SVM_Financial Planning_011922

FINANCIAL PLANNING

$ $ $ $ Avoiding Financial Pitfalls

See story on page 2

■ Strategies to ease the burden of student loan debt ■ Expert tips to protect yourself from credit scams ■ How to road trip on a budget ■ Plus much more!

Wednesday, January 19, 2022

Pitfalls to avoid falling into debt

Sauk Valley Media • Wednesday, January 19, 2022

FINANCIAL PLANNING

2

High consumer debt can compromise individuals’ financial futures and have an adverse effect on their overall health. Debt has long been an issue that threatens individuals’ well-being, but the good news is that certain debts seem to be on the decline.

According to the “Quarterly Report on Household Debt and Credit” that was released in May 2021 by the Federal Reserve Bank of New York, credit card balances were $157 billion lower by the end of the first quarter of 2021 than they had been at the end of 2019. Authors of the report credit that decline to paydowns by buyers and reduced consumption opportunities related to the pandemic.

I ndividuals who want to avoid debt can keep an eye open for these pitfalls.

• Retail credit cards: Many retailers offer their own credit cards. Consumers may be enticed to sign up for such cards by the opportunity for instant, and often significant, savings. For example, a home improvement store may offer an immediate 25 percent discount to customers who sign up for a store credit card and use the card to make a purchase. As enticing as such savings can be, consumers should recognize that a recent study by CreditCards.com found that the average retail credit card APR is 25.9 percent. That’s more than 6 percent higher than a general purpose credit card. Consumers who cannot pay balances in full each month could end up paying much more in interest if they use retail credit cards instead of general purpose cards.

• Too many accounts: A 2019 study from the credit reporting agency Experian found that the average American has four credit cards. Though many consumers can effectively manage that many cards, the more cards an individual has, the easier it can be to lose track of spending. More cards also means a greater potential for more debt, as each card has its own limit that is unrelated to the limits on other cards.

• Bonus hunting: Another pitfall to avoid is the temptation to use credit cards instead of cash in an effort to accumulate more travel miles or cash back bonuses. Consumers should aspire to use cash over credit whenever possible. Doing so ensures consumers are not spending money they don’t have, which is one of the most common ways that individuals build significant consumer debt.

• Failure to budget: A budget is the most effective way for individuals to gain control of their spending. That lesson seems to resonate more with young people than older men and women. A 2019 poll from Debt. com found that 74 percent of consumers between the ages of 23 and 38 use a budget to govern their spending, while only 67 percent of consumers between the ages of 39 and 54 use a budget. A failure to budget can

Here to help life go right.

increase the risk of spending impulsively and make it hard for consumers to see what’s coming in and what’s going out. That’s a recipe for accumulating debt.

Avoiding certain pitfalls can help consumers avoid accumulating debt that can adversely affect their financial futures. MM21C530

At Community State Bank, we’re all about you. We’re a community bank owned by local people and our mission is to make sure our customers are successful. We offer a variety of progressive banking services, including: Checking Accounts

Mortgages - apply online, call or stop by Constructions loans

Call or visit today and experience the Community State Bank difference. You’ll like the way we do banking!

Home equity loans

ROCK FALLS 1801 First Avenue (815) 625-1110

Online Banking and Bill Pay

STERLING 3210 E. Lincolnway (815) 625-4300

Savings, CDs, IRAs, and Health Savings Accounts Shay Brown, Agent

313 First Avenue Rock Falls, IL 61071 815-625-5100 Email: shay@shaybrown1.com Website: www.shaybrown1.com

SM-ST1950637

Whether you need a question answered, a problem solved, or a claim reported, my job is to make it happen.

Like a good neighbor, State Farm is there.® CALL ME TODAY. State Farm, Home Office, Bloomington, IL

Mobile Banking Debit cards

24-hour ATMs NMLS #480435

DIXON 1021 North Galena Avenue (815) 284-8500 www.commstbk.com

their student loans. Individuals with sizable student loan debts whose companies do not currently offer such benefits can look for new employment opportunities with firms that will help them pay down their debts.

• Consolidate loans. Consolidation is often viewed through the lens of simplifying loan repayment by combining all loans into one so borrowers with multiple loans only need to make a single payment each month. That impression is correct, but there’s more to consolidation than simplifying repayment. The experts at Credit.com note that consolidation typically allows borrowers to change their repayment terms. Longer repayment terms will increase the amount of interest borrowers pay over the life of the loans. But longer repayment terms also allow borrowers to pay less each month, which can free up money to pay bills and build savings for large purchases, including a home.

• Know your loans. Many borrowers signed their student loan documents when they were 18, while others might have signed when they were 22 or 23 and about to enter graduate school. It’s easy for young borrowers to overlook important details like interest rates, but individuals who have multiple loans must recognize that the interest rates on loans that have not been consolidated almost certainly vary. Learn the interest rates on your loans and make a concerted effort to pay extra principle each month on the loans with the higher interest rates. Doing so can save borrowers a lot of money over time and get them that much closer to eradicating their student loan debt.

Student loan debt is a significant burden for millions of individuals.

Finding ways to ease that burden can help borrowers secure their financial futures. MM21C533

JOHNSON CPA LLC

Certified Public Accountants & Consultants

DIXON

1302 North Galena Avenue Dixon, Illinois 61021 815-288-1316

Wealth Planning • Tax Planning Social Security Planning

NAPLES

4099 Tamiami Trail North, Suite 401 Naples, Florida 34103 239-207-6531 jjohnson@johnsoncpa-llc.com

www.NicklausFinancialService.com

319 W. 1st Street, Dixon, IL 61021

815-288-3554

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

Sauk Valley Media • Wednesday, January 19, 2022

Student loan debt in the United States is growing. According to EducationData.org, federal student loan debt has grown at an annual average rate of just under 28 percent since the start of the 21st century. Private student loan debt also is a significant burden, totaling $132 billion by the end of 2020.

As student loan debt has risen, managing that debt has become an important component of financial planning. Individuals with student loan debt can look into various strategies to help ease their debt burdens.

• Reconsider your employment. As student loan debts have risen, employee repayment assistance programs once associated strictly with government jobs have grown in popularity at private companies. The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed around the onset of the pandemic in 2020 included a tax-free provision for employer-sponsored loan assistance programs. The tax benefits helped both employees, who did not have to pay income taxes on loan assistance money provided by their employers, and businesses, who received payroll tax exclusions on funds paid to employers via the program.

The CARES Act provision was temporary, but experts at Goldman Sachs have noted that many private companies have gotten creative in regard to helping employees pay down student loan debt. For example, some have allowed employees to redirect PTO and vacation pay toward

3 FINANCIAL PLANNING

Strategies to ease the burden of student loan debt

Sauk Valley Media • Wednesday, January 19, 2022

FINANCIAL PLANNING

4

EXPERT TIPS TO PROTECT YOURSELF FROM CREDIT SCAMS (BPT) - While credit scams have been around forever, they’ve recently exploded in number. According to Mint, from 2019 to 2020, the number of identity theft reports went up by 113% and the number of reports of identity theft by credit cards increased by 44.6%. The amount of fraud by new credit card accounts saw a 48% increase from 2019.

As more information is digital today, on top of the increase in health and financial stressors, scams designed to access your credit accounts or personal information are on the rise.

Having financial or credit accounts hacked can have long-lasting implications, beyond financial loss and inconvenience.

Here are tips to help protect your credit and personal information.

Practice good cyber hygiene Use long, strong passwords unique to each account or website - or use a password manager to help create better passwords and keep track of them. Change the password on your home’s router. If you’re using the same password for several accounts, or haven’t changed passwords in a while, now’s the time to clean up your digital act.

Back up your data Having digital and physical backups for your data protects you from not only losing important information, but also from ransomware attacks - when a hacker freezes or destroys your data unless you pay them in bitcoin. While this is more likely to happen to businesses, it can give you peace of mind to have your data backed up.

Consider both a Cloud backup as well as on a physical hard drive and/or printing out vital information or documents.

Monitor your credit reports Keeping an eye on your credit reports alerts you to attempts to steal your identity, such as someone opening an account in your name. You can check any of the major credit reporting companies for free once a year. However, because identity theft is becoming more frequent, you should check your credit score more often. One tactic is to rotate which company you request a report from, requesting one every few months.

You can also check your credit with VantageScore, which uses credit

scoring models that provide lenders and consumers with highly predictive credit scores that are easier to understand and actually score more people. Access yours for free through the providers at VantageScore. com.

Check your credit reports for: • Credit accounts/debt that isn’t yours.

• Inquiries indicating a company accessed your report without your permission.

• An address where you’ve never lived. This could be a sign someone’s tried to use your identity to open an account.

If you see items like these on your report, contact the credit agency right away. A change to the Fair Credit Reporting Act (FCRA) in 2018 allows consumers to put a freeze on their credit reports for free, so credit reporting companies will restrict access to your reports, not allowing lenders with whom you do not have an existing relationship to pull them.

This can help prevent fraudulent credit applications from being opened.

Then you can choose when to “unfreeze” the credit reports and put them back into circulation.

Be alert to common scams You may receive an email saying one of your credit accounts has been blocked or suspended. It may look like an email from a legit company.

Never click links within the email, as they may take you to a fake website (that looks real). Instead, access your account from the website you always use to see if there’s a problem. Contact the company directly, not through the email. Most likely it’s a phishing attempt to get your personal login or financial information.

Scammers may take advantage of current crises, claiming to be COVID-19 contact tracers, or referring to government stimulus checks.

Never give personal or financial information like your birthdate or Social Security number over the phone or via email. Other common scams involve taxes or unemployment compensation.

View any email or text asking for information or to reply with an account login or other personal information as suspect, and contact the supposed sender directly.

Learn more about tips and credit strategies at VantageScore.com.

How to road trip on a budget

Stop chipping away at your high interest debt . . .

We’ll help you build a better New Year.

Mahaffey Law Office (815) 400-9496

409 N. Cherry St. • Morrison, IL 61270

Debt Consolidation Loan Special PLAN FOR THE FUTURE & PROTECT YOUR FAMILY • WILL • TRUSTS • ESTATE PLANNING • POWER OF ATTORNEY

MAHAFFEYLAWOFFICE . COM

• Borrow up to $15,000 • One low, easy payment • Terms to 36 months

Rates as low as

3.99

% APR*

Freeport | Sterling | Milledgeville | South Beloit 800.711.3277 | Se habla español | cornerstonecu.org *APR=Annual Percentage Rate. Rate and terms subject to change and based on creditworthiness. Automatic payment required. A $50 origination fee applies to funded loans. Offer excludes all loans financed at Cornerstone Credit Union. Offer ends 3/31/2022.

Sauk Valley Media • Wednesday, January 19, 2022

• Pack food and drinks. Visiting sitdown restaurants and even fast-food establishments can cause expenditures to add up. The financial resource Money Crashers says a typical fast-food meal costs just under $6, but fast casual places, like Chipotle and Panera, can run around $12 per person. Multiply those prices by three meals a day over the course of the trip, and that’s expensive.

Instead, save dining out for a treat and pack non-perishable items or even sandwiches in a cooler to satisfy you while on the road.

• Book a suite or Airbnb. When traveling with the family, a suite or Airbnb might provide cheaper alternatives to a standard hotel room, since they likely have fully furnished kitchen facilities, laundry services and other extended-stay perks. The up-front cost may be more, but you’ll save in the long run on all the extras.

• Utilize any and all coupons. Retail coupon providers like Honey.com and RetailMeNot.com can help you find discounts on a variety of items.

There also may be coupons for parking garages and area attractions.

• Find free entertainment. With a little research you can find attractions that don’t require high admission fees or may have no fees at all.

Public parks, certain museums and area landmarks may offer free admission.

Road trips can be even more affordable when vacationers embrace the many ways to save money. SC223751

FINANCIAL PLANNING

The opportunities for adventure are endless when the car is fueled up with a full tank of gas and the open road awaits.

Road trips can be cost-conscious ways to travel, as they save travelers from having to contend with potentially expensive flights. However, there’s even more road trippers can do to save on their next excursions. Explore these money-saving tips before hitting the open road.

• Improve fuel economy. There’s no avoiding the gas station on road trips, but there may be ways to stretch gas mileage. Make sure tires are properly inflated; have the vehicle serviced before leaving to change oil and check that everything is running efficiently; don’t overpack with lots of heavy cargo; and bring bikes along to explore certain areas without having to use the vehicle.

• Establish a daily budget. You can’t anticipate every expense, but you can make a plan and estimate what it will cost for the trip. Determine your priorities so you know if you want luxury accommodations or if campgrounds will suffice, and then build a budget around anticipated costs. Keep track of all costs so you’ll know when to cut back, if necessary.

• Consider a rental. If you’re leasing a car or truck and are dangerously close to going over miles, a rental vehicle may save you money in the long run. Also, if you’ll be traveling with a crowd, renting a van — and splitting the costs — can save everyone money.

5

Sauk Valley Media • Wednesday, January 19, 2022

FINANCIAL PLANNING

6

Retirement readiness hacks to help you SAVE SMARTER (BPT) - What are your goals for the future? If retirement planning is top of mind, you’re not alone.

According to new research from Empower and Personal Capital, 36% of Americans are making retirement planning a priority this year. That’s more than those who said losing weight (28%), buying a house (14%) or getting a new job (11%).

Whether you’re just getting started or looking to kick it up a notch, here are some of the best ways to save for retirement in 2022 and beyond:

Understand your complete financial picture

It’s important to look at your finances from where you are in the present and where you want to be in the future. Make sure you’re in a good spot now, so you can stay on track to accomplish future financial goals.

One simple way to start is understanding where your money is going and any barriers that are holding you back from meeting your goals.

Utilize online tools that can help provide a holistic snapshot of your financial life and commit to making changes where necessary. For example, determine areas you can decrease spending and put more money toward saving.

Maximize retirement savings plan perks Don’t leave “free” money on the table. If you have an employer-sponsored 401(k) plan (or 403b, 457 or other), enroll and meet your match.

This is the money your employer provides to match what you set aside for retirement, so you can save more than if you did it individually.

Additionally, check out the IRS 401(k) limits and consider maxing out your contribution. For 2022 the IRS allows individual contributions of $20,500 per person and $27,000 (including catch-up contributions) for people age 50 and older. If that’s not possible, consider increasing your contribution a bit every year.

Remember to explore all options of your employer’s retirement plan to create a savings approach that is right for you. For example, some employers offer a Roth 401(k), which is funded with taxed dollars. There are no income limits on a Roth 401(k) and withdrawals are tax-free at age 59¬Ω as long as your initial account contribution was made five or more years prior to the withdrawal.

Contribute to an IRA

IRAs are another retirement tool to consider directing savings into.

IRAs are great options for self-employed workers, small businesses, teens with their first job and those who are maxing out their employer retirement plan. Even if a spouse isn’t working, they may be eligible to fund a spousal IRA. Remember, you can save in both a 401(k) and an IRA. Which type of IRA is right for you? A traditional IRA gets a tax break upfront because it is funded with pretax dollars and a Roth IRA is funded with post-tax dollars, so you can pull that money out in retirement and not have to pay additional taxes on the contributions and earnings. If flexibility is important, a Roth IRA might be a good choice because you can withdraw your contributions without penalties at any time if needed.

Contribute to a Health Savings Account

Health savings accounts (HSAs) are a convenient way to set aside money for expenses related to your health, but they are also a smart financial tool. HSA contributions reduce your taxable income so you benefit come tax time. HSA earnings growth and qualified withdrawals are also tax free, rounding out HSAs’ triple tax advantage. In 2022, an individual with coverage under a qualifying high-deductible health plan can contribute up to $3,650, according to the IRS. What’s more, there’s also no “use it or lose it” requirement, and many programs allow you to invest your HSA money once you hit a certain threshold. This means it’s a great way to save for health expenses now as well as during retirement.

Get help from a pro

Financial planning can be confusing and complex, so don’t be afraid to ask for help. A financial advisor can help you determine exactly what your financial goals are, walk you through your options, and provide a personalized plan. Getting trustworthy advice can have a big impact on how confident you feel about your prospects going forward.

No matter what stage of life you’re in, it’s never too early to start saving for retirement. There are plenty of paths you can take, and the earlier you start, the better off you’ll be.

How to include giving in your estate plaN

SM-ST1944865

Sauk Valley Media • Wednesday, January 19, 2022

charitable organization in their wills.

• Consider a charitable rollover. The Internal Revenue Service notes that individuals with an IRA, SEP IRA, Simple IRA, or retirement plan account generally must begin withdrawing money from these accounts when they reach age 72.

These withdrawals are called required minimum distributions and they are considered taxable income. However, individuals who want to give to charity can opt for a Qualified Charitable Distribution, or QCD. A QCD counts toward the minimum distribution from retirement accounts and individuals will not be taxed on the money they donate to charity.

That’s a win-win for charities and individuals 72 and over who do not need to withdraw money from their IRAs to meet daily living expenses.

• Donate via a charitable remainder trust. A charitable remainder trust, or CRT, allows individuals to set up a trust that benefits both a designated beneficiary and a charity or charities of their choosing. When a CRT is set up, a beneficiary will receive annual payments from the trust until it terminates, at which time the remaining funds in the trust are donated to charity. The philanthropy experts at Fidelity Charitable note that individuals can name themselves as the beneficiaries of the trust, which ensures they will have an income during retirement and that their favorite charities will be supported when the trust expires.

Individuals who want to make charitable giving part of their estate plan can do so in various ways. GB21B438

FINANCIAL PLANNING

Charitable giving is the lifeblood of many nonprofit organizations. The generosity of donors helps charities meet their missions and provide vital services to people facing disease, financial hardship and other situations they cannot overcome on their own.

Many donors make sacrifices to support their favorite causes and charities. Forgoing certain luxuries so money can be donated to charity illustrates the selfness nature of charitable giving, which can even continue after death. Estate planning is a complicated process that details exactly how a person wants their assets divvied up after death. But an estate plan also can go into effect while individuals are still alive.

Each year, millions of people across the globe choose to include charitable giving in their estate plans, and that can benefit charities and donors. The following are a handful of the many ways charitable men and women can incorporate giving into their estate plans.

• Bequest giving in a will or living trust. Perhaps the most widely known way to include charitable giving in an estate plan is to bequeath money in a will or living will. The Community Foundation Alliance notes that bequests typically allow donors to define how their donations will be spent or utilized. That benefits charitable organizations, but surviving family members also can benefit from such arrangements. According to LawDepot.com, individuals may be able to lower the estate taxes on their estates at their time of death if they bequeath money to an eligible

7

FINANCIAL PLANNING

8

Leaving Your Employer?

Understand Your 401(k) Options.

Sauk Valley Media • Wednesday, January 19, 2022

At Edward Jones, we can explain options for your 401(k), including leaving the money in your former employer’s plan, moving it to your new employer’s plan, rolling it over to an Individual Retirement Account (IRA) or cashing out the account subject to tax consequences.

To learn more, call today.

DIXON Emily A Byers

STERLING Tom Gleissner

ROCK FALLS Tyler Ewing

Wes Morrissey

Nicolas Lareau

Sam Meier, CFP®

630 N Galena Avenue Suite 101 815-994-4278

415 Locust Street Suite C 815-626-1588

102 E Route 30 Suite 2 815-535-0776

Chad M Weigle, CFP®, AAMS®

Mike Loos

MORRISON Tonya M Wiersema

302 S Galena Ave 815-288-3838

316 First Avenue 815-622-7948

302 S Galena Ave 815-288-3838

4204 East Lincolnway Suite B 815-564-0336

Aaron Young

Jim McPherson, CFP®

324 W 1st Street 815-285-3930

316 First Avenue 815-622-7948

Tom Wold, AAMS® 2522 East Lincolnway 815-564-0487

SM-ST1950312

907 West Route 30 815-626-4822

116 East Main Street 815-772-3799

PROPHETSTOWN Madeline Wold, CFP®, AAMS® 341 Washington St 815-989-2045

www.edwardjones.com Member SIPC