Category: Personal Finance

So You’ve Bought Your First Home: Savings 101

home

Congratulations! You’ve taken a big step in your financial future by purchasing your first home. As a new homeowner, you may be worried about the chunk of change you just spent, and your bank account may be looking a little slim right now. Luckily, Raccoon Valley Bank is here with a few simple saving solutions to help your funds increase.

 

Slow Your Spending

As you have just made a big dent in your savings, now is the time to slow down on your purchasing behavior. Be sure to be aware of your spending habits. Don’t go shop for an extra pair of shoes or dine out multiple times a week, as that can add up in a hurry!

 

Revamp Your Emergency Fund

A bigger house means bigger emergency expenses. Put a little extra money here and there into your emergency fund to save up for problems such as needing a new roof, replacing a broken appliance or common plumbing issues. Being prepared means your bank account will take less of a hit since you have your emergency fund to fall back on.

 

Stretch Your Grocery Dollars

Eating out can cost you a fortune! According to the Bureau of Labor Statistics, the average household spends an average of $3,008 per year on dining out. Instead, find discount grocery stores such as ALDI in order to meet your budget. Setting a budget and only buying items you truly need will help stretch your money. Finding recipes for casseroles, soups and other large portion meals will help save money by creating leftovers for you to bring as lunch every day to work.

 

Don’t Buy New Furniture

Even though you’re excited and want to decorate your new home to the extreme, try to wait. Slowing down and taking the time to find second hand stores, garage sales and so on will help save you hundreds to thousands of dollars on furniture. It’s easy to do a little digging and find store-quality items.

 

Clean Out the Closet

As you’re already packing to move into your new home, now is the time to get rid of items you no longer need. Facebook Marketplace, Ebay and other online platforms allow you to easily sell items to others all over the world! Not only are you freeing up space in your new home, you’re making a few extra bucks along the way!

 

Being a homeowner is an exciting new journey, but keeping up with your finances can be a little hectic. These tips will help you put a few more dollars in your bank account while enjoying the joys of your new home!

How to Adult: Financial Starters

adult

It’s been said that youth is wasted on the young, but let’s not let that be true of those of you who are fresh into the adult world. We get it, many adults feel underprepared and overwhelmed at the amount of responsibilities that snowball after college or high school. Don’t fret! The fact that you are even taking the time to read this says that you are going to be okay. We have compiled a list of basic adult financial musts that will help you navigate this new terrain.

 

Build a Basic Budget

Many who have been in the adult world for years still do not have this down. Training yourself to say no to the short lived pleasures will translate to accomplishing your goals faster in the financial world and in other aspects of your life. You may finally be out of school and making a consistent income. This is exciting and scary as you see that the longer you are in adult world, the more expenses you have. This is why keeping a budget is crucial.

 

There are many different ways to budget, but one of the simplified ways is to break down your take home (net) pay and divide it by percentages. Dedicate 50 percent towards your living expenses such as rent, insurance and food. Allocate 20 percent towards savings and 30 percent towards good ole’ guilt free fun. This will help to ensure you are covering all of your bases no matter what your salary increases to.

 

Protect Yourself

While there are many new expenses being thrown at you, one crucial payment you can’t forget to make is that of insurance. Making sure you have quality auto, home and life insurance will help to provide cushion from a setback that could put you in the whole for years to come.

 

Automate it!

We already mentioned allotting room for savings in your budget and the easiest way to do this is to take the decision making out of the equation. Make savings automatically come out of your paycheck, and not only will you start building up an emergency savings, which is a crucial first step, but you will quickly accumulate savings for fun things like vacations or a downpayment on a house. You’ll be surprised how fast it adds up!

 

Educate Yourself

Just because you’re out of the schoolhouse doesn’t mean you should stop learning about the less exciting topics like finance. Take time to read influential financial books, talk to a trusted banking partner, or to a friend or family member whose financial habits you admire. Do you really have a grasp on what credit means and how to best use it? Simply ask and seek for answers, and no, we don’t mean just Googling your questions. The financial world doesn’t have to be intimidating, just start digging in!

3 Keys to Managing Your Money When You’re Self-Employed

employed

If you’re similar to 10 percent of the active American workforce, you are self-employed. Those who enjoy going into business for themselves find a great degree of freedom and empowerment. You have more value for your work, no uniforms, get to choose your customers, not to mention unlimited vacation days. However, these benefits can be quickly overshadowed by the effects of poor money management. In order to make your dream successful, there are certain key habits and skills you should have or develop in order to help your business thrive.

 

Organization

 

You may have already thought about the most exciting aspects of your new business such as the products you are selling and your logos. However, in order to keep the things you are passionate about alive, you need to keep your finances highly organized.

 

Taxes – Many self-employed people forget about Uncle Sam until they are hit with a shocking letter. Unlike the days when your employer would automatically deduct taxes from your paycheck, you will need to do this all yourself. This should take priority over everything else because the costs of not doing so can shut you down. Keep in mind that you may need to pay an additional 15 percent self-employment tax in addition to your regular income taxes.

 

Budget – In addition to a personal budget, you need to create a business budget to allocate expenses like postage, childcare or insurance. Calculate the basics of that you will need to make ends meet. Decide what salary you are going to pay yourself every month. These are the items that many forget about that could cause your business to fail. Decide what percentage you are going to spend on what categories each month and stick to them.

 

Tracking Expenses – It may be easy to dismiss a small business lunch here and there, but not having a system of tracking can severely disrupt your budget.

 

Open Separate Accounts – We can’t stress the importance of this enough, but the secret to staying organized and on track is having your business accounts separate from your personal accounts. You can create an account where you put a percentage of your income in just for taxes so you never have to sweat when the quarterly taxes become due. Come see us at Raccoon Valley Bank to look at our business account options.

 

Plan Ahead

 

While there are many items to stay on top of for your business, you shouldn’t neglect your own goals for the future such as retirement or emergency savings. While it may be great you are your own boss, you no longer have the matching 401k contributions that many employees receive as benefits. This means you will have to make it even more of a priority to save for your post-work life.

 

Self-Control

 

There may be some months where you make double or even triple the amount of profit you had estimated. When this happens, take out the same amount that you always do towards the items in your budget and anything extra put into the Emergency Fund.  We recommend doing this in percentages, so no matter if you make a lot or a little you are still funneling money into every priority you have.

 

On months when you don’t make as much money or even if you make no revenue, you’ll be thankful that you saved your profits from the high income months. Eventually, you should aim to hit the point where you can go 3-6 months without a salary because you have built up a significant savings. This takes diligence and self-control. It takes doing the little things right, every month.

 

Adopting these key habits into your business plan is going to set you up for success, so you can focus and enjoy the fruits of your labor.

The Expert Saver’s Financial Bucket List

list

Savvy savers are full of great ideas and qualities, so those who aren’t the best at keeping our finances in check are always left wondering how they do it. Thankfully, Raccoon Valley Bank offers a bucket list with some of the expert saver’s top priorities you can strive to meet!

 

Pay off your credit card debt.

As the average American has $16,000 worth of credit card debt, focusing on paying off yours can be a big financial undertaking. There are different methods you can utilize such as The Snowball Method, which includes making minimum payments on all your accounts and putting what you have left towards the account with the smallest balance. The Avalanche Method involves paying off the largest amount of debt first and continuing on until everything has been paid.

 

Say goodbye to student loans.

Student loans can be one of the longest standing debts in many households. With the average outstanding loan balance being at $37,000, starting a routine to pay off these loans should be a top priority. By committing to a certain amount each month to pay, you’ll see your loans decrease quickly. Be sure to put extra cash towards the loans with the highest interest rates or try to refinance to a lower interest rate.

 

Buy a home.

Being a homeowner is a big step to take in life but well worth it. In some areas, buying a home and paying your mortgage each month can be cheaper than paying rent. Figuring out how much home you can afford and getting pre-approved are your first steps to financial success. A rule of thumb can be to take your monthly after-tax income, subtract all current debt payments and then multiply that number by 25%. This is a good indicator of how large your monthly payment can be.

 

Set up an emergency fund.

It’s sad to say, but bad things are bound to happen. Instead of being caught off guard when a pipe bursts or you need an emergency surgery, build an emergency fund. Having money put aside for the unexpected will help life be much more enjoyable when problems arise. Depending on your income, monthly costs and lifestyle, try to have between three and nine months worth of expenses saved in your emergency fund. See about setting up a savings account with us for items just like this!

 

Get a raise.

Negotiating for a raise can be tricky, but you won’t be able to move forward financially if you don’t push for what you deserve. Focus on all of the benefits you have brought to the company and changes you’ve made for the better. However, don’t expect more than a 4-5% bump, as asking for too much can be viewed as greedy.

 

This bucket list is what all expert savers strive for as an end goal. Put into action a few of these tips to allow yourself the monetary success you deserve! Feel free to give us a call or stop in to discuss our different savings options!

7 Ways to Get the Most Out of Your Tax Refund

tax

So you’ve either gotten, or are about to receive, your long awaited refund. There’s quite a buzz of excitement as many Americans decide what types of things they are going to buy with their extra cash. But if you are looking to do something different with your money this year, we have come up with some great ways for you to not spend away your money, but to get the very most out of it!

 

  1. Establish a Savings Account

We’re sure you’re not surprised with us telling you this, but pay yourself first! You have just given the government an interest-free loan, so immediately taking that back and putting it in a high interest savings account is a great option!

 

  1.   Keep Your Eye on the Prize: Retirement

Another wise move to make with this return is to invest the entire amount towards your future. If you get in the habit of doing this every year, think how large this amount can accumulate over time. Contact Raccoon Valley Bank to get an IRA started now.

 

  1. Grow your 9-1-1

You never know when a disaster can take a blow to your savings account, snowballing you into debt you didn’t plan for to cover emergency expenses like illness or car problems. Adding some extra cushion to your life is a way to keep you on top of your game.

 

  1. Grow Your Potential

This might be just the money motivation you needed to amp up your education! Get certified in a specialty area of your field, or attend a conference to network with other professionals. Many people don’t go back to school because of the costs, but this seed money could potentially help you to earn more in the future.

 

  1. Update Your Home

If you are looking to put your house on the market soon, a great investment would be to improve an area of your home that would give you a good return on your investment. Maybe this is updating the kitchen sink or redoing the bathroom floor. You may make your money back and then some if you do it yourself!

 

  1. Pay Down Your Debt

If you have gotten yourself in a bad spot when it comes to high interest debts, now might be the time to start paying those down. Getting those out of the way can make more room for savings and investments.

 

  1.  Invest in Your Emotional Health

Maybe it’s been a rough year for you, and you just need to getaway. Getting the most out of your return for you may be to take a vacation. You might want to just have the chance to restore and recalibrate your dreams and goals. Creating memories will last for years to come, and may be what you need in order to move forward this next year.

Four Emotions That Are Interfering With Your Finances

emotions

Who doesn’t want a healthy financial life? Yet, the number of people who actually have one is decreasing. Americans’ total credit card debt grew by 8 percent in 2017, with an overall 12.96 trillion in debt. While there are many underlying factors, one component that can be limited in your budget is emotions. You may feel helpless when it comes to taking control of your finances, but one of the biggest hindrances is your emotional state. The good news is, where you are at doesn’t have to be where you stay!

 

Keep your finances in check by thinking through these emotions when it comes to financial decisions.

 

  1. Sadness

Most likely you have heard the phrase, “You can’t buy happiness.” Even though many might know this, they have purchase habits that speak otherwise. Negative emotions like sadness have twice the intensity of positive emotions. This creates a feeling of a need or weakness to be remedied. For many, this is impulse purchases such as new shoes or ordering takeout after a bad day of work. The next time you’re down, remind yourself of your goals that will inevitably make you happier in the long run. Maybe even make a list of what you are grateful for, instead of being down about circumstances beyond your control.

 

  1. Anger

Similar to sadness, acting on anger can have damaging consequences. You may even have a feeling of hatred towards money because you think it is the source of all your problems. Feeling like you are constantly struggling with your finances is frustrating, and can cause you to think there is no point in making wise decisions, so why not buy yourself that new TV? You’re angry and begin taking bigger risks than you should. Take a deep breath and remember that being consistent is key to success. Emotions are anything but steady.

 

  1. Fear

Have you ever been told that your money defines you? We are here to tell you that you define your money. Maybe you are out of debt, but are paralyzed from making investment decisions because you fear falling back into old habits and feelings of guilt. Perhaps you worry about being accepted in society, so you break your budget to buy the latest name brand sunglasses.

 

  1. Happiness

You’re happy, and that’s fantastic! Even so, emotions and finances don’t mix. If you let happiness rule your spending, you may lose sight of reality, becoming overconfident with the number in your bank account.

 

Letting emotions creep into your finances will slow you down in getting to your goals. Meet with a trusted financial advisor at Raccoon Valley Bank to help you make calculated decisions and create a monthly budget so you can set yourself on a path for success.

Relationships & Money: What Your Conflict Strategy Says About Your Finances

“I think what makes people fascinating is conflict, it’s the drama, it’s the human condition. Nobody wants to watch perfection” (Nicholas Cage). If you’re human, you experience some degree of conflict daily. With the American expenditures averaging $157 per day, the purchase decisions you make every day are impacted by how you manage conflict. Understanding your conflict-resolution style can not only help you better understand and improve your financial obstacles, but help improve your relationships with others when it comes to money.

 

Accommodating

Accommodation is when you are agreeable to such a high degree, that you actually work against your own self-interest. Essentially, you are either excessively polite or are in conflict with another party who has more knowledge on a topic. This style can be helpful when you are seeking advice from a trusted financial advisor. This can be problematic, if you automatically assume that others know more than you about money, or what to spend your money on. You may be too eager to please and too trusting. This is even more true if you are constantly finding yourself on the losing end.

 

Avoidance

 

People who use this style simply do not address conflict with themselves, or others. In this scenario, all are losers.  This is acceptable for a short term strategy, but can be dangerous if it creeps into a long period of time. People who are prone to the avoidance style may also have high amounts of debt.  If you are constantly avoiding the realities of your bank account and spending habits, you may be creating even more conflict for yourself and any financial partners.

 

Collaborating

 

This is the ideal way to handle financial conflicts within your relationships. This is a win-win style, where you work to meet each person’s goals. This can be helpful when you are crafting a budget with your spouse, and you both work to make sure your financial goals can be met based on the mutual plan you establish. In times of financial stress, you both communicate and work together to fix the situation for an outcome that is helpful to both parties. This can even be true for friendships. For example, if you have a higher income than your friend, and want to go out to a fancy restaurant, you may collaborate with your friend to find a restaurant that you will both enjoy, and afford. You can still go to a nice restaurant, but your friend can afford it, or maybe you can even treat them to a meal!

 

Competing

 

This is a style more commonly taken on by the aggressive or ambitious. It is typically a win-lose scenario. A person with this management technique doesn’t care about the other party getting what they want, and makes decisions with a sense of urgency. This may be okay in times of emergency, but can be damaging for the long term. For example, if you constantly spend on big ticket items without consulting your partner, you may have the competing style. You may take advantage of others, and seek to appear financially superior to your friends and family. This can be especially damaging if your bank account doesn’t match your spending habits, causing others to feel inferior, and your partner to feel weighed down by your decisions.

 

Compromising

 

Compromising is the worst way to handle your finances. It creates a situation where nobody wins. Both parties may not speak their full truth, or take the paths of least resistance, so no one truly gets what they want. This might be where neither party really wants to cooperate, so they make sure nobody gets what they want. This can be problematic on financial decisions, such as whether or not to buy a new or a used car. You might decide not to purchase a vehicle at all and really end up paying to fix the clunker you have, spending more on fixing it than you would have to just replace the vehicle.

 

Consider which one of these styles you lean towards the most and how it can be hurting or helping your financial situations and impacting those you care about. We suggest striving for collaboration to satisfy your relationships and bank account!

The Savings of Bicycle Commuting and Why You Should Try It

 

Many people realize that biking to work is better for the environment and healthier. You cut down on pollution, get some sunshine and trim your waistline with cycling. However, did you realize that ditching your car on the daily commute has the ability to bring you great savings? As of 2016, the Bureau of Labor Statistics estimated the average person spent $9,000 a year on transportation costs.

 

When people first start thinking of cutting their costs, transportation isn’t typically first on the list. This is partially due to the fact that many see it as a necessity that simply cannot be bargained. We are here to challenge this notion and potentially put some money back in your pocket for retirement or a great vacation!

 

Insurance

 

Many auto insurance companies will give you a discount for putting low mileage on your vehicle. You won’t be driving the car as much, so you are less of a risk to the company. Everyone would love to spend less on insurance, right?

 

Investments

 

General auto maintenance can cost an average of 4k a year, which is significantly higher than a bike at $308 per year. While using a bike as a daily commuter, you are going to want to be sure to invest in appropriate safety gear. This is nominal compared when to a vehicle. You will have less wear and tear on your vehicle, making it easier to sell for a higher price  should you choose to do so.

 

Gas

 

You should slowly diminish your reliance on gas. Who wouldn’t like that? You fuel your bike from the energy you get from food, with many miles more than what your car can get off of 1 gallon of gas.

 

A Better Employee

 

Adding exercise into your daily routine can not only eliminate your need for a gym membership, but make you better at your job! People who exercise before work or at lunch have improved time management, motivation and a decrease in stress. Not to mention the added benefit to your employer of less parking space needed.

 

Consider these benefits as the weather improves and try commuting by bike to work! Maybe cutting back on your transportation costs is exactly what your budget needs!

Is Politeness Costing You Money? 6 Money Manners to Quit Now

“Politeness costs nothing and gains everything,” said Lady Mary Wortley Montagu. Many have been told or even repeated this saying. However, does it hold true? Not when it comes to these manners with money. There may be some moves you are making, or have been taught to make from a young age that can cost you more than what you intended, for little social benefits. Here’s the top 6, and how to avoid them!

 

  1. Not Asking for Your Money Back

 

If you are dealing with a retail situation where you were either charged more than you agreed to, or were the recipient of a faulty product, being assertive over being overly polite is what is going to help make things right.  According to a Marchex study, 79% of callers are polite, but only 57% of agents show the same courtesy. If the representatives are not likely to be polite with you, certainly don’t be overly polite by giving up getting your money back. Definitely still be respectful, but stay firm to get what is owed to you!

 

It can get even more sticky when it comes to your relationships, if you lent money to a friend (see #3). If you did break the rule and loaned money, don’t be afraid to ask for your money back if they already agreed to do so at the start.

 

  1. Always Chipping into Group Gifts

 

If it seems like you are giving money as a part of office birthday gifts or other social group gifts, know that you don’t have to participate! Be creative and try to find other ways to celebrate the individual or ways to cut down on the amount contributed. Maybe you celebrate all of the birthdays once a month, instead of every week!

 

  1. Loaning Money to Friends and Family

 

If you have certain friends who think you have extra to spare, you may find them consistently asking you for interest-free loans of varying amounts, because 1) you always say yes 2) they know you won’t hound them about repayment. It can be compelling to say yes to those you love, but in addition to jeopardizing the relationship, you are much less likely to get your money back from those you know. It can sacrifice your own security, and in some situations, enable them to make poor money decisions. Having this as an always “no” will prevent people from asking, and get you off the hook!

 

  1. Participating in EVERY fundraiser

So your best friend’s cousin’s child is having another cookie fundraiser along with 5 other coworker’s children. Trying to be polite by buying from everyone gives you items you don’t need that should be invested somewhere else. There are many things that we pay for because we have been told we are “supposed to” even though we can’t afford them.  These small yes’s can really add up! Next time, work on the amount you are wanting to donate into your budget, so you know what you can afford and what you can’t. When it’s gone, it’s gone!

  1. Eating Out With Friends Every Week: Splitting the Bill

 

Of course you love getting a bite with friends, but eating out is expensive! Maybe you say yes so you won’t get left out, or so nobody will feel snubbed. It can become even more problematic if your politeness keeps you from saying no when your group wants to split the bill evenly, even though you only ordered a side salad while the rest ordered appetizers, drinks and dessert. Let your friends know ahead of time that your entertainment budget only allots a certain amount, so you will be limited to the number of times you will go out, and that you will be paying for only what you order.

 

  1. Not Asking for That Raise

 

If you aren’t asking for a raise at work, for fear of damaging a working relationship, you are hurting yourself and wealth extensively. Continually shying away from asking for extras will put you more and more behind of where you want to be and should be. Do you know who gets extra perks and bonuses? The people who ask for them! Make a list of why you have earned what you are asking for, and be sure to ask for it at least once a year! You may not get everything you ask for, but a good employer will work with you to not lose a confident and respectful employee.

 

Politeness is a valuable trait in many situations, but knowing when manners are hurting your pocketbook is key to accruing wealth for your future.

Considerations of Renting Vs. Buying in Retirement

Congratulations, you have made it to retirement or are close to being in your Golden Years! As you may be discovering, a successful retirement plan involves extensive planning and a lot of patience. Likely, one of the last and biggest decisions to make in your plan is deciding what living situation is most financially feasible.  While you may have invested in home ownership for many years, it may be time to downsize and your decision to rent or to buy your next space can have a significant impact on your hard earned savings. Considering all the pros and cons of both will help aid you in your choice!

Buying

 

The perks of homeownership don’t necessarily change in retirement. In fact, the rate of homeownership for people age 65 and up has remained at about 80% since 2006. There are property and tax write-offs, the potential for appreciation/equity and the power to make your place look exactly the way you wish.  However, your needs are changing and with that so will the benefits and disadvantages.

 

A question you need to ask yourself is whether you want to leave an inheritance with your home. If you are not, it might be better for you to choose renting, unless the median home price in your area is low. Don’t forget to factor in closing costs and taxes. Your home as an investment late in life can become less important. You should run the numbers in your desired living community.

 

The reality is, one of the major advantages of home ownership is building equity, which would require you living in the home for at least 5 years. Unfortunately, depending on health, living in the new home for 15 years may not be possible, especially if you need to move into assisted living sooner than expected. The bottom line with home ownership is that it would make the most financial sense to ensure that you are going to be in the house long term.

 

Renting

 

You may be of the belief that renting is primarily for the younger generation. However, from 2005 to 2015, the number of renters ages 60 to 64 nearly doubled, increasing from 1.2 million households to 2.5 million. The benefit that comes with renting is the flexibility that retirees have been looking forward to all of their working years. You can move as often as you like and have notably less responsibilities that your body may not be up for such as lawn care and basic home maintenance.

 

Estimate your cash flow needs and assess the relative costs of home prices and yearly rent for comparable properties. Would it make most financial sense for you to put the proceeds from selling your home into investments that you can use for renting? Don’t forget to consider that rental prices will increase.

 

You may be so accustomed to the idea of “owning” that the transition to renting might not be easy. If you are planning on moving away from where you have lived for years, starting fresh in a new community will be an adjustment, along with not being able to paint or make large changes to your home.

 

As with all major decisions, the right one will vary for each individual and location. At Raccoon Valley Bank, we would love to help offer some guidance in your financial decisions to make your Golden Years truly golden. Give us a call, or stop by today to see how we can help!

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