Nov 19, 2012

Graduates—Kick Off the Next Chapter on the Right Foot

It’s a big jump from college or other technical schooling to “the real world.” Here’s a free graduation gift … five smart money moves for graduates. 

Smart Money Move #1: Don’t Buy a Car

Most students have either gotten by with no car or a clunker car during their college years. Now that the prospect of “getting a job” is a reality, a car might seem like a good investment. However, be cautious … you don’t need a NEW car to have adequate transportation to and from work. A new car may be unnecessary and will keep you on a tight budget (with that hefty monthly payment) for years. Instead, consider buying a car that’s gently used, one to three years old. It’ll look like new but save you a lot of money. And if you’re looking for something to save for, think about a starter home.

Smart Money Move #2:  Get in the Budget Habit

Don’t let the “b” word scare you. When you have fun things you want to do or items you’d like to splurge on, a budget really comes in handy. A budget is like a spending plan that helps guide your spending and saving. This way you can set aside money for bills and necessary things and still have money left over for the “fun stuff,” without the guilt.

Smart Money Move #3:  Use Envelopes With Cash

Rent or mortgage payment. Check! Water bill. Check! Electric bill. Check! Loan payments. Check! If you’re afraid you’ll spend the cash when you first get paid, label envelopes with your payment category. Write out a check, and put it in each envelope. Then, stash the envelopes until payments are due.  Of course, have an envelope for your “mad money” too, but once the envelope is empty, your funds have run out, and you’ll have to cut back until the next pay period.

Smart Money Move #4:  Consider Moving Out on Your Own

Many college graduates return to their parent’s home to save money, but most of them lack the discipline to save and end up blowing their earnings on cars, entertainment, electronic gadgets, and their social life. You’ll grow faster and learn more by being on your own, even though it may be a struggle at first. It’s easy to let Mom and Dad take care of everything, and you may become too comfortable. Being on your own forces you to take your finances into your own hands and start making smart—albeit sometimes difficult—grown-up decisions.

Smart Money Move #5:  Educate Yourself About Finances

When you needed to learn about math, you took a math course and did math exercises, right? Same rules apply. The best way to learn about personal finance basics is to read a good personal finance book—one that covers all the basics without boring you to tears. You could also meet with your banker to get information and have them help you create a customized plan for you!

Sure, making mistakes is part of growing up, but why make costly financial mistakes if you don’t have to?  With a little common sense, and by following our five smart guidelines, you’ll be embarking on a successful financial future! A+

Watch this video to get more helpful tips from Bank of Luxemburg Chief Operating Officer Rebecca Edler.

Nov 12, 2012

Managing Your Finances During a Divorce

Divorce is difficult. Plain and simple. Lots of things are changing, and confusion is a common feeling throughout the process. However, finances are a very important aspect of divorce, and planning for the future while going through a divorce should not be taken lightly. By staying on top of the financial aspect of divorce, it will hopefully prevent major hassles down the road.

Things to Consider When Re-establishing Your Personal Finances After a Divorce:

  • Order a Free Credit Report — Following a divorce, order your free annual credit report to identify your remaining debts, and determine if the reported information is accurate. It is important following the divorce to remain financially vigilant and continue to pay your debts. 
  • Establish Credit in Your Own Name — Following a divorce, it may be necessary to establish credit as an individual to start to build a credit history and credit score. This will be important if you need to make a major purchase such as a home or vehicle. 
  • Review Retirement Savings Plan and Goals — As a single individual, your retirement goals may be different than when you were married. Meet with a financial planner to discuss your dreams, and determine what you will need to save each month to live your new retirement dreams.
  • Review Insurance Policies — Review your insurance policies to determine what is necessary and appropriate for your new lifestyle. This is a great time to review your beneficiaries on the accounts and make updates as needed.

Many people have been down this road before and can offer advice on everything that needs taking care of.  The staff at Bank of Luxemburg is sensitive to each customer’s situation and will take the time and care necessary to help get answers and resolution.

Nov 8, 2012

Oh Baby! Making the Best Choices—Financially—for Your Newborn

Pregnancy—labor—bringing baby home. You’d think the hard part is over, but actually now comes the tricky part—determining the best savings plan for your child. 

It will most likely take four to sixteen weeks to receive a social security card for your little bundle of joy. (Typically hospitals have the paperwork for a social security card and provide new parents with it before they are discharged.) Wait until you receive the card to take action. You will need this number in order to proceed.

During this time, it’s a good idea to evaluate the timeline and what you would like to save for. Are you saving for something that your child will draw on regularly, or will they wait to draw funds until college or into the future? This makes a difference in deciding which option is best.

A few options…
  • Traditional Savings Accounts — Most will follow a typical savings account rate, which is typically on the low end interest rate-wise but typically has a low minimum balance and requires minimal funds to open. If you put $5 a week in a savings account starting when they are born, your child will have approximately $4,700 when they turn 18.
  • Certificates of Deposits (CDs) — Most require a minimum of $1,000 to open and have a certain amount of time where the funds must remain untouched. However, CDs have a higher interest rate than a savings or money market account. (It’s a good idea to watch for special promotional CDs that often have even better rates.)  If you put $25 a week in a CD starting when they are born, your child would have approximately $23,000 when they turn 18.
  • College Savings Accounts — And if you’re really looking to get a good rate of return over time, you might want to invest in a College Savings Plan. In addition to offering a high rate of return on investments, these types of accounts also offer tax advantages. Wisconsin’s 529 College Savings Plan is EdVest. If you put $25 a week in a College Savings Plan starting when they are born, your child would have approximately $65,000 when they turn 18.  

Additional Things to Consider…
  • Budget — Babies bring expected—and unexpected—expenses. You should review your family’s budget and update it to include new expenses like diapers, baby food, insurance, health care, and day care. Remember to update your income to reflect any changes in your work status, if one parent is staying home to raise the child or only returning back to work part time.
  • Insurance/Retirement — In addition to adding the new baby to your health insurance plan, parents should examine their own life insurance policies and possibly make adjustments. The same is true for retirement and other savings accounts. Are the goals that you’ve set for yourself before children the same goals you have as you begin to have children? If not, parents may need to make adjustments. Now is also the time to review beneficiary information on all investments, insurance, and retirement accounts.
  • Will — Wills are often a touchy subject for people. However, having a child to think about is a great reason to establish a will if parents don’t already have one. Contact an attorney to discuss your options.
  • Vehicles & Home — These are areas that need to be examined after the birth of a child. Is your vehicle equipped to safely transport children? Is your home functional enough to support a growing family? Even though it’s probably not necessary to buy a new vehicle or move to a new home simply because of a new baby, it’s still a good time to reevaluate. 

Remember: When it comes to a savings plan for your child, there isn’t one magic answer. It depends on your financial situation and overall goals. No matter how you look at it though, higher education is getting increasingly more expensive. It’s a good idea to start saving when children are young. As you’re going through our list of savings plan options, contact a
Bank of Luxemburg representative with any questions or concerns.