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Budgeting and Reducing Expenses

4/20/18

The Importance of Keeping a Budget

Any financial advisor, banker or investment broker will tell you the same thing if you are pursuing financial independence, budget! And more than just creating a budget, it is imperative that you stick to it!

Budgeting is one of the few financial lessons that cannot be preached enough, especially when the economy is turbulent.

More than just pursuing financial independence, a budget keeps you on target for goals and it makes sure you do not spend more money than you have. According a study conducted by NerdWallet, the average household that’s carrying credit card debt has a balance of $15,953! 

Additionally, a budget leads to a happy retirement, allows you to be prepared for emergencies and unexpected expenses and it also sheds light on your bad spending habits.

Reducing Expenses Where Possible

It is unrealistic to expect that everyone will be able to slash thousands of dollars from their expenses; however there are small changes that we can all make.

Even small changes, as we have previously discussed in our blog focusing on building a wealth snowball, make a huge difference in the long run.

Think that your budget and expenses are already lean? There are always ways that you can improve.

Examples of ways you can save money each month include:

  • Refinancing your home or automobile loan
  • Consolidating student loans
  • Requesting a credit card reduction rate
  • Cancel club memberships
  • Reduce or eliminate your cable bill
  • Reduce eating out
  • Buy nonperishable items in bulk
  • Reduce or eliminate consumable habits

These are just a few examples of ways you can reduce expenses to add to your savings. Not everyone will be able to use these examples, so here’s a list of 40 more ways you can cut expenses!

Other Benefits of Budgeting and Reducing Expenses 

Beyond the financial benefits of budgeting and reducing expenses, there are many benefits that are not apparent right away.

If your income is significantly higher than your expenses you can work to pay down any debt you may have and sleep better at night at the same time!

Many people do not like the restrictions of following a budget, but it is a sacrifice you make in the present for a better future. It is not a limitation on the fun you can have in your life, but a way of opening up opportunities for yourself and your family in the future!

 

2018 Bellco FCU Annual Community Scholarship 

4/9/18

Rising Costs Presents Challenges

Every year the spring season brings a world of excitement for high school seniors. These young adolescents are about to take a giant step in their life, for some of them it is time to enter the workforce, while others are continuing to invest in themselves and are headed to a technical school or to pursue a college degree.

However, over the last 20 years, the price of attending a technical school or a college has risen dramatically and that can cause many to stress about how to pay for this newfound expense.

According to US News in the last 20 years:

  • Private national universities’ tuition and fees have jumped 157 percent.
  • Public national universities’ tuition and fees for out-of-state students have risen 194 percent.
  • Public national universities’ tuition and fees for in-state students have grown by over 237 percent.

With these dramatically rising costs, students have been looking for ways to help pay for their education and Bellco Federal Credit Union is here to help!

Bellco Annual Community Scholarship

One of our favorite and most valued parts of our business is the fact that we are a community based, not-for-profit federal credit union that believes in investing into our community and rewarding our members.

Part of this mission is to give back to students in the form of a suite of easy to use products and services and an annual scholarship to help students pay for their education!

Our scholarship is for students who are attending an accredited post-secondary school. This means you could be heading off to a technical school, a college, a trade school or a university, and this is open to students of all years, not just incoming freshmen!

Bellco is awarding $1,000 to a deserving student who meets a few basic requirements:

  • You must have an account with Bellco Federal Credit Union in Berks County, Pennsylvania
    • You can open an account for a deposit of just $5!
  • You must be accepted into or enrolled full time in an approved post-secondary school
  • Your cumulative grade point average must be at least 2.5
  • Open to all members regardless of age

Application Details and Important Dates 

Applying for our scholarship is a breeze! All you have to do is complete these few items:

  1. Complete our application 
  2. Provide an official school transcript confirming current GPA
  3. Provide proof of full-time enrollment and/or acceptance at a post-secondary school
  4. Submit a video
    1. Email your submission to marketing@bellcocu.org
    2. (video submission cannot contain any copyrighted material)

Just record a few minute video talking about your experience here at Bellco Federal Credit Union and tell us why you chose to use us! A few video ideas are:

  • What benefits does a credit union offer over a big bank
  • Why you love Bellco
  • Explain Bellco's benefits to another college student or friend
  • Tell us how you manage your Bellco checking account and Debit Card
  • What is your favorite Bellco technology feature? App or Text banking, Apple Pay, Shared Branching, etc...

There are just a few important dates to note:

  • Submissions must be received by May 10th, 2018
  • Awards will be made by May 31st, 2018 and a member of our staff will be contacting the winner before publishing the results

We hope that this scholarship will go to a deserving student to help cover educational expenses and that we can make a positive impact on the life of a young and promising emerging adult!

Building a Wealth Snowball

3/28/2018

The vast majority of people who achieve financial success do so over long periods of time.

If you are 19, you have over 40 years to set yourself up for financial success and even small steps now will make a big difference over the long run.

A lot of monetary growth occurs from the concept of compounding interest. Over short periods of time, any investment or savings do not create large returns, but over decades, compounding interest can help you create a truly impressive wealth snowball!

By making sound financial choices during your first 50 years, you can dramatically change your future and even tiny steps, like saving a dollar here, a dollar there, can really add up!

While it is still possible to have a positive impact on your financial future if you are starting late in life, the task is much more cumbersome.

The Potential of Compound Interest

In concept, compounding is very simple, and almost boring.

The more money you save or invest, the more interest it can generate, but as the pile grows, your interest is then reinvested. Over the first few years of saving or investing, compounding does not do much. However, the longer your money has to grow, the more of a return you will see.

The stock market on average returns roughly 6.8% per year. Let’s assume that you invest $1 into the stock market, over the first few years you do not see a large return on your money.

By year 10, that same $1 would be worth $1.97, but this is where compound interest really begins to takeover. By the end of year 20, that $1 would be worth $3.88 and the return continues to climb from that point.

If you invest $1 and achieve an average return, after 50 years that same $1 would be worth $29.68, which is over a 2700% return!

The Importance of Saving

Retirement is a phase of life that we all hope to reach one day, it is something that most Americans are working towards. But more than just retirement, people seek financial independence and to live the remainder of their life in comfort while minimizing the amount of time they have to spend working.

Almost every grandparent or elderly individual will tell you about the mistakes they have made throughout life and how to avoid them. However, the most common response when discussing retirement with them is to simply “start saving early and save often.”

By reducing expenses where you can early in life, you can retire in comfort, or in some cases if you are really disciplined, you can retire early! The longer your money has to earn interest and grow; the better off you will be in the future. 

Hopefully using some of these tips you too can achieve a peaceful retirement, or maybe even accelerate your savings process and reach that goal sooner than you thought possible!

How to Decide It’s Time to Buy a Home

NerdWallet 

3/12/2018

Maybe it’s spotting a “for sale” sign on that funky cottage you’ve always admired on your morning bike ride. Or a friend raves about the perks and privacy at the chic new condo she’s just purchased. Maybe you’re tired of roommates or just want to tend your own garden.

At some point, something will make you ask yourself: Should I buy a home and how much house can I afford?

The decision to go from renter to homeowner is emotionally and financially complex. Here are some key factors to consider when deciding whether buying is right for you.

There’s no better time to buy, right?

Owning a home used to be a virtual requirement in attaining the so-called American dream. But that was when people drove 2-ton cars, smoked on airplanes and watched live television. Buying is a smart choice for many people, but it isn’t always the best deal, depending on the market where you live and factors such as how long you plan to stay in your home and the size of the home you want to purchase compared to where you’re renting.

Before you commit to buying, factor in the following points:

  • There’s a big initial investment involved. You have to pony up a lot of money when you purchase your house, from the closing costs (roughly 3% of the home’s purchase price) to the down payment itself. Not everyone has that kind of cash to spare.
  • Can you handle the debt? Lenders often look at your debt-to-income ratio: how your mortgage payments and other debts would stack up against your pay. Conventional lenders often use the so-called 28/36 rule when determining whether to offer you a loan. Your house-related payments (mortgages, taxes, insurance) shouldn’t exceed 28% of your pretax income, and all other combined debts shouldn’t exceed 36% of your monthly pretax income. (Much more on this later.)
  • Buying is more expensive than you think. You can’t simply compare your monthly mortgage payment to your monthly rent — these are apples and oranges, particularly when you consider that the place you purchase won’t necessarily be the same size as the place you’re renting. Though you can deduct some of your homeownership expenses, you’ll have to pay property taxes, homeowner’s insurance, HOA fees and probably mortgage insurance, as well as renovations, maintenance, utilities, and other fees typically covered by a landlord. (You can directly plug numbers into a handy rent-buy calculator from the New York Times.)
  • Buying decreases ease of mobility. In today’s ever-changing job market, very few people can say with certainty that they’ll have the same employer in five years. It’s much easier, and less expensive, to leave a yearlong lease than to sell a home.
  • How hot is your market? Real estate is local and cyclical, so consider whether your area is better suited to renting or buying. If you live in a larger metropolitan area, the Case-Shiller Index is a useful at-a-glance look at how current real estate values where you live compare to historic highs and lows.

» MORE: Get homebuying tips with our email newsletter

Is a home an investment?

Some people would rather put their money toward equity in their property instead of giving it to a landlord. While that math makes sense for many — especially those who plan to stay long enough to pay off their mortgage entirely — nobody can predict whether home prices will rise or fall in a given time frame, so don’t count on your home to be a cash cow.

What to do before you act

If you’re thinking about buying, follow these steps before making your move.

  1. Calculate your current debts, including car loans, credit card payments, and student loans. Remember the 28/36 rule mentioned above.
  2. Consider how much available cash you have. You’ll want enough to at least cover your down payment and closing costs, and don’t forget to leave enough in your bank account to cover any emergencies that might arise.
  3. Make sure you can put enough money down. Traditionally, lenders have required down payments equal to 20% of the home’s purchase price, but special programs allowing down payments as low as 3% are available. (Putting 20% down on a $300,000 home would require $60,000 in the bank — plus an additional $9,000 or so for closing costs.)
  4. Get preapproved for a loan. Contact a lender to get preapproved for a mortgage. This doesn’t require you to accept the loan; it’s just a way of showing real estate agents and sellers that you’re serious. One of the first things a prospective agent will ask is whether you’ve been preapproved, so check off this box early in the process.

» MORE: Find a Lender to Get Preapproved

Are you better off renting?

Deciding whether to rent or buy is a big decision that requires serious “Where am I now?” and “Where am I going?” sorts of questions. It might be best to keep renting if you want to maintain maximum flexibility for personal or professional reasons, or if jumping into more debt right now takes you out of your comfort zone. Maybe you’re just not ready to face the responsibilities of homeownership: repairs, upgrades, maintenance, yardwork and all the rest. Even thinking about the difference between cleaning an 800-square-foot apartment and a 2,400-square-foot house can make you want to take a seat and a deep breath.

Your local housing market could be working against you, as well. If you live in a hot market with eager house hunters chasing too few properties, it might be best to bide your time until a better buying opportunity presents itself.

Check out NerdWallet's interactive calculator to visualize this important decision!

 © 2018 NerdWallet, Inc. All Rights Reserved

Credit and Credit Scores

2/28/2018

Credit and credit scores, you hear about these terms on a regular basis and many of you actively engage in the changing of your score daily! But what exactly is credit, what is a credit score, and how do you improve your score?

Credit, in its most basic form, according to Dictionary.com is:

“the ability of a customer to obtain goods or services before payment, based on trust that payment will be made in the future.”

You might ask yourself, why do you need to use credit, is it not more beneficial to pay for everything when you have the cash to pay for it?

Well credit is important for a few reasons, first you can use it to purchase goods or services you may not have the capital to currently acquire, but will within the next month or two. Additionally, building a track record of good credit is imperative for financing major purchases such as, a car, a home, a new appliance or even a vacation.

What exactly is a credit score?

On a very basic level, your credit score is a number (typically ranging from 330 to 830) which is a representation of your history with managing your credit and making payments. There are many different reporting agencies which all have their own method of determining your score, so do not panic if you see multiple different numbers because we ALL have multiple scores!

What these numbers are meant to do is predict if you are likely to pay your bills on time. One of the most common credit scores is your FICO credit score. This number is calculated based on a few factors.

  1. Payment history – have you missed payments, defaulted on loans or made late payments?
  2. Amounts owed – how much do you owe and how well have you managed your payments?
  3. Length of credit – how long have you been borrowing money?
  4. New credit – have you applied for new loans recently?
  5. Type of credit – do you have a good mix of different types of debt (home, auto, credit cards and others)

Tips to build strong credit

How does one go about building a credit score? You actively are building your score with each day you make purchases on credit or make payments on time.

Credit scores take time to build and usually cannot be changed very rapidly, this is why it is important to remain consistent on your efforts to improve your score! Here are some helpful tips to help improve your credit score so you can secure lower rates on loans, allow you to borrow more and can even allow you to avoid placing security deposits in some cases!

  1. Avoid opening too many new accounts, especially at one time! Each new account you open will lower your average account age, which in turn will lower your score.
  2. Make all of your payments 100% of the balance due and make them on time! This applies to not just credit card bills, but mortgages, auto loans, rent or even utility bills, it all factors in!
  3. Minimize the amount of credit you utilize. You may have a $2,000 limit, but that does not mean you should spend to that limit every month. Scores have seen the most improvement by keeping their monthly balance below 30% of their limit, in this case that would mean keeping your balance below $600 per month.
  4. Keep accounts open for as long as possible, the longer an account is open the better it looks on your credit report! Sometimes financial advisors can recommend closing an account with an annual fee and over the long-run this may be beneficial. When opening new accounts seek out cards like our Bellco Visa® credit card, which has no annual fee!
  5. Check your credit reports once a year for errors or discrepancies.

Hopefully by utilizing these tips and learning a little bit more about how a credit score is calculated you too can see your score rise!

First Time Home Buying

2/14/2018

There are a lot of new, fun and exciting rites of passage to becoming a full-fledged adult. One of the biggest decisions you have to make as an adult is not where you are taking your next vacation or what car to buy; it is what home you will buy.

Questions beyond just what home you will buy follow you through this process, how much of a down payment will you place on the home, how will you finance it, how long do you want to finance it. All of these questions can really stress an individual out and require hours and hours of research to solve.

Starting with the basics

What exactly is a mortgage? Well think of it as a huge loan that someone takes out to secure the purchase of a home or condominium. A first mortgage is a little different, as it is specifically the primary loan on a property. The other factor in a mortgage is your interest rate; this is the percentage you have to pay annually to have that money loaned to you.

How does it work?

When an individual, a couple or an organization want to purchase a property but do not have the capital on hand to pay for it, they take out a mortgage. Lending institutions, like Bellco Federal Credit Union, will provide the capital for the individual to purchase the property and then will be paid back over time.

The lender expects the home loan, or mortgage, to be repaid in monthly installments, which include a portion of the principal and interest payments. Interest is the amount of money that you have to pay to the institution to compensate them lending you the money where as the principal is the initial amount borrowed.

Mortgages sound complicated, but are they?

Mortgages, loans and home buying may seem intimidating, there are a lot of fancy words used, but it is actually quite a simple concept. A mortgage is a form of debt, so your initial thought may be to avoid this.

However, a mortgage is actually the most advised form of debt due to the security of the collateral. Additionally, mortgages usually come with some of the lowest interest rates compared to almost any other form of debt.

Want to know more?

If this brief introduction to the world of lending and mortgages piqued your interest and you want to know more, come to our free home buying and refinancing seminar. It will be held on February 28th at 6:00pm in Bellco’s Wyomissing branch. Sandwiches will be provided; you can listen to a fun and informative presentation from Bellco’s partnered insurance and real estate agents.

To RSVP for this seminar, email marketing@bellcocu.org!

 

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