carefully choose a trustworthy person to act as your agent in all financial matters.

2. KNOWLEDGE. Know who is in your home. There is nothing wrong with completing a background check on individuals you hire for personal care or home care services. Ask for references and credentials before you let them into your personal space.

3. CONSULT. Never sign something you don’t understand. Show it to a separate financial advisor or attorney first. Any document you sign should have a clear purpose.

4. POA. Understand the terms of assigning a Power of Attorney. Someone with POA has authority to act and make decisions on your behalf. This includes managing and having access to your financial accounts.

5. INSTINCTS. Always trust your instincts. Exploiters and abusers are very skilled. They can be very charming and forceful in their efforts to exploit you. Don’t be fooled – if something doesn’t feel right, it may not be.

6. SAFEGUARD. Safeguard all personal information. Shred old/unneeded bills, junk mail, bank statements and personal documents. Personal documents left around the house could get in the wrong hands, leading to misuse. Opt to store keepsake documents in a locked cabinet or safe deposit box at your bank.

7. PROTECT. Keep personal items out of plain sight. Anyone - even family members - could be desperate enough to take advantage of you. Lock up checkbooks, credit cards and other monetary instruments to prevent unauthorized use.

Earth Day - What Can YOU Do?

April 22 is National Earth Day! According to EPA.gov, on the first Earth Day in 1970 over 22 million Americans celebrated clean air, land, and water. So, how can YOU be a part of it?

Here are 10 ways you can celebrate Earth Day and join the movement to preserve our environment:

1. Plant a Tree and/or Wildflowers

Probably the most obvious. Research what types of trees will survive in your environment and plant one in your yard. If you don't have a yard, donate a tree to your city or a local park. Planting wildflowers that are native to your area can help attract native animals and insects. For example, Monarch butterflies love milkweed and pansies, Hummingbirds are attracted to foxglove and lilies. 

2. Conserve Water in Your Home

It's been said that fixing one leaky faucet can save over 1300 gallons per year! Take the time to fix it. You can also save water by turning it off when brushing your teeth or scrubbing your hands,  taking shorter showers, and investing in efficient appliances (dishwasher, washing machine, toilet, etc).

3. Switch from Paper Bills and Bank Statements to Online

We all get lots of bills and often several statements. Think about how many you receive each month and figure several sheets of paper each (plus envelopes) - it adds up! Make sure to not only switch your checking accounts, but also saving accounts, retirement accounts, loan accounts, etc. Another twist to this idea is checking if your favorite magazine or newspaper subscriptions offer online access instead. 

4. Use Scrap Paper - and we mean both sides!

Your to-do lists, grocery lists, phone notes, project planning, reminders, etc. Do you need a new sheet of notepad paper or could you use that used piece from the printer with just a link across the top?

5. Eat Locally Grown Food
Visit a farmer's market, see if your grocery store has local options, talk to a local farmer, or even grow your own!  Buying locally grown food is a great way to live conservatively. It not only supports increased plant growth in your area, but also means your food didn't have to be shipped thousands of miles, packaged in plastic and shipped in cardboard boxes that will be thrown away, or manufactured in a factory. It's also great for the local economy and your health!

6. Quit Buying Bottled Water
The more bottled water you use, the more plastic is going into landfills. Get a quality water bottle that you can refill and take with you over and over again. The same concept could be applied to coffee - use a thermos or mug rather than styrofoam that will be thrown.  

7. Bike or Walk to Your Destination Whenever Possible
Your vehicle releases damaging emissions. If you are close enough to your destination to walk or bike, choose that option! It's also great for your health.

8. Begin Recycling
 Find the nearest recycling center and learn their requirements. Then, begin separate bins for the different types of trash! Plastics, glass, paper, metal, etc.
 
9. Volunteer
Give your time. Either become involved in an environmental group, participate in a charity, or volunteer to be on a committee. Projects like picking up litter along the road, cleaning trash in your neighborhood, or cleaning-up a park can be very helpful!
 
10. Sell/Donate, not Throw
When you are ready to get rid of your used clothing, toys, household items, etc., don't just throw them out. See if someone else could use them! Either hold a garage sale, try selling online, or donate them to a local charity or thrift shop. 

There is our list of 10 ideas for celebrating Earth Day. Which will you choose? We'd encourage to try at least one or two and commit the them for the year.

How to Talk to Your Kids About Money

When should you begin talking to your kids about money?

Are they are old enough to ask for a toy or a bike? Then they are ready to learn financial lessons that will last a lifetime.

Watch for everyday experiences to build discussions around. Talk about money, read books aloud and play games that center around spending money. Be open and honest when you discuss your financial experiences—good or bad.

Here are a few teachable moments to get you started:

Banking

• Bring your children to the bank with you and show them how transactions work. Ask the manager to explain how the bank operates, how money earns interest and how an ATM works. The manager might even give you a tour—be sure to ask to see the vault.

Payday

• Discuss how you budget your pay for housing, food and clothing. Also, discuss putting a percentage aside for future expenses. An emergency fund, or college tuition and retirement savings account are great examples.

Groceries

• Give clear examples of “needs” vs. “wants” using different kinds of foods. Vegetables are a need; candy bars are a want. Explain the benefits of comparison shopping, coupons and store brands.

Chores and allowances

• Assign chores and give them a monetary value. Discuss ways to budget and divide allowances. Encourage children to set a financial goal, such as saving for a bike, and figure out how to achieve it.

Bills

• Explain the many ways to pay bills: over the phone, paper or by check, or online. Discuss late penalties and how that can affect credit score, plus cost you extra money.

Credit cards

• Your kids should understand that credit cards are a loan and need to be repaid. Show how your statement comes each month with a bill. Go over the features of different types of cards: ATM, debit and credit cards.

Internet

• It's a part of life now. Tell your children how valuable their personal information and privacy is. Discuss the risks of sharing certain information. Then, as a family, make guidelines for keeping personal information safe online.

Vacations

• Include your kids in the planning of vacations. Whether a local outing or a once-in-a-lifetime trip, emphasize the value of saving first rather than paying later. Figure out the cost and discuss ways everyone can help to reach the goal.

Always encourage your children to ask questions about money. If you don’t know the answer, research it together or ask your local banker.

Understanding Your Role as a Financial Caregiver

Over 90 million Americans care for a loved one. This is due to the disabilities, disease or financial struggles associated with aging. (According to the Caregiver Action Network). Financial caregivers play an important role. You want your loved ones to maintain the best quality of life possible. The American Bankers Association has offered the following tips for financial caregivers.

“It’s extremely important that caregivers understand their role in managing day-to-day finances and planning for future expenses to ensure that all their loved ones’ needs are met.” - Corey Carlisle, ABA Foundation executive director.

• Learn the rights and restrictions that apply to your role. What is a Financial caregiver? It can mean power of attorney, trustee, and federal benefits fiduciary, or someone with a duty to act and make decisions on their loved one’s behalf. Learn the legal responsibilities of your assigned role.

• Manage money and other assets with wisdom. You may be in charge of daily, unexpected and future expenses your loved one may incur. It is important that you cut unnecessary costs and budget to ensure that all money is properly allocated. (Especially if your beneficiary has a fixed income or limited finances.)

• Recognize danger signs. Seniors have become major targets for financial abuse and fraud. Make sure to stay alert to signs of scams or identity theft that may put your loved one’s assets in peril.

• Keep careful records. When acting as a financial agent, proper documentation is not encouraged but required. Organized financial records, up-to date lists of assets and debts, and a streamline of transactions.

• Stay informed. Watch changes in financial status of the beneficiary and take appropriate action. Also, be sure to stay up to date on changes in the laws affecting seniors.

• Seek professional advice. Consult a banker or other professional advisors when you’re not sure what to do.

Here is an explanation of the various roles and responsibilities of three types of financial caregivers.

Power of attorney (POA)

POA, designated by your loved one, gives you the authority to act and make decisions on their behalf. This includes managing and their bank and other financial accounts. Authority continues if loved one becomes incapacitated and ends when revoked or your loved one dies.

Trustee

Authorized once you are named as trustee or co-trustee of a revocable living trust. Your authority applies only to the property noted in the trust. You're authorized to protect, manage and distribute the trust’s assets as directed in the trust document. Authority continues after the death of the trust creator or grantor.

Federal benefits fiduciary

You will accept/delegate federal government benefit payments in the beneficiary's best interest. (Social Security and Veterans Affairs benefits). The beneficiary receives funds through an account set up for this purpose. Being a representative payee for Social Security benefits or a VA fiduciary for VA benefits, requires you to keep detailed records of all transactions related to the beneficiary. And, you must file annual reports detailing how benefits were used.

Fun facts:

• The Caregiver Action Network began promoting national recognition of family caregivers in 1994.
• President Clinton signed the first NFC Month Presidential Proclamation in 1997.
• Every president since has followed suit. Each November, they issue an annual proclamation recognizing and honoring family caregivers.

For more information on the role of financial caregivers, visit www.caregiveraction.org. For tips and extra resources, visit aba.com/seniors.

Planning for Student Loans

 

 

Many graduates are worrying about student debt, and with good reason. In 2006, U.S. student loan debt hovered around $600 billion; today, that number has skyrocketed to $1.3 trillion. On one hand, that isn't a bad thing - it means more Americans are going to college. But, the debt is becoming unmanageable for many graduates. 

 

Here are strategies you can use to make your student loan experience a success. 

Before Attending:

You Need a Strategy

Create a strategy early, so that you have longer to save. If you're already late, don't pull from other savings like your retirement fund. Parents: never forgo saving for retirement to build up a college fund. Students have many available resources to pay for education, but you can't get a loan to retire. 

Wisconsin College Savings Program

Have you heard of the Wisconsin College Savings Program? It's a great way to save if you're starting early. Made up of the 529 EdVest and Tomorrow's Scholar college savings plans, it enables you to save tax-free for future education costs. You can find more about the program here: www.statetreasury.wisconsin.gov.

Scholarships/Grants 

Every strategy should include applying for grants and scholarships. National grants include:

• Pell Grants
• Academic Competitiveness Grants
• National SMART Grants

Often though, local scholarships have less competition (such as Peoples State Bank's scholarships). Check with civic organizations and religious institutions for available aid also. Don't forget to ask the school itself about maximizing their financial aid package. If you've been accepted to several schools, try to negotiate for an even better package.

Loans 

Federal loans, whether subsidized or not, are usually the better option. They are often cheaper with flexible repayment options. Students with financial need should check into their federal options first. The Consumer Financial Protection Bureau has more information available: www.consumerfinance.gov/paying-for-college. The most important thing to remember when applying for loans is to know how much you need. Having this defined will help stop you from taking on more debt than needed. 

After Graduating:

Organize 

Organize all the information you have for your student loans. Make a list or spreadsheet that with important information such as:

• the name of the loan
• the lender
• interest rate
• total principal (amount due)
• monthly payment
• when repayment begins

The first payment may be due at different times for different loans. 

Communicate with your Lender 

After college, many people move. You want your lenders to know how to reach you! Update your contact info whenever changes occur. Staying in touch is also wise in case you start having difficulty making your payments. (Due to unemployment, injury, medical condition, or other financial emergency.) Lenders will work with you to adjust your payments or schedule, but you have to let them know first. 

Consolidating? 

A consolidation loan combines several loans into one. You get a single monthly payment and fixed interest rate. There are pros and cons. Consolidating often extends the repayment period. Meaning while you enjoy a lower monthly payment, it will take you longer to pay off the loan. It can often provide an interest rate break (especially if you have any variable rate loans). And, one payment is more convenient to budget for. Seek expert advice if you're considering consolidation as a strategy. 

Tax Breaks 

 The Student Loan Interest Deduction allows taxpayers to deduct up to $2,500 of the interest paid on student loans (depending on your income). Even if you do not itemize your taxes, you're should claim this deduction. Watch for your 1040 form(s) to arrive - you'll receive one per lender - and follow the instructions on them. 

Are you struggling to make payments? Seek the advice of a financial aid counselor or talk to your lender. Another good resource is http://StudentAid.ed.gov. It has repayment estimators and info on repayment plans for federal student loans

Wasting Less with E-Statements

Is one of your New Year's Resolutions to help out our environment this year? To stop wasting so much and "reduce, reuse, recycle"?

Start by switching to E-Statements. Right now, we use over 37,000 sheets of paper each month (that doesn't even include envelopes) just for printing statements. Sometimes we wonder, how many people even open them and use them? We know there are many customers who keep up with their account online, so they don't even bother looking at the paper statements.

If that sounds like you, here's an easy way to help our beautiful earth!

Just log into your online banking, and click the drop-down next to 'Welcome'. Select 'All Services & Settings'.

Now, select 'View Statements'. This should bring you to the following screen, where you can view your monthly statements, checks, and Opt In to receive E-Statements vs. paper. To Opt In, simply click 'Electronic Only Statement Delivery' and follow the on-screen prompts.

 

Switching to E-Statements can be more convenient if you're already using online banking to watch your accounts. You don't have to wait for the mail to watch what's coming in and out of your account. Plus, you are helping us go green, one sheet of paper at a time.