A couple of months ago, I was thinking about how similar eating and spending are. Although I planned my spending, I wasn’t planning what I ate, and I realized that was silly because I already knew how. So, I decided to apply budget my eating. Before doing this, I thought that I was healthy. I started trying out different apps to track my eating. As I tracked, I realized that I didn’t eat as healthy as I thought that I did. A lot of little things, like mayo and snacks, added up. Last week I put on some jean shorts, which I hadn’t worn for a year. A year ago these were very comfortable, but this year they fit very tight! One of my friends called these my “gauge jeans.” As soon as I put them on, I knew I had gotten bigger over the last year.
The same principles of physical health apply to financial health. We have to have a gauge that lets us know when we are keeping within our budget. We can think we are doing fine but unless we are really tracking it and gauging it, we won’t know until we incur overdraft fees, denied debit cards, or other negative consequences.
Can you imagine driving your car without a fuel gauge and trusting your general feelings that you are fine since you filled up the tank recently? That may work for a while, but eventually you would probably run out of gas. I like to keep the gas tank in my car half full, but the other day I looked down and it was almost to the E! If I hadn’t had my gauge, I probably would have thought that there was plenty of gas, but we had driven more than usual, and we hadn’t filled up the tank.
When Ty and I first started budgeting, we didn’t gauge our spending, and every month we overspent. I only reviewed our spending at the end of the month. After a few months of doing this, I realized that we needed to have a spending gauge — like our car’s fuel gauge. I needed to know how much I had left in my groceries and repairs budget. Although I could still overspend, I would be aware that I was overspending. Our car still run out of gas even with a fuel gauge, but the gauge makes you aware of what will happen. On holidays and vacations, I know I’m going to spend more than usual because I have tracked it, so I have to allow myself more calories and more money during those times. Tomorrow, being the Fourth of July, will be one of those times. I can allow more and still use my gauge.
Noom Coach, which is the app I’ve been using for tracking my eating, works well for me personally because I can relate to it. It even calls my eating plan a “budget” and it has a gauge built in gauge. The other day it told me, “1576 calories left in budget.” I’m not a nutrition expert, but I do know enough to know that nutrition is more complicated that just calories. I'm just simplifying the analogy in order to illustrate my point. Tracking and gauging my spending and my eating make me so much more mindful than when I don’t track and gauge them. If I consistently overeat, my pants are going to get tighter and tighter until they don’t fit anymore. If I consistently overspend, my debt will increase and money will become tight.
It’s easy to say, “I’m frugal.” It’s a general statement and anyone can say they are frugal because they can easily compare themselves to others who spend a lot more that they do, but as you track and gauge your spending you may find you are overspending. A lot of small purchases can really add up.
I struggle with self-discipline, so a gauge helps me realize what’s going on. Gauging can’t force me to stop spending or stop eating, but it lets me know what I am spending and helps me to be more mindful of what I’m doing. If I’m wise, I won’t go past the “empty” mark on our gauge, because doing so will make me run out of money and be forced to call for help or refuel (earn more).
There is no magical app that can force you to be financially fit, but apps can be so useful. I love to try out new financial apps! What’s your favorite app for managing your finances? If I haven’t tried it, I will.
Did you know that Wasatch Peaks Provides access to the Peaks Money Manager app? I’ve been trying it out. Here are a few things that it helps me do.
Do you gauge your spending? If so, how?
Smart money management is always important, but it can take on more urgency for those who are without a partner. Whether you're divorced, widowed, or single by choice, single parenting brings unique budgeting challenges.
Marilyn Timbers, a Connecticut-based financial advisor, says of having to raise a child on one income: "Children are a joy, but they do not come cheap." The U.S. Department of Agriculture notes in a report that it costs an estimated $241,080 for a middle-income couple to raise a child to age 18, and some single parents have to shoulder that responsibility alone. Even if child support is adequate - unfortunately nearly 50% of that support is never paid - you'll do yourself a favor if you think ahead about financial matters as a single mom or dad.
Estate planning is your first priority, according to Lisa Hay of Ascend Financial. It's essential to make arrangements for your children should you become incapacitated, and this means spending time on two documents that no one enjoys thinking about: a will, which specifies a guardian for your children and how you'll pass assets down to them; and a "power of attorney," which gives someone the legal right to make decisions on your behalf if you're unable to do so.
You may also want to set up a trust. A trust is a legal structure in which your assets can be held for the children. It is overseen by a trustee. And check with your employer to see if it offers a disability benefit. Generally, you will get a reduced income amount when you claim disability - anywhere from 50% to 70% of your salary. "Your income is your most important asset," says Tom Morrill, owner of Morrill Insurance Group. Insuring it can be especially crucial for single parents who don't have a second income to cover a gap.
Hay also says be sure to have life insurance. What you purchase will depend on your finances, but a term policy is most economical because it's a straightforward death benefit. A healthy 33-year-old woman, for example, would pay roughly $240 a year for a 20-year term, $500,000 life insurance policy. This would get your child through college should something happen to you.
Health insurance is "the number one insurance need for a single parent," according to Morrill, who considers life insurance a close second. People often complain about the cost, but if you're uninsured, a serious medical procedure or hospital stay can be disastrous to your finances. And, of course, losing a job or becoming ill is still more catastrophic as a single parent than as part of a two-income couple. A recent Harvard study revealed that 62 percent of bankruptcies were caused by medical debt. You can comparison-shop for policies at your state's marketplace or at HealthCare.gov.
Along with the rest of your boring-but-necessary financial thinking, don't forget about tax breaks. If you're a single parent, you should probably file as head of household (not as single) because you'll often pay less and get to claim a higher standard deduction. You can also claim exemptions for yourself and each qualifying child. You also might qualify for the earned income tax credit, the child and dependent care credit (if you pay someone to care for your kids), and the child tax credit.
As far as day-to-day household operations, here are a few more things to keep in mind:
Whatever your income, it's important to give yourself a safety net, because emergencies happen. Put aside a little bit of money from each paycheck to set up an emergency fund for car repairs, broken refrigerators and other realities of life. As a general rule, experts recommend having six months' worth of non-discretionary expenses in an account that is separate from the one you use for daily expenses. That could be a savings account or possibly a low-risk investment account.
Bucket budgeting can help, says Jan Cullinane, author of AARP's The Single Woman's Guide to Retirement. That means creating four different accounts: one for fixed monthly expenses such as food and bills, another for long-term expenses like retirement or replacing appliances, a third for emergencies and a fourth for discretionary spending.
"Put the appropriate amount of money into the first three, and whatever is left is your discretionary or 'fun' spending," says Cullinane. "If there is nothing left for that month in the 'fun' bucket, you simply go without - you don't dip into the other buckets. Harsh, but necessary."
And it's more doable than you'd think. One study asked people if they could save 20 percent of their income. Most respondents said no. But, when asked if they could live on 80 percent of their income, most said yes. "Be aware of how you frame questions to yourself," Cullinane says. "You might be surprised."
Have you faced tough questions and financial circumstances as a single parent? What were the most useful solutions you found?
When was the last time that you felt like quitting? It was a couple of weeks ago for me. I was writing my post for the week, which talked about de-cluttering our finances. The post was turning into a guilt-inducing post, which I did not want, but I couldn’t figure out why it wasn’t coming together. I had worked on it, and I woke up early in the morning unable to sleep and worked on it. I started to wonder if these posts had helped anyone. I felt like quitting. As these negative thoughts bombarded me, I started remembering the reasons why I am so passionate about helping others learn to manage their personal finances. The reason has to do with grief, pain, and peace.
A couple of years before my Dad died, he went through financial stress. My parents owned many assets, but all of their wealth was tied into the real estate market. Dad worked as a realtor and a landlord. He also ran a construction crew, and he owned his home. During the recession of 2006, home prices plummeted, building of new homes decreased, and lending practices tightened. As his income decreased, he borrowed against some of the properties.
After Dad died in 2009, I prepared the accounting reports for the rental units and realized that there wasn’t enough cash coming in to pay the expenses of all of the rentals. One morning I woke up at 4 am to work on his business accounting. As I realized how much pain he experienced during the last few years of his life due to financial stress, my chest hurt! It was one of the most painful times of my life! I remembered these lines from Emily Dickinson's book, The Complete Poems, which I had memorized in my youth: “If I can stop one heart from breaking, I shall not live in vain. If I can ease one life the aching or cool one pain…. I shall not live in vain.”
At that point, I decided to direct my pain outwards by serving others. If I could help one family, even if it was my own family, then it was worth my effort.
I contacted my family finance professor from college and thanked her for encouraging me to live what she taught. I will never forget when Professor Lown told our class that if we earned an “A” grade in her class, but we didn’t live what she taught us, that the “A grade” wouldn’t mean a thing. I started volunteering at a financial counseling nonprofit agency. When I could no longer work in the office, I wrote a blog for them. I taught a class in my church about financial principles and then wrote a book about those principles. I was later asked to write for Wasatch Peaks Credit Union, which I felt grateful to be able to do.
Although the pain surrounding my father’s death has subsided a lot, grief does resurface. Sometimes grief is almost predictable: holidays, my dad’s birthday, Father’s Day, and family events. Other times grief hits me unexpectedly, like snow hits in May.
That’s what happened the night before I finished the post about decluttering finances. I had a bad dream and woke up in the middle of the night crying for my daddy. I was missing him. No wonder the post would not come together! Finally, I ran out of time and had to pause work on my post so I could wake up my kids and help them get ready for school.
My husband Ty came home from the gym that morning and said, “I wasn’t feeling it. I couldn’t get into a rhythm while I was swimming. My arms felt dead tired.” Then my son threw tantrums after he woke up. He and I got into the car 3 minutes before school started. Several kids were already in the car, and the emergency lights were flashing. I turned the key, and nothing happened. My five-year-old was innocently sitting in her pajamas. The neighbor’s cat pooped in our sandbox. Then, the internet stopped working on my Chromebook, losing half of my work. It was my version of a Terrible, Horrible, No Good, Very Bad Day. After a good cry, I got back to work.
Even though I felt like quitting, I remembered the quote, “We are not our feelings.” It came from Steven Covey’s book, 7 Habits of Highly Effective People. He taught that no matter what happens to us, we can choose how we respond to it. I teach this saying to my kids, but that day I applied it to my situation. The sun was shining! Friends and family came to help me work on the car and take the kids to school. I finished the post late, but it wasn’t a big deal. The credit union staff treated me graciously.
I’ve been thinking about what I learned from my dad’s passing. With Father’s Day coming this week, I want to share some financial lessons I learned from my Dad’s death. I hope that they can help you and your family.
While planning my dad’s funeral, I searched through mom’s piano books for the right song to play. When I flipped to Bridge Over Troubled waters I knew that it was the song Dad wanted. I wasn’t very familiar with it at the time, and the music was too difficult for me to learn to play in that short period of time. Obstacles kept coming. Our family friend told me that he was just getting his voice back from laryngitis and didn’t think he could sing because he could barely speak. He also did not know the song, and we only had a couple of days to prepare. I almost gave up, but we found a way to perform it: my sister played the left hand while I played the right hand, and our friend was able to sing.
Here are a few of Simon & Garfunkel’s lyrics that I felt were like messages from my dad to my mom. Even though it isn’t the typical song I’ve heard at funerals, my dad wasn’t the typical person.
“When tears are in your eyes
I will dry them all
I'm on your side
When times get rough
And friends just can't be found
Like a bridge over troubled water
I will lay me down….
When darkness comes
And pain is all around
Like a bridge over troubled water
I will lay me down
Sail on, silvergirl
Sail on by
Your time has come to shine
All your dreams are on their way
See how they shine
If you need a friend
I'm sailing right behind
Like a bridge over troubled water
I will ease your mind.”
Because my dad had life insurance, my mom didn’t have to worry about finances at the time of his death. Our lives stopped. There was so much grief, sorrow, and adjustment to having him gone from our lives. Mom had to get used to daily life without him and had to do many of the tasks that he used to do. His life insurance policy provided the “bridge” to help us get through this troubled time. What a relief that my mom was able to pay any bills. Even the mortuary bill was paid directly from the life insurance so that we didn’t have to pay money upfront. That period of time was rough enough without the financial stress!
When I refer to life insurance, this includes being self-insured. If you have enough assets, you can get to the point where you can self-insure if you choose, but I still consider that life insurance. Life insurance enables your family to continue on paying for their financial expenses after you and the income you provide are gone.
Last Saturday, we saw a lot of dads teaching their kids how to fish as part of Free Fishing Day. Picture this: A man was walking with his fishing pole in his left hand and his daughter’s hand in his right hand. It reminded me of fishing and camping trips with my dad. He taught me to ride a horse. He taught me to love being outside in the mountains. Dad also taught me to help others.
Dad taught me to pay off debt. He paid off cars as fast as he could, and he refinanced his home into a fifteen-year mortgage. But in 2006, when his income decreased, he overleveraged, and this taught me that financial storms will come to everyone. I learned that we can lower our risk by decreasing our debt and saving for emergencies. Because of what my parents went through, I have spent the last 8 years working on paying off our debt and “saving for a rainy day.”
When we had a income crisis two years ago, we were prepared and we worked through it together. We had a lot of peace during that turbulent time. We experienced peace knowing that we both had marketable degrees with experience. We had peace knowing we could pay for six months of expenses. Emotionally, this was one of the hardest times of our marriage, but it strengthened our marriage. I was Ty’s cheerleader to help him recover his lost confidence. Within a few months, he realized that his employer did him a favor by releasing him. He felt very fortunate. Our story could have ended in bankruptcy, foreclosure, or divorce. I’m thankful that we were spared all of those.
The housing market is really good where I live right now. Homes are selling within a few hours in some cases. I considered selling our home this year, but I realized that to upgrade our home, we would increase our debt, which will increase our risk. We didn’t feel comfortable doing that.
I feel thankful for the lessons grief has taught me. They are gifts that have helped me so much. I’m thankful for my dad. He is my hero! I’m celebrating his life and celebrating dads! What’s one thing you have learned from your dad?
I’m still cleaning walls. This job seems to be neverending, but one good result is that I've lost all desire to upgrade to a larger home. (I don't want any more walls to clean.) Last week I had to move the couches in the front room so that I could get to the walls. Underneath the couches was a big mess. I thought it would take me a few minutes to clean the front room, but it took several hours! My kids had shoved items under and behind the couches instead of throwing and putting the stuff away. I hadn’t realized that area was even getting cluttered because the clutter hid beneath the couch. I found broken junk, dirt, books, socks, shoes, and a lot of pens. Now I know why I can’t ever find a pen!
Like the couch, financial clutter is often unseen. It can be an overwhelming mess that we don’t want to uncover. I’ve observed so much pain result from cluttered finances. I hope the next few suggestions are helpful if you are feeling overwhelmed with finances.
To be honest, I felt like throwing away everything that was underneath the couches. I almost did but if I had, I would have caused other problems. It’s hard to know where to start when you’re in a mess. Financially, we can also feel like giving up. It’s not a fun feeling. When I help a family make a budget, the first thing we do is to sort through the bills and the income. We examine one financial item at a time and figure out how much is due, when it is due, and how it will be paid. This is such a simple idea, but I’ve seen people change from feeling overwhelmed to feeling hopeful. It’s not hard to sort through bills, but it is time-consuming so the next suggestion can be helpful.
I have had several exercising friends over the years. It helps so much to have them exercise with me. It is helpful when they know about weight equipment and nutrition. But, even when they don’t, it helps to have someone to exercise with me. Finances can be the same way. Sometimes it just helps to have someone alongside you. It could be a spouse, friend, parent, or sibling. It really just needs to be someone who cares about you. If they have financial background, it can be helpful, especially if they are working on financial goals. We can all find someone who doesn’t mind helping us because it helps them too. It helps them to be motivated. It helps them to serve. So, it’s good for everyone. My cleaning buddy was my five year old. When she stayed with me, it was helpful. When she left, it was much harder.
That was not the first time I cleaned under the couch. In fact, my husband had cleaned behind it recently. We were both amazed at how quickly it became cluttered. Unless our family changes the habits that caused the clutter, the problem can recur. Clutter can easily come back. Financially, I have seen this happen. Oftentimes, we are making big changes, so it’s going to take more than one time. Just like exercising, each day we need to find motivation to do it. We also need to do this with our finances.
No matter how cluttered your finances may seem, you can work through it and remove the clutter. It’s such a peaceful feeling that is worth the effort.
Growing up, my family loved watching sports together. My younger brother wrote down all of the players' names and kept track of their stats as the games were played. I hadn't seen a Jazz game for a decade until Ty's boss gave us tickets earlier this year. We sat on the fourth row and were so completely entertained that my kids didn't fight or complain at all! It's exciting for our Utah Jazz to advance in the playoffs and play the Golden State Warriors! But, the most important statistics to us individually don't have much to do with the NBA playoffs.
Have you seen the classic game of Family Feud? Why do the family teams care what the “survey said.” Because, if the families guess the responses that were the most common answers, they can win the prize money. In a personal finance class I just taught, we took a financial quiz. I read a lot of financial surveys to prepare for this class. Three of the statistics from these surveys impacted me the most. More importantly than finding out what the surveys said, is to find out what you think about these statistics!
Could you cover an unexpected expense that cost $1,000? We’ve had a whole lot of rainy days here in Northern Utah the past couple of weeks. We don’t know when, but we know that it will rain. I don’t mind being wet, but I don’t like feeling cold, which always follows my getting wet. We have regular financial storms too. We don’t know when they will hit, but we know that they will hit. An emergency fund protects my family from getting rained on and being left in the cold financially. There are different opinions on how much an emergency fund should be. Because of the emergencies my family has experienced, I wouldn’t feel comfortable with an $1,000 emergency fund, but it’s a great place to start. Do you agree with having an emergency fund? If you were surveyed about having an emergency fund, what would you say? Has an emergency fund ever helped you work through changes in your life? Does an emergency fund matter to you?
I am a fan of having an emergency fund for many reasons, but I’ll share the most recent experience with our emergency fund. My husband Ty changed jobs 6 months ago, and we had a two month waiting period to enroll in the new employer’s health insurance plan. Ty’s employer generously offered to reimburse us for the cost of the COBRA health insurance coverage for the two month waiting period. However, we had to pay for the insurance first before it could be reimbursed. Our emergency fund allowed us to pay for that insurance coverage. When we were reimbursed, we deposited the money back into the emergency fund so that it will be there the next time that we need it. The emergency fund relieved and prevented a lot of stress for us. I recommend an emergency fund to you because it has helped my family adjust to life's changes.
Again, it doesn’t matter whether this survey is accurate, it matters what is true for you. Do you have a retirement savings account? Are you saving regularly for retirement? Just like the rain is sure to come in springtime in Utah, retirement is going to happen as we age. If you don’t have retirement savings, or if you haven't saved as much as you wished you had, it’s not too late to make a plan and work towards retirement.
Am I saving for retirement? Yes! Have I saved enough for retirement? No, but we are making progress. With so many financial emergencies and financial pressures, I understand how retirement can slip into the background of your finances. My husband and I try to keep them in the forefront and make retirement a priority for our family, but to be honest, sometimes we have to cut back our retirement savings. Our retirement contributions increased when our income increased and decreased when our income decreased. Although I’m not retired, I have mentors and friends who are retired. They advise me to save for retirement throughout my working life, and I trust them. I believe in saving for retirement!
Do you talk about money with your friends and family? If you have children, do you give them opportunities to save, share, and spend money? Do they understand that a $20 bill is worth much more than a $1 bill? My kids may think that I talk with them too much about money. I talk about it all the time because we use money all of the time.
My 5 year old daughter and I ran a lot of errands this past week. I told her we were going shopping and encouraged her to bring her Hello Kitty purse and five dollars. On the way to the store, she told me that she wanted a ball. I let her spend her money as she wanted. At the first store, she bought some cotton candy. The price rang up higher than the price listed. It turns out that the cotton candy was in the wrong spot on the shelf. I asked her if she still wanted it. She bought the overpriced cotton candy, and she was excited that she still had money left. At the next store, she saw the bulk bins of salt water taffy in the middle of the isle and bought that. She used her last few quarters to ride the Clifford ride at the front of the store. Although it was hard for me to watch her spend money on candy, I let her experience spending her own money.
I think she learned a lot that day. By going on the Clifford ride, she learned what a quarter looks like. (The machine only took quarters.) Even though I didn’t agree with her spending choices, I felt proud of her for learning what a quarter was and being able to spend money on her own. At the last store, she saw a tiara that she wanted badly, and I explained that she had enough money at the beginning of the day to buy the tiara, but she didn’t any left. She replied, "But I didn’t know they would have this.” We talked about figuring out what she wanted and then not getting distracted by other items.
Surveys are just one tool to find out how our personal finances are going. Are the statistics from these surveys true for you?
As you cheer for your favorite NBA team, I hope you think about the most important financial statistics for your life.
Last week I went to the Nature Center with my son for his class field trip. In our first activity, we walked along a path while using a field guide to identify birds. Because the birds were fake and wooden, we could clearly see them, and we could take our time to identify them.
Later on, the first grade students were given a pair of binoculars with these instructions: “Keep the binoculars hung around your neck. Don’t walk while looking through the binoculars. Look at the object first, then try to find that object in your binoculars.” My son Tommy broke most of those rules as we walked again looking for birds. The birds we tried to spot this time weren’t wooden birds, they fluttered wildly and moved constantly. Because Tommy was focused on his binoculars, instead of seeing all of the birds, he saw his binoculars.
Having binoculars, and knowing how to use them could help us find our goal of seeing and identifying birds. When youth save for your first big goal, it can be like trying to see and identify those wild birds.
Over the past few decades, I’ve learned a lot about saving. It’s NOT easy, but you can achieve challenging goals, and I’m cheering you on! I hope these tips will help you achieve challenging goals:
On our field trip, the guide helped us to set a goal to see and identify birds. Just like there are so many things in nature, there are so many things in life.
What is important to you? You can achieve any goal, but you can’t achieve every goal. Write it down! ”I want to save for a _____ (car, senior trip to Europe, mountain bike, etc.).” Then, I suggest you hang it up where you’ll see it. When we were saving for a car, everyone who came to my house saw our car savings chart on our whiteboard.
You will also need to decide why you want to reach that goal. Is it because that goal will give you more freedom? Will it help you achieve other goals? What other reasons do you have?
I learned this with the first graders. If they focused on too many things, they missed the birds. The guide first had them focus on the birds. Then, the guide had them focus on finding turtles.
Focusing on one goal will help that goal appear closer and bigger, which will help you achieve it. It will also help tune out the distractions. You can limit all other spending as much as possible in order to concentrate on the goal that has the highest priority. Use any unexpected income towards your goal. Most adults I talk to think it’s impossible to save for expensive items, especially cars. I’ve done it though, and I know it’s not impossible. I saved for a car as an adult, but now I realize I could have saved for it as a youth if I had defined that goal and focused on it.
When we started saving for a car I wanted an SUV, but as we worked towards the goal, we realized that a van would be better for our family at that time. It wasn’t a brand new car - far from it, but it was had low mileage and was a practical vehicle for my family. When the first graders had to focus on the bird that they wanted to see, they realized that as the bird moved, they had to move. Our goal may need to move and change as life does.
My son was so excited about his binoculars that it distracted him from focusing on his goal. There isn’t a magical app, spreadsheet, or savings tool that will achieve your goal for you. Binoculars can help us to focus if we use them to zoom in on one object.
In finances, we can use tools to help us focus. Adults in your life can really help you to focus in on that goal. Our family printed a picture of the car we wanted and had a chart showing how close we were to the goal. Although the amount I spent on the car changed, and the type of car changed, the goal didn’t change.
Depending on your personality, use the tool that will help you. If you love details, use a spreadsheet. If you don’t love details, use a picture chart. Youth are so good with technology, that using an app would work great for them. As long as it helps you focus and track your progress, it will be best for you.
Focusing on one thing is a challenge for me, but I’m learning to do it because it’s essential!
Have you ever wondered about the real differences between your savings and checking accounts? Many people realize there must be more to it than just the fact that one includes checks and the other does not. However, they just don't know what those differences are. So let's look at some of the technical differences that define each account type.
Did you ever wonder how much cash your credit union keeps in its vaults? It's not all the money that members have deposited into their accounts. If that were the case, the credit union could never lend or invest money, and you could never earn any dividends on your deposits. Your credit union would simply function as a gigantic communal piggy bank.
There are laws determined by the Federal Reserve's Board of Governors, called reserve requirements, which govern how much cash financial institutions (including credit unions and banks) must hold in reserve against the accounts at that institution. The portion of federal regulations that contain these rules is called Regulation D - Reserve Requirements of Depository Institutions.
The percentage of funds that must be kept by institutions is currently 10%. But here's the catch: Only accounts that are defined as "transaction accounts" are considered when calculating this ratio. Other types of accounts do not have the same requirements. If you think about it, it makes perfect sense.
Transaction accounts, such as checking accounts, are used by account holders on a daily basis for their personal finances. That being the case, there is a great likelihood that the credit union will need to come up with a portion of those funds each day. On the other hand, non-transaction accounts, such as savings accounts and money markets, are intended more for long-term savings, so account holders usually leave the deposited funds in the account to grow over longer periods of time.
This also explains why savings accounts frequently offer higher dividend rates than checking accounts do: because financial institutions can use more of the funds on deposit to make money with savings deposits than they can with checking deposits.
What accounts fall into the category of transaction accounts? These include demand deposit accounts, also called checking accounts and NOW (negotiable order of withdrawal) accounts.
What characteristics do transaction accounts share? The depositor is allowed to make an unlimited number of payments and transfers from the account to third parties as well as to other accounts belonging to the depositor. The account holder can perform these transactions in various ways, such as by writing checks and by using a debit card and online payment services, among others.
Which accounts are non-transaction accounts? These include savings accounts and money market accounts. What characteristics do they share? Firstly, financial institutions must reserve the right to require at least seven days of written advance notice before account holders intend to make a withdrawal. This right is rarely if ever exercised, but it is included in the account agreement. Additionally, the account holder is limited to making no more than six "convenient" transfers or withdrawals per month.
These "convenient" transfers include preauthorized automatic transfers, transfers and withdrawals requested by phone, fax or made online, checks written to third parties and debit card transactions. Less convenient transactions, however, are unlimited. This includes any transactions made in person, by mail or at an ATM, and phone withdrawals requesting a check mailed to the account holder.
If a depositor tries to exceed the six-per-month transaction limit, the financial institution is required to refuse transfer privileges or convert the account into a transaction account. When this happens to them, many people are unaware of the laws in Regulation D (and never bothered to read their account agreement) and think their credit union or bank has a strange policy. But the truth is, if you don't like it, you're going to have to take it up with the Federal Reserve. Your financial institution is just following regulations.
Of course, there are simple solutions that allow savings account holders to avoid the issue. If you need to make more than six payments or transfers from your savings account, you must be up for a little more inconvenience and may need to complete the transactions in a less high-tech method than usual.
Did you ever discover, by mistake, that your savings account has limits to the number and type of transactions? What happened, and how did you deal with it? Share the experience with us in the comments.
Whether you're a regular news junkie or you rely on your better half to keep you updated on the latest, you'll get the same conflicting messages about the state of today's economy. One day you'll hear about rising wages, and the next day you'll read about the lagging growth in the GDP, or Gross Domestic Product.
The only thing certain about today's economy is that it is uncertain. While things look relatively stable now, no one can guarantee what the next few years will bring.
Fortunately, you don't have to give up on the home of your dreams because of a fluctuating economy. Read on for four steps you can take to make sure your money - and your house - are completely safe regardless of what's going on.
The magic number for down payments has been established at 20% of the home's value. Those who can't afford to plunk down that much money, though, will often put down a much smaller amount.
If you can't come up with a down payment worth at least 5% of the home's total value, you may not be ready to buy a house just yet, because having little or no equity in a home could mean taking a loss should you need to sell it. Also, not making any profit from selling your home means you won't have funds to cover the down payment on your new home and offset the closing costs. That's why it's always best to own as much of your house as you can.
If you've been hoping to qualify for a more expensive home, you may be planning to push the limits of your mortgage approval. In fact, it's best to buy a house that comes in well under your approved limit, allowing you to maintain a lower debt-to-income ratio. This will give you breathing room and keep your mortgage payments from dwarfing your monthly budget.
Also, if the economy worsens and you feel the effects, you'll have a smaller mortgage payment to scrape together each month.
Here's how to cut through the hype of the real estate market and find the Realtor that is truly best for you:
A professional inspection before signing on a home is a given, but did you take a careful look around? You don't want any unpleasant surprises after you've moved in.
Check for the following:
Don't forget to call, click or stop by Wasatch Peaks Credit Union to learn about our fantastic programs on home loans and mortgages before you start your search. We're here to help you with the finances as you find the home of your dreams!
Did you recently purchase a new home? What did you wish you'd known before you started on your search? Let us learn from your experience; share your wisdom with us in the comments!
In my blog last week, I talked about how life’s experiences provides opportunities to teach children. Almost every day we spend some time in the car. This week is our family’s spring break from school, and we have already spent 6 hours in the car. A lot happens in car rides. Some of it is good, some of it is not - there was plenty of poking and fighting on this ride. There was also some sleeping - I sleep through a lot of road trips.
Car rides are also time for storytelling and teaching. Our family loves to listen to stories on car rides. My kids really love fiction novels like Michael Vey. Right now we are listening to Treasure Island. Sometimes, I put in an audio CD about finances. We often listen to kid songs in the car, but sometimes we listen to the Dave Ramsey show on talk radio. This introduces them to financial topics. This exposure to financial topics allows them to ask questions and converse about finances. Car rides provide a lot of opportunities to talk and teach.
I drive my kids to and from school everyday. On one of these rides, my minivan was making an annoying sound and we could not get it to stop. My daughter finally screamed, “I can’t take it anymore! We need a new car.”
That opened up discussion about loans. I taught her how much cars cost and honestly told her that we couldn’t afford to buy another car, so we would have to get a loan if we were to buy another car. We talked about interest rates. After that, she didn’t complain about our car. It was a good conversation that came out of that annoying noise that almost drove us crazy.
On another ride, we discussed mortgages. Each child learns on their own timetable. One of our children understood mortgages at about age 7. Occasionally he asks us how much we owe on our mortgage loan. He also asks other people if their house is paid off. If it is not, he asks how much they owe on their house. We are working on teaching how to tactfully talking about finances.
My other son takes more time to learn financial concepts. There’s no need to worry that it takes him longer. Each contact with personal financial topics will help him learn financial principles.
We went to a gymnastics meet and my daughter cheered for BYU. They all support different schools. My son likes whatever team is winning.
Kids talk about college as they watch sporting events. This opens up opportunity to talk about how they will pay for college and teach them about their options. We have told my daughter that if she chooses to attend BYU, she will need to pay for housing and food, along with tuition and books. It is important to be informed about loans so that you know what you are agreeing to pay.
How did you pay for college, cars, or mortgage? Please tell your children your story. Children love stories! We tell them that we worked our way through school. I didn’t prepare for the costs of college. My parents and grandparents helped pay for college expenses.
Through conversation, several key concepts can be taught to children:
While kids are strapped in their seat belts, you have the opportunity to talk finances. They experience an introduction to loans, and over time they can learn and understand what a loan is and what makes up the loan. How have car rides helped you talk to and teach children?
We often hear Credit Union’s say that we need to get back to our roots. The news about Wells Fargo’s sales culture made most of us realize that we cannot bow to the almighty dollar as we try to increase income in a very competitive market.
Over the years we have seen sales cultures transform into bad selling habits, ill-conceived incentive programs, and sales goals that could take us close to repelling and antagonizing our members. We must ensure that our sales training, incentives and other sales practices don’t get us in the same quandary.
Rather than looking at our members as a short term transaction, we hope that we position ourselves as a trusted financial partner in all of your important life events. As we do this, we hope, instead of just pitching products, we will use relationship-building skills that will incorporate cross-selling of other products but at a higher level. We hope our mindset is, “How can we improve your financial well being?” and not, “How many products can we sell to you?”
As we do these things, we hope that as you live your lives and finances come into question that Wasatch Peaks Credit Union is who you think about.
Our mission statement is “Exceeding expectations one member at a time.” Hopefully, your expectations are being exceeded.
C. Blake Burrell