APRIL 2018 IHMVCU.org
THE BEGINNERS GUIDE TO
DEBT CONSOLIDATION
ALSO INSIDE >> Hometown staycations the whole family will love >> Why collecting cans is no way to make extra cash >> The essential home-buying vocab you need to know
save | spend | borrow | plan
IN THIS ISSUE SAVE »Why your rainy-day fund is just as important as an emergency fund »Can collecting: legitimate side hustle or sticky situation? »Spring & summer Member Advantages
IN THE QUAD CITIES 2839 AAA Court Bettendorf, IA 52722 201 East 3rd Street Davenport, IA 52801 2102 East Kimberly Road Davenport, IA 52807 3646 West Kimberly Road Davenport, IA 52806 358 17th Avenue East Moline, IL 61244 801 Tech Drive Milan, IL 61264 1118 5th Avenue Moline, IL 61265
SPEND
2101 52nd Avenue Moline, IL 61265
»Family Staycations the whole family will love
4206 5th Avenue Rock Island, IL 61201
»5 ways to deck out your rented home on a budget
BORROW »Should you pay off your loan faster or buildup savings? »12 mortgage words you need to know
685 Avenue of the Cities Silvis, IL 61282
OUTSIDE THE QUAD CITIES 1703 11th Street DeWitt, IA 52742 404 West Carl Sandburg Drive Galesburg, IL 61401 337 Tenney Street Kewanee, IL 61443
PLAN »The beginners guide to debt consolidation »When to buy everything (free download!)
2 AmericInn Way Monmouth, IL 61462 334 Washington Street Prophetstown, IL 61277 403 South Gear Avenue West Burlington, IA 52655 309-793-6200
UPDATES »The scoop on our new HQ »EMV Debit cards on the way »Upcoming events
2
PATHFINDER APRIL 2018
800-722-0333 Federally Insured by NCUA Equal Housing Opportunity NMLS #463074 IHMVCU.org
SAVE
Why saving for a
rainy day is just as important as an emergency fund BY AMANDA SPURGEON Imagine your boss pulls you aside after you’re done reading this article and tells you you’re being let go. Would you be prepared to live off your savings for another month if you lost your job today? If you said no, you’re not alone. In fact, the 2016 Federal Reserve Board Report shows that nearly half of all Americans say they couldn’t cover a $400 emergency expense without selling something or borrowing the money.
IHMVCU.org
3
If a few hundred dollars is enough for you to resort to racking up new debt, creating a solid savings plan is crucial to your financial wellbeing. But just socking all your extra cash away into one account may not make the most financial sense. Distinguishing between an emergency fund for unexpected purchases and a rainy-day fund for everything else could be the key to being prepared in a financial emergency.
What’s the difference?
Your emergency fund should be used for just that: financial emergencies. That means the kind of expense that threatens major financial upheaval and couldn’t have been predicted with any certainty. Things like divorce, unexpected job loss or the diagnoses of a major illness would all fall into the emergency category. Your rainy-day fund should be for everything else: occasional expenses like your vehicle registration, planned spending like a family vacation or a minor financial hiccup like a surprise car repair. Here’s an easy rule of thumb: if you’re not shocked by the event that causes an expense, it probably shouldn’t come out of your emergency fund.
What’s in a name?
Making a distinction between these two kinds of savings might seem kind of arbitrary. After all, it shouldn’t matter what you call your savings as long as you’re doing it, right? Not necessarily. It comes up in fairy tales and pop culture all the time: knowing the name of something gives you power over it. Correctly guessing Rumpelstiltskin’s name frees the miller’s daughter from captivity; letting the name Baggins slip to Gollum allows the latter to track Bilbo in The Hobbit; calling Voldemort by his name instead of You Know Who gives Harry Potter the strength to conquer the fear of his enemy. This behavioral psychology isn’t limited to the world of fantasy: it can apply to your savings account, too. Simply calling one account your vacation savings and another your emergency fund is enough to visualize a purpose, and prevent yourself from dipping into it for any reason other than what you’ve dictated.
4
PATHFINDER APRIL 2018
Dave Ramsay’s famous envelope budget is a notable example of this working in real life. The act of naming creates a mental barrier that can prevent you from paying for your entertainment from your grocery fund when the correct fund is tapped out.
You can save for multiple things at once.
If you struggle to save at all, suggesting that you should have two different savings accounts probably sounds ridiculous. But, with a little sacrifice and planning you can absolutely save for both things at once. Even if you don’t have any savings right now. The key is to employ just one more mental trick: automate your savings. Set up your direct deposit so that a specific amount goes into each of your savings accounts without ever touching your checking. This little act of separation increases the likelihood that you actually save this money. If you’re prone to overspending, putting all your money directly into your checking account makes it all too easy spend it all and plan to save next month. The ultimate goal for your emergency fund should be somewhere around 3-6 months’ expenses, but it’s totally crazy to think you can save six months’ expenses in the same amount of time. You still have to pay your bills and have a life. Start by putting a couple dollars into each account every month, and adjust as you become more comfortable with saving. Changing the way you spend or save is never easy, so it’s important to be realistic with yourself about what you can actually accomplish in a set timeframe. Real life can be crazy, and you’ll probably never be completely prepared for every bump in the road. Saving for unexpected expenses and potential spending in two different buckets can help get you closer to feeling financially secure in the face of the unexpected. Ready to get started? Our Rainy Day Savings calculator is a great way to set a realistic goal and start visualizing your spending! n
IHMVCU.org
5
SAVE
Collecting cans Legitimate side-hustle or sticky situation? 6
PATHFINDER APRIL 2018
BY SARAH-BETH FLOYD Sticky, slimy and wet. That’s how the can collecting journey started for this intern. From an outside perspective, collecting cans for extra cash might seem like a great idea. But throughout this monthlong adventure I’ve gained noteworthy insight on what it means to collect cans for a side hustle. Is the time, money and potential profit worth it? Lucky for you, I’ve done the dirty work so you can find out BEFORE you start getting called, “can girl.”
97 cans = $6.45
The two biggest factors to consider are the time spent and the (potential) money made.
Time
Obviously when you’re collecting cans you must go somewhere to pick up the cans – whether it’s the grocery store for your own soda supply or pick them out of recycling bins. You might think that people just recycle their cans, but think again! I spent so much time calling business to ask if I could take their cans and got rejected by every single place but Coffee Hound in Bettendorf (Thanks, dog.). When I wasn’t calling local businesses, or picking up cans at Coffee Hound, I was raiding my family’s recycling bins. What a glorious way to get extra cash. Not only that, but stores will only accept returned cans if they’re clean and dry. I had to haul all
the cans up to my third-floor apartment, rinse them out, let them dry and then haul them back to my local HyVee. The drive was easy because it takes me two minutes to drive to the closest HyVee, but prepping my cans wasn’t as easy. Washing all 97 cans took about 40 minutes and drying took about an hour. Then I would have had to lug that huge bag of cans down 3 flights of stairs, squish them into my tiny car, and drive to HyVee. Only to get a million awkward stares because a 23-year-old girl is carrying in a huge bag of cans. Not my best look.
Money
Each can earns a five-cent return, so for all 97 cans I’m looking at $6.45. After coming to this sad realization, the cans are still sitting in two large garbage bags in my office at home. It
just didn’t feel worth it to take them back to the store for such a small profit. How’s that for can collecting? I also have a large bag sitting in my car that would make me another $3. But after going through all the work to haul the first 97 up the stairs, wash, dry and make space for them on my tiny apartment counter, I decided it wasn’t worth it. $3 for that much work? No way, Jose. All in all, can collecting is not a legitimate way to make extra money. As a busy person, my time would be better spent doing homework or working than scrounging up cans for change. And I mean, who wants to spend their time head first in a recycling bin? NOT ME. If you need a side hustle and collecting cans isn’t worth it for you, check out our blog on side hustles worth your struggle. n
IHMVCU.org
7
SAVE
Our spring and summer
Member Advantages will make you feel like you’re swimming in money. From pools and baseball games to live music and waterslides, our discounts make it possible to do it all! See what’s in store for your wallet this summer at IHMVCU.org/MemberDiscounts.
8
PATHFINDER APRIL 2018
SPEND
Hometown staycations your family will love BY CHRISTINA CRESS
A trip to Europe or Disney World sounds like fun, right? Sometimes it’s just not possible. Either you have no time or no money preventing you from taking that grand vacation of your dreams.
Sometimes the best vacation is one you can take without ever leaving town. Have you ever stopped and looked around? Take a minute or two to discover what’s in your own town and you might be surprised at how much fun you can have in your own zip code!
IHMVCU.org
9
Museums
Museums offer hours of exploration and fun for kids and adults alike. Plus, these trips don’t need to be planned months in advance, which means you can have a fun filled day on a moment’s notice. Here are a few fun & affordable* museums in your area: *All prices based on a family of four w/ kids ages 2 to 17. Putnam Museum & Science Center www.putnam.org This museum allows handson fun for everyone of all ages! It’ll cost around $30 for general admission tickets for the whole family. Want to pet a penguin? An Augmented Reality experience puts you into the world of different ocean creatures. Want to watch a documentary in the National Geographic Giant Screen Theater? You’re looking at $50 total for the outing. Kids two and under are free. Don’t forget the food! Snacks like popcorn and hot dogs add additional cost to your family fun day, so plan to spend extra or eat before you go. Bettendorf Family Museum www.familymuseum.org You’re looking at $36 total to explore this museum. Kids under one are free. This museum is full of opportunities for the kids to experience hands-on learning and role playing. Explore Fox Hollow, a kid-sized village where your littles can use their imagination to become a fireman, veterinarian or any other number of dream jobs. They can pick vegetables and harvest a field on George’s Farm, discover the
10
PATHFINDER APRIL 2018
AREA PARKS OFFER PLENTY TO DO. ... TAKE A PICNIC LUNCH, SIT BACK AND LET YOUR KIDS ENJOY THE PLAYGROUND OR YOU CAN JOIN IN TOO! giant, er. . . Lil ’Ssippi River Valley (it’s the Mighty Mississippi only much smaller). The Iowa Children’s Museum www.theicm.com Your family will pay around $36 at this museum. Kids under one are free. There’s something for all kids to experience here: music, art, planes and more. They can even dress up and put on a play in the PlayWorks Theater. Galesburg Discovery Depot www.discoverydepot.org $24 allows your family hours of fun at this museum. Kids under one are free. Your kids can create works of art, become a First Responder and even play with a largescale Lite Brite! All activities at this museum are designed to promote critical thinking and hands-on learning. John Deere Pavilion Check out John Deere’s history! Explore tractors, combines, a dozer – you and the kids can climb up and into some of John Deere’s biggest machines. Best yet, it’s free!
Fairs & events
Look for local fairs and events. That carnival atmosphere can really make it feel like you’ve
traveled far from home. Here are some to consider: Galesburg Railroad Days, Burlington Steam Boat Days and Aledo’s Rhubarb Festival take place in June. The Mississippi Valley Fair in Davenport takes place August. Tug Fest can be enjoyed from the shores of Port Byron or Le Claire in August. Kewanee’s Hog Days Festival is Labor Day weekend. Some of these festivals charge admission. All food and rides cost extra, so plan accordingly. If you’re a family of music lovers, check out Live@Five in the River Music Experience courtyard in downtown Davenport: a family friendly, free outdoor concert series taking place every Friday at five o’clock, June – September.
Parks & nature preserves
Area parks offer plenty to do. Most towns and cities have free public parks. Take a picnic lunch, sit back and let your kids enjoy the playground or you can join in too! Have your phone? Take it out and start taking pictures to make those family memories last longer than just the day. Scott County Park The largest park in Scott County can be found in Eldridge, IA (just 20 minutes from the Quad Cities) has ample picnic areas, a pool (cost for admission), and plenty of trails to explore. Take a trip back to the 1800s in the historic Pioneer Village! Explore a blacksmith shop, an old school house, stop in at the Soda Shop for some ice cream. This is a seasonal attraction open April through October. Camping is also an option. Camping rates
and times vary throughout the season. West Lake Park 620 acres of land with four lakes for fishing and swimming. Rent paddle boats or have a picnic. Enjoy 24 holes of disc golf at their championship caliber disc golf course. Want to stay the weekend? Pick from two campground areas. Camping rates and times vary throughout the season. Nahant Marsh www.nahantmarsh.com This is one of the largest urban wetlands on the Upper Mississippi River. This nature
preserve offers education and fun. Take a hike along their nature trials or join a guided hike the first Saturday of the month.
Sports & outdoor fun
Take in a ball game and Ferris Wheel ride The Quad Cities River Bandits season starts in April and goes through August. Tickets to the game range from $28 to $80 for a family of four. If you’re just taking in a game, our BOGO (buy one, get one free) will cut your cost in half (wink, wink). Additional cost may vary depending on how much stuff you plan to do with your family and
where you choose to sit. Throw in food for four and rides in the Family Fun Area for two kids you may be looking at a lavish outing. The good news is that it’s still cheaper than a trip to Disney World. Explore the Mississippi River Whether by bike, boat, or foot the Mississippi River offers many bike trails and walking paths at no cost. Feeling up to a boat ride? For a price, you can take a cruise on the Channel Cat Water Taxi. Your family can enjoy the Channel Cat for $24 if your kids are 10 and under. Kids under two are free. Kids over 10 pay the adult admission price. n
For more ideas check out your local visitor’s bureau! Where do they recommend going? What do they tell tourists to do? If you don’t have a visitor’s bureau, head to a local hotel and see what brochures are available. Chances are they feature some great local places, some of which you may not have visited before. And don’t forget that IHMVCU members enjoy discounts to some of the area’s best events and attractions. Learn more about our member-exclusive discounts at IHMVCU.org/MemberDiscounts.
IHMVCU.org
11
5 SPEND
ways to deck out your crib
RENTER’S STYLE BY SARAH-BETH FLOYD
12
PATHFINDER APRIL 2018
Having trouble making your rented house or apartment “home”? It may seem more difficult for renters to spruce up their space without sacrificing their security deposit, but removable wallpaper, new lighting, and accessories create a lot of unexpected opportunities. Make the process of updating your space even easier with our price and security deposit scale for every customization; you’ll know what to expect and how to budget before you start shopping.
Make it POP with removable wallpaper
Adding a fun pattern/color to a wall can be the perfect temporary touch. Buy some removable wallpaper, hang it up and BOOM! Your home just went from dreary and dull to modern and exciting. And if removable wallpaper is out of your budget, Washi Tape is a way cheaper alternative. $ Rating: $$ Security deposit damage:
Get creative with storage
It’s easy to have lots of clutter in a fun size apartment/house. Because let’s be real, you don’t have a lot of space. But it’s also easy to creatively organize. When you’re shopping for furniture, look for pieces that can double as storage like an ottoman or a bookshelf headboard. If that’s not your style, look for ways you can hang your items to get it a little out of the way. For example, mounting your tv, hanging some of your mugs, or hanging a shelf. $ Rating: $ Security deposit damage:
$ = Very affordable $$ = Affordable $$$ = Expensive = No harm to your security deposit = Potential to harm your security deposit = You won’t get your security deposit back
Hang it
Ever thought about adding some art or any other décor to your walls? This is one of the most enjoyable parts of decorating and can be extremely cheap! Head on over to Hobby Lobby and you can find plenty of ways to deck out your crib (usually for 50% off). Pro tip: use command strips instead of nails so you don’t have to fill any holes when your lease is up. $ Rating: $ Security deposit damage:
Make it shine with new lighting
Rental apartments and houses are known for awful fluorescent lighting. Luckily, lighting is a super easy temporary fix that can give your place some personality. Floor lamps are the easiest to add, but if you’re running into the clutter issue explained above, you can also switch out overhead lights. Just make sure you read your lease to make sure it’s not prohibited, and keep the originals to put back before you leave. $ Rating: $$ Security deposit damage:
Accessorize, accessorize, accessorize
Time for those personal touches to shine! Buy a couple succulents, find a rug or add some curtains that liven up your place. These items may seem insignificant, but they have the potential to drastically change a space. A good store to check for these items is TJ Maxx where you can always find a good deal. $ Rating: $$ Security deposit damage:
Making your rented house a home isn’t as difficult as you might have once thought. With your new knowledge, you can confidently decorate your new space without hurting your security deposit or your wallet. So, go ahead, go crazy in Hobby Lobby or spend hours in front of fun wallpapers at Target. You deserve it. Now that your home has a lot more “you” in it, protect yourself! Check out our renter’s insurance to make sure you’re always covered. n
IHMVCU.org
13
BORROW
debt
sa
ve
sav
e
Build up your savings?
14
PATHFINDER APRIL 2018
Pay off your loan faster?
deb t
e
BY AMY ORR Despite wishful thinking, I’ve accepted the fact that I’ll never be one of those people who find a lost Jackson Pollock painting in the garage that’s worth $15 million or win $22.8 million with a $7 lottery ticket. I’m thrilled when I find $10 in my coat pocket. It may not be $15 million, or even $1,500, but what if you found yourself with an extra $50 each month? What would you do? Pay extra on your loan or build up your savings? Common financial advice would recommend putting any extra money toward your debt, which would lower the total cost of interest and allow you to pay off the debt faster. But we all know how the real world works – just because it makes the most sense, doesn’t mean it’s the best choice. Even my friends have mixed opinions about it. I did a quick Facebook poll and 57 percent said they’d pay extra on the loan, the other 43 percent would save it. “Pay off the loan. The interest on the loan will cost you more money than any interest you’ll earn on your savings account.” “Build up savings so if you need a new furnace or something, you don’t have to add on to the debt.” “Get the loan paid as quickly as you can and then once it’s paid, put that money in savings.” “It depends on the loan, honestly. If it was my student loans at a super low interest rate, build up savings. If it’s an interest rate over 5 percent or so, pay extra. (I don’t actually do this, this is just what I think I SHOULD do.)” Reality is, there is no right answer. It depends on where you are on your
financial journey. Maybe the better question is to ask – do you have an emergency fund? If your answer is no, it may be wise to use that extra $50 to build up your savings. In a perfect world, we’d all have 3-6 months’ salary tucked away for the unexpected. But until Publisher’s Clearing House shows up on your door step with a big check, you’re on your own. So, aim for $1,000 to start. Want to build up your emergency savings quicker? Check out our One Year $1,000 Savings Plan. Already have an emergency fund? Awesome! Keep up the good work. As long as you’re making the minimum payment on your loans, consider adding that extra $50 to your credit card balance or loan with the highest interest rate. For an auto loan, mortgage or student loan, it won’t change your monthly payment, but it can reduce the amount of interest you’ll pay long term. If it’s a credit card balance, you could drastically reduce the time it takes to pay it off. They say you can’t have your cake and eat it too, but I disagree in this situation. What if you could pay off your loan faster AND build up your savings? The best of both worlds, right? Consider splitting your $50 – half toward your loan, half toward your savings or emergency fund. It’ll take a little longer to pay off the loan (and you’ll be paying a little more in interest), and a little longer to hit your savings goal, but it can happen. Whatever you decide, just do it. There’s no wrong answer, just three right ones. Any way you look at it, you’re coming out ahead. Looking for more ways to improve your financial health? It’s never too late to start a New Year’s resolution or do a little spring cleaning. n
IHMVCU.org
15
BORROW
12
mortgage words
you need to know before you buy your first home BY AMANDA SPURGEON
Making the move from renter to homeowner this year? Don’t get discouraged by tricky vocab. Here are some common words you might hear along the way:
1. Adjustable-rate mortgage (ARM)
An adjustable-rate mortgage is a loan with an interest rate that changes based on market fluctuations. ARMs may initially have a lower interest rate than a fixed-rate mortgage, but keep in mind that that rate could go up, which may result in a higher monthly payment.
2. Annual percentage rate (APR)
Your annual percentage rate, or APR, includes your loan’s interest rate, discount points (see 8) and other financing costs. The higher your APR, the higher your payment will likely be over the life of the loan. The APR is usually higher than the interest rate, because it encompasses multiple loan costs
3. Down Payment
Your down payment is the amount of money you’ll put toward the sale price of your future home. It reduces
16
PATHFINDER APRIL 2018
the amount of money you’ll have to borrow. How much money you need to put down depends on the type of loan you choose. Mortgage lenders generally require between five and 20 percent, though some first-time home buyer programs offer mortgages with down payments as low as 3 percent.
4. Earnest money
Earnest money is essentially a cash deposit you make to the seller if they accept your offer to buy the home. It’s a way to tell the seller you’re good for the rest of the money and you won’t back out before the sale is completed. If you do back out, the seller can usually choose to keep your earnest money.
5. Escrow
Escrow is when an impartial third party holds on to something of value during a transaction. That earnest money check you write to the sellers? It’s held in escrow by a third party until you and the seller come to a final purchase and sale agreement so that no one can use it as leverage to affect the loan terms.
You’ll probably also hear about an escrow account from your mortgage lender. An escrow account is where your mortgage lender holds funds for your homeowners insurance and property taxes. They’ll collect them as part of your monthly payment and make the payments when they’re due. An escrow account allows the lender to guarantee that those payments will be made, therefore protecting their investment.
6. Fixed-rate loan
Fixed-rate mortgage is a loan with an interest rate that doesn’t fluctuate. You’re locked into the interest rate for the life of the loan, allowing you to accurately predict your future payments.
7. Good faith estimate (GFE)
A good faith estimate or GFE is a document from your lender that includes the breakdown of estimated payments due at the closing of your loan. This document not only allows you to plan ahead for these expenses, but also gives you a chance to shop around and compare closing costs with other lenders.
8. Point
Mortgage points are fees you pay directly to your lender at closing in exchange for a lower interest rate. This is also sometimes called “buying down the rate.” One point costs 1 percent of your mortgage amount or $1,000 for every $100,000.
9. Pre-approval
Pre-approval comes after you fill out a mortgage
application. Your lender will take a hard look at your financial situation—pull your credit, assess debt-toincome ratios and verify your employment. When it’s all said and done, you’ll be given a specific amount for which your mortgage is approved. You’ll probably also get a written contingent agreement allowing you to shop for homes at or below that dollar amount.
10. Private mortgage insurance (PMI)
PMI protects your lender if you default on your loan, but you pay the premiums. It’s a requirement for any mortgage loan with a down payment less than 20 percent. There’s really no benefit for the borrower, so it’s best to avoid it if you can. If you opt for a lower down payment, you’ll have to make PMI payments until the balance of the loan reaches 78 percent of the home’s original value.
11. Lien
To sell or refinance a property you must have a clear title of ownership. A property lien is a legal claim on a residential property for the homeowner’s unpaid debts making the title unclear. If a lien is placed on a home’s title, the owner can’t legally sell, refinance or otherwise transfer the title of ownership to the home.
12. Market value
Market value is the price a home will most likely sell for in an open market transaction. This value is based on different elements of a home, like exterior condition, internal characteristics, comparable homes in the area and location. n
Every 30 seconds, a RE/MAX agent helps someone FIND their perfect place. IHMVCU helps you BUY it. IHMVCU.org qcelitehomes.com Subject to credit approval. Equal Housing Lender. NMLS #463074. IHMVCU is not compensated by REMAX Elite Homes. The credit union does not warrant or guarantee any services by REMAX Elite Homes.
PLAN
18
PATHFINDER APRIL 2018
THE BEGINNERS GUIDE TO
DEBT CONSOLIDATION BY AMANDA SPURGEON
Debt consolidation is a personal finance strategy that rolls multiple debts into one loan with one payment. If you’re feeling overwhelmed, consolidation might make your debt more manageable and help you to see a light at the end of your debt-pay-off tunnel. So how do you know if this is a smart financial move for you? As a Financial Advocate at IHMVCU, Jon Schrader helps people find success on their financial journeys every day. When it comes to debt, he’s seen it all: the good, the bad and the ugly. We sat down with him to get the nitty gritty about debt consolidation -when it can be a tool for financial success and when it can cause more harm than good.
What is debt consolidation?
“Debt consolidation is one way to make your monthly
payment obligations a little more manageable,” Schrader says. “And it should help you save some money in the long run, too.” Usually people choose to consolidate unsecured debts, like high interest credit cards, home improvement loans and personal loans, into one loan or line of credit with a lower interest rate and one monthly payment. If you’re considering this route, remember that debt consolidation is NOT debt elimination. If you choose to consolidate your debt, you’ll still need to make monthly payments. But, if done correctly, it should reduce the amount of interest you’ll pay over time.
How does it work?
There are a lot of different ways you can consolidate debt, but most commonly people seek to consolidate with either a fixedrate personal loan or credit card
balance transfer. A credit card balance transfer: To significantly reduce the amount you pay in interest, look for a 0% balance transfer offer and pay off the total debt before the promotion ends. If you can’t find or don’t qualify for a 0% offer, transferring your balances to a card with a significantly lower interest rate can help too. Here’s an example from Schrader of how a transfer, even if it’s not at 0%, can help you pay less over time: A credit card at XYZ Bank with a $10,000 balance and 29.99% APR will have a monthly payment of about $300. If you never charge another cent on that balance, it’ll take you 73 months and cost you $11,800 in interest. If you transfer that $10,000 balance to an IHMVCU credit card at 9.9% APR, your monthly payment will only be $200. If you never charge another cent
IHMVCU.org
19
on that balance, it’ll take you approximately 65 months to pay off and cost you $2,960 in interest. In this situation, you’ve saved $8,840 in interest just by transferring your balance. A low-interest personal loan: Look for a loan with a low, fixedrate of interest. A fixed rate allows you to calculate exactly what you’ll end up paying at the end of the loan without any surprises due to changes in the market. Use the loan to pay off your debt, and pay off the loan in installments over the set term. If you can’t find a good credit card balance transfer offer, Schrader suggests a personal loan as the next best option. Here’s another example: Let’s say you decide to take out a consolidation loan to pay off your $10,000 credit card balance at XYZ Bank using your car’s title as collateral. A five-year loan at 5 percent will have a monthly payment of about $190 and will only cost you about $1,300 in interest. In this situation, you’d save $10,500 compared to leaving your balance at XYZ Bank, and pay $1,660 less than if you’d transferred your balance to an IHMVCU credit card at 9.9% APR. If either of these situations sounds beneficial to you, keep in mind that the rate you’d get on any loan, credit card or balance transfer offer is dependent upon your credit score, so how much you’ll pay will vary.
Why consolidate?
“The main reason to consolidate is to save money,” Schrader says. “You can look at the money saved by consolidating in two
20
PATHFINDER APRIL 2018
“THE MAIN REASON TO CONSOLIDATE IS TO SAVE MONEY. YOU CAN LOOK AT THE MONEY SAVED BY CONSOLIDATING IN TWO WAYS. EITHER MONEY SAVED ON THE MONTHLY PAYMENT(S) OR TERM OF LOANS SAVINGS.” ways. Either money saved on the monthly payment(s) or term of loans savings.” If you’re over extended and struggling to keep track of all your payments, knocking all your loans down to one will make it easier to keep track of your money and might even reduce the amount you pay every month. But beware of getting wrapped up in a loan that costs you way more over time. If the payment on your new loan is much lower than what you were paying before, make sure the term isn’t so long that it costs you significantly more in interest than you would’ve paid if your debts were kept separate.
There are some downsides to consider before you pull the trigger on a consolidation loan, especially if you use your car or house as collateral. “It can put your home or vehicle at much greater risk,” Schrader warns. “If you have unexpected expenses and need to use your home’s equity, it may be tapped out. Using your car title will at the very least affect your insurance. Lenders require full coverage to protect their investment and if you’re only paying for liability now you can expect to pay more.”
Who should consolidate?
Debt consolidation is usually a sound method for people who are successfully managing their debt now, but might benefit from reorganizing their debt into one monthly payment or stand to save a significant amount of money by finding a lower interest rate. To find out if debt consolidation makes sense for you, find the total amount you owe by adding up all your consumer debts: credit card balances, medical bills and personal loans. Don’t include your mortgage, auto loans or student loans.
If you find yourself in that situation, using collateral like your home or car could help you score a lower payment and save money overall.
If your total owed is less than half of your gross annual income, and you think you can reasonably pay it off within about five years without stretching yourself too thin, you might benefit from debt consolidation.
“I had one member use his restored classic car to pay off his credit cards,” Schrader explained, “He chose to raise his payments a little, but had those consolidated debts paid off in under three years.”
Like other debt reduction practices, a consolidation loan can give you the mental boost you need to keep paying your debt until it’s eliminated. Assuming you make your all your monthly payments on time, a
termed-loan like an auto or home equity can help you to see the light at the end of the tunnel. If you took out a five-year loan, you know your debt will be paid off in five years. That can feel really good and keep you motivated.
Who shouldn’t consolidate?
If you can reasonably pay off your debts within a year, or your credit is bad to very bad, debt consolidation may not be helpful for you. A low credit score can make it hard to qualify for a loan that’ll save you money by reducing your monthly obligation or by reducing the total amount of interest you pay overall. “If a consolidation loan doesn’t save you money in at least one of the two ways, you shouldn’t do it,” Schrader says. “Otherwise you’re just moving debt around. That doesn’t benefit anyone.” If your debt is small enough to tackle within a year or you won’t qualify for a low-interest loan or balance transfer, you might benefit from other debt reduction strategies, like a debt snowball or debt avalanche. The debt avalanche works like this: Make a list of all your debts in order of highest to lowest interest rate. Pay the just minimum payment on all your debts, but add any extra money you can afford to pay to the account with the highest interest rate. When the loan with the highest rate is paid off, add everything you were paying (plus the minimum payment) to the debt with the second highest interest and so on.
The debt snowball works in the opposite way: Instead of paying your debts off in order of the highest interest, you start with the lowest balance. Pay just the minimum payment on everything except the account with the lowest balance. Add any extra money only to that account. When it’s paid off, add everything you were paying (plus the minimum payment) to the account with the next lowest balance, and so on. Which one you choose comes down to personal preference. The debt avalanche might save you money and help you pay your debts off faster than the debt snowball, but many experts recommend the debt snowball for its positive psychological effect. Paying off a loan or credit card feels good, and that good feeling helps you keep your motivation. By tackling small balances first, you give yourself that endorphin boost and free up extra money more often.
What should you do after consolidation?
If you decide to consolidate, it’s very important that you make a plan to prevent racking up your debt again. “The most important thing to learn from a consolidation is what caused you to need to consolidate in the first place,” Schrader says. “You need to figure out how to avoid falling into the same traps in the future.”
overspending. Keep in mind that a budget doesn’t need to be complicated. It can be as simple as keeping a list of your expenses and income, or as detailed as you want it to be. You can even go so far as to break your expenses down by percentage, like we do in our 50/30/20 budget. If having room to spend on your credit cards is a temptation to overspend, make it hard to access that money. Stop carrying your cards with you, disconnect them from any online accounts (sorry, Amazon!) and take them out of your mobile wallets. You might be surprised to find that if you require yourself to do extra work to spend, you’re less likely to spend frivolously. “One thing to remember,” Schrader adds, “consolidation is a way to help you. Even after your cards are paid off, only close credit card accounts with annual fees. Keep everything else open to help your credit score. Then use each credit card once or twice a year to keep them active.” If you think you could benefit from debt consolidation, contact our financial services team to learn more about your options. If you’re still not sure, our partners at GreenPath Financial Wellness provide free access to money management and financial education solutions for IHMVCU members. n
If living outside your means is what caused you to accumulate so much debt, you may need to come up with a solid budget to prevent yourself from
IHMVCU.org
21
PLAN
When to buy ever BY AMANDA SPURGEON
If you’ve ever made a purchase only to find that same item on sale a week later, you know that sometimes when you shop m market for a new mattress or shopping for summer swimsuits, there’s a proper time to buy just about everything.
January
»Christmas decorations, wrapping paper and artificial trees are on serious discount after the holidays »Get all your exercise equipment (elliptical, treadmills, kettlebells) and gym apparel while retailers are catering to the New Year’s Resolution crowd »Department store “white sales” usually mean towels and bedding are significantly marked down
July
»The Fourth of July usually means discounts on anything red, white & blue. Retailers love a good holiday weekend sale so keep an eye out for advertisements for discounted food, appliances and more »Amazon’s Prime Day occurs on July 12, so look for limitedtime discounts across the site
February
»Winter coats are on sale to make room for spring fashions »President’s Day usually means discounted home goods at department stores »Winter sports gear goes on clearance to make room for warmweather sports
March
»New digital camera models arrive in February, so older models are usually marked down »Get last year’s luggage styles on sale thanks to new models arriving in March
»After Valentine’s Day boxed chocolates and other holiday-themed candies go on sale
August
»Get all your pencils, crayons and folders during back to school sales »Outdoor furniture gets marked down as summer comes to an end
September
»Labor Day weekend means you can find a sale for just about anything, especially mattresses, furniture and appliances »Laptops, desktops and printers get a discount for the back-to-college crowd
Don’t get caught shopping i 22
PATHFINDER APRIL 2018
rything
matters more than where. Whether you’re in the
April
»Graduation and wedding season means discounted cookware »New carpet and flooring styles arrive in early spring and older looks get marked down
May
»Buy a new mattress on Memorial Day weekend to take advantage of retailers making room for new models arriving in June, plus the typical holiday weekend sale
»Update your furniture & decor on April 25 during Wayfair’s Way Day sale
October
November
»Look for deals on grills and smokers at Lowe’s, Home Depot and other hardware stores
»Black Friday sales mean discounts on vacuums, electronics, toys, and just about everything else
»Camping and patio gear get marked down as fall rolls in
»Get leftover fun-sized Halloween candy for cheap
June
»Stock up on ladies’ swimsuits and lingerie during Victoria’s Secret’s semi-annual sale »Look for dad-oriented sales before Father’s Day at places like Sears, Home Depot and Dick’s Sporting Goods
December
»Toys and stuffed animals are on sale leading up to the big winter holidays »Stock up on gift cards while retailers and restaurants offer deals and additional cards free as a reward for purchasing a certain dollar amount.
in the wrong season. Print this calendar so you can keep it handy.
IHMVCU.org
23
UPDATES
The new IHMVCU headquarters Our new headquarters building is underway at 2500 River Drive in Moline. The 90,000 square-foot building will span four stories and accommodate up to 300 employees. Employees will enjoy a campus-like setting with 290 parking spaces, a fitness center, a large community room, collaboration areas, outdoor walking paths and convenient access to MetroLINK, Channel Cat Water Taxi, and the bike path.
24
PATHFINDER APRIL 2018
“The building that will stand here is a continuation of the commitment we started in 1934 to improve the financial lives our members and the communities we serve,” IHMVCU President & CEO Brian Laufenberg says. “It’s the driving force behind all we do.” The design-builder for this project is Russell and the architect is LEO A DALY. This is an IMPACT project, meaning it will be constructed with Quad City building trade locals and contractors. The building is expected to be completed in 2019, and occupied in 2020.
Chip-enhanced debit cards on the way
UPCOMING EVENTS April 25, 7 p.m.: Money Matters 101 Youth Seminar, Knox County YMCA
To ensure staff can address any member questions or concerns in a timely manner, new cards will mail to members in waves starting in April and ending in late September.
April 26, 6 p.m.: Money Matters 101 Youth Seminar, Helium Trampoline Park May 28, all day: All IHMVCU branches closed
Please take a minute to ensure we have correct contact information for you by completing a change address form in Online Branch or calling us at 309-793-6200.
June 1, 5 p.m.: IHMVCU sponsors Live@5 at the River Music Experience
Why switch to chip-enhanced debit cards?
July 4, all day: All IHMVCU branches closed
We’re making your wallet a little more secure with chip-enhanced debit cards for all members.
The magnetic stripe on the back of traditional credit and debit cards contains unchanging data—like your card number, expiration date and CVV code. If a fraudster gains access to that data, they have all the information they need to duplicate your card and start making purchases. Chip-enhanced cards, on the other hand, contain an embedded microchip that creates a unique, one-time use transaction code every time the card is used. If a fraudster steals information from one specific transaction, they can’t duplicate the card in the traditional way. Because the chip creates codes that can only be used one time, attempting to reuse a transaction code would likely result in the card being denied. Chip-enhanced technology won’t stop hackers from stealing data, but it’ll be much harder for them to profit from the information they steal.
July 4, 10 a.m.: DeWitt Fourth of July Parade July 14, 6 p.m.: Galesburg Movie in the Park, Lakeside Splashzone Water Park July 21, 6 p.m.: Kewanee Movie in the Park, Windmont Park July 27, 6 p.m.: Burlington Movie in the Park, Drake Hardware August 11, 6 p.m.: Prophetstown Movie in the Park, Eclipse Square Sept. 3, all day: All IHMVCU branches closed
Why stop with a security upgrade?
With enhanced security for our debit cards we’re rolling out an enhanced look, too! Your new debit card will have a flat design. Your card number and expiration date will now be on the back of your card below the signature box.
IHMVCU.org
25
