Emergency Savings

Nearly a Quarter of Americans Have No Emergency Savings

Nearly a quarter of Americans have no emergency savings, according to a new report from Bankrate.com.

However, the percentage of those without an emergency fund currently sits at a six year low, down to 24% this year from 28% last year.

Additionally, Americans with an adequate savings cushion – enough to cover six months’ expenses or more – jumped to 31% (from 22% in 2015 and 28% last year), a new high during the seven years Bankrate.com has been polling on this subject.

Overall, Americans are doing a better job at saving. Those with some savings, but not enough to cover three months’ expenses, increased from 18% to 20%. Americans with enough savings to cover 3-5 months’ expenses nosed higher from 16% to 17%.

Bankrate.com chief financial analyst Greg McBride, CFA commented, “With all the spending that is not happening in the economy, something else apparently is – Americans are putting money in savings! We’re still not out of the woods yet – everyone should strive to have at least six months’ expenses socked away for the unexpected – but it’s encouraging to see progress being made.”

The tendency to have no emergency savings is highest among those ages 53-62, who seem to be all-or-nothing, as they have an equal propensity to have no emergency savings and enough to cover six months’ expenses (32% for each).

After that, the likelihood of having zero emergency savings declines substantially; the oldest Americans (63+) report the lowest likelihood of having nothing set aside for a rainy day (17%) and the highest probability of at least a six month reserve (44%).

While one quarter of Millennials and Generation Xers lack any emergency savings, younger Millennials (ages 18-26) seem to be well on their way; they have the highest propensity to have enough to cover 3-5 months’ expenses (31%). Generation X is most likely to have some savings, but not enough to cover three months’ expenses (28%).

Not surprisingly, those with enough emergency savings to cover at least six months’ expenses tend to be higher income and more highly educated, while those with no emergency savings are more likely to be lower income and have lesser levels of education.

That being said, lower-middle income households ($30K-$49.9K per year) are more likely to have enough savings to cover six months’ or more of expenses than to have no savings at all.

Residents of the Midwest are most likely to have enough to cover six months’ expenses or more, while residents of the South are least likely.

If you are looking at jump-starting your emergency savings, talk to a representative at ProMedica FCU. ProMedica FCU has several products and services to assist your savings plan including a save your change account that makes savings easy and automatic. ProMedicaFCU also has financial counselors on staff to assist with other important financial areas such as budgeting and credit. Contact ProMedica FCU at 419-479-4040.

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Car Prices

Car Prices: Something Funny Is Going On

People are paying way too much for new vehicles these days, with average transaction way out of whack with average household incomes.

According to Kelley Blue Book, the estimated average transaction price (ATP) for light vehicles in the United States was $33,261 in May 2017. According to the government, the median household income in the U.S. was $56,000 in 2015.

This is just too much, once we apply the time-tested “20/4/10” rule.

Use This Rule to Determine How Much Car You Can Afford:

This rule stipulates that a car is affordable when a buyer can make a down payment of at least 20%, use financing lasting no longer than four years — with principal, interest and insurance not exceeding 10% of a household’s gross income.

If a median-income household cannot buy a median-priced new vehicle using the “20/4/10” rule, then we have a problem with affordability.

So, why are new vehicle sales so strong? The answer to this is simple: people aren’t following the “20/4/10” rule, and automakers keep coming up with ingenious new financing strategies that ensure they won’t.

Think about the number of “0 Down” financing schemes on offer; think of all of the factory leasing deals.

Leasing used to represent a tiny portion of new vehicle transactions. Today, more than 50% of all new vehicles are leased in certain vehicle categories.

In short, car companies are making it easier than ever to help Americans drive away in vehicles that they cannot really afford (according to the “20/4/10” rule).

Don’t Buy the Payment

Car salesmen are trained to “sell the payment” to buyers. If the monthly payment is do-able, a sale can be made. The trouble is, getting that monthly payment down to an “affordable” level often means stretching payment out to 60 months, 72 months or even more. It also means factory lease deals that may seem cheap, until you factor in that they leave you with nothing at trade-in time.

Before You Shop for a Vehicle, Go See ProMedica FCU

The simple truth is that following the “20/4/10” rule is still an excellent way to buy a new vehicle without threatening your long-term financial health.

If you’re considering a new vehicle purchase, do yourself a favor and go see ProMedica FCU before you drive to a dealer lot.

ProMedica FCU will help you to see how different car buying scenarios fit in with your other financial goals – such as saving for emergencies and retirement. It’s the best way to ensure that you don’t buy yourself a shiny new mistake.

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Travel

Travel Smarter and Save Bigger this Summer Vacation

Spring flowers are in full bloom, which can only indicate one thing: summer is nearly upon us. For many, that means it’s time for a well-deserved vacation with family and friends. In a year-end 2016 survey conducted by the Ohio Credit Union League, an overwhelming majority of respondents, 71 percent, are planning to get some rest and relaxation with a vacation this summer.

Whether heading somewhere new or traveling back to a family favorite, most Ohioans plan their vacations in advance, but at varying times – 34 percent plan six months to a year in advance, 31 percent plan three to six months in advance, and 15 percent plan one to three months in advance. And, while ample time to organize is important, budgets definitely play a role in those plans as well, with 70 percent of Ohioans surveyed noting the cost of the trip as a major influence on where they go for vacation. Other factors included travel distance, scheduling, and amenities or activities at the destination.

We all want and need downtime, but a large financial burden will long outlive the benefits of a vacation. In 2016, households likely to take a vacation spent $1,798 on average, up roughly 11 percent from 2015, according to Condé Nast Travel. In addition, a survey conducted by ValuePenguin noted that the typical vacationing family spends 44 percent of their travel funds on transportation.

Since many vacation decisions are driven by cost, here are a few tips to spend wisely when you take those hard-earned vacation days.

• Scheduling matters: When planning low-cost trips, timing is everything. To save money booking accommodations, try traveling during an off-season or even a few weeks before peak-season starts. If you’re booking airfare, do so at least a month in advance, if not earlier. Airlines price their flights differently depending on the day of the week, so use an airfare tracker site or app, like Hopper, to keep up with changes.

• Travel smart: Many vacation destinations take advantage of the naiveté of travelers, so tourist hot spots may be higher priced than smaller, locally-owned places. Do your research before deciding where to say, what to eat, and what activities you should embark on and you’ll likely save during your trip.

• Use rewards: ProMedica FCU’s VISA Platinum Card earns rewards points that can be redeemed for airfare or other vacation expenses. Even though you may not consistently travel, airlines, and booking services may also offer rewards points.

• Set aside a little at a time — If traveling is important to you, make room for vacation savings in your annual or monthly budget. ProMedica FCU has an account specifically for saving for your dream vacation. ProMedica FCU is also a great resource to consult if you’re looking for ways to save and budget for vacation.

To learn more about ProMedica FCU and how they can help you afford life, call us at 419.479.4040.

Budget

Does sticking to a budget work?

While many Ohio consumers plan to start 2017 off with a household budget/Personal Spending Plan (I like to use the term Personal Spending Plan (PSP) instead of budget. Budget sounds too restrictive and that is not what a PSP is), sticking to that PSP may pose a problem. Data from a consumer survey conducted by the Ohio Credit Union League reveals 75 percent of respondents plan to start the New Year off with a household PSP, but 45 percent of those respondents said they need a lot of improvement when it comes to sticking to a PSP.
Also revealed in this survey was that 70 percent of Ohioans are looking forward to a milestone event in 2017, such as a wedding, the birth of a baby, or a vacation, all of which require months of planning.

Managing money is often a top New Year’s resolution for Americans. In Fact, 34 percent of Americans make money-related resolutions at the beginning of a new year, according to the 2016 Brain Research Institute. Unfortunately, only 46 percent of people who make a resolution maintain it longer than six months and only 8 percent achieve their goals.

With so many missing the mark on their goals, what can consumers do to get on the right financial path this year? Here are the first steps to getting finances in order before creating your PSP.

• Save receipts. It’s hard to know how to start planning if you don’t have a good understanding of how you spend. Save your receipts for a month to track where you’re spending money. Then, add them up and compare your income. After doing this, ask yourself if you’re saving any money and what purchases maybe weren’t necessary.

• Put the bare minimum in checking. Only put a planned amount of money into a checking account for spending each month and put the rest into a savings account. Making money less accessible can help you spend less.

• Get a special savings account. Open a Holiday or Vacation account at ProMedica Federal Credit Union. These types of accounts keep you from scrabbling before last minute events, which can ruin any PSP. The Holiday account only allows a certain number of withdrawals each year to help keep you on track.

• Get a PSP/budgeting app. Download an app to your smartphone or tablet to help with you plan. Many financial apps include planning platforms, monthly account monitoring, and tips for getting out of debt. According to GotToBeMobile.com the best 2017 mobile PSP/budgeting apps include; Mint, PocketGuard, You Need a Budget, GoodBudget, and Mvelopes.

ProMedica Federal Credit Union in partnership with the ProMedica Ebeid Institute and Toledo Community Foundation will also be offering financial seminars throughout the ProMedica footprint including how to Create a Personal Spending and Personal Savings Plan. Please check the events area on our Facebook page for upcoming seminars.

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Credit Card Debt

American Household Credit Card Debt a Growing Burden

American households with credit card debt have an average of $16,061 of it, according a study from NerdWallet. NerdWallet adds that consumers who carry credit card debt pay an average of $1,292 per year in interest on it.

Now, maybe you read that top line statistic and say, “great! I’m below the average.” But there are two big points to consider when it comes to credit card debt:

1. It’s all relative. Just about any amount of credit card debt becomes unsustainable when a financial crisis occurs. Keep that in mind before you accumulate it.

2. All credit card debt is very expensive. Credit cards are a bad bet. Meaning, the companies that issue them are betting against you at every step. They are betting that you won’t pay balances off before “0 interest” promo deals expire. Especially companies where purchase rates are in the high double-digits.

In other words, it’s all bad debt. You need to pay off your credit cards each month.

If you can’t, come see ProMedica FCU. We have some ideas to help you to consolidate some of the high-interest debt into a lower-interest solution. We can also discuss how to free up cash flow to pay down your cards quicker.

Again, the best solution is to pay of those cards each month. If you can’t come see ProMedica FCU before you find yourself shelling out hundreds or thousands of dollars on interest.

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New Year

5 Steps to a New Financial You in 2017

Holiday shoppers have been careful each season to make their lists and check them twice. Budgets have become more discerning and savers have become better planners for their holiday spending, prioritizing savings along the way. According to a September 2016 report, two out of five millennial shoppers got a head start this year and had started buying gifts for the season before summer had even come to a close.
These successful financial habits don’t have to stop there. With the New Year comes an opportunity to make some improvements to your financial health. Don’t make just another resolution that disappears by Valentine’s Day. Take your financial wellness to a whole new level: a New Year, a new financial you.

These five steps will help you to establish your best financial path for 2017, and you can have all the heavy lifting done before the clock strikes twelve:

1. Take stock of your finances. Take account of all your income, expenses, and existing savings/investment accounts. And no matter how nice you were, don’t forget to include any naughty debts you may have incurred in the spirit of the season.

2. Sketch out a budget “template” for the year to come. Think big picture. Plan your holiday spending for 2016 and find the method for budgeting that you’re going to use in 2017, and rough out what you’d like it to look like from month to month. Be pragmatic about your needs and be honest about where your money is going. Plan to make adjustments and really dig into your spending habits when you check back in on a regular basis.

3. Check your credit report. It is your legal right to get a free copy of your credit report every 12 months from each of the three major credit reporting bureaus. Add a visit to AnnualCreditReport.com to the calendar as an annual “holiday” or divvy up the bureaus to get a free report from a different bureau every four months. If you are not sure how to read your credit report, please contact ProMedica FCU. We would be happy to assist!

4. Set up bank and credit alerts, and financial reminders. Whether you’re at your computer or on your mobile device, you are in an ideal position to receive notifications about upcoming payments, suspicious activities on an account, transactions over a certain dollar amount, low balances, and more. Find out what online services your financial institution(s) offer, and supplement what they don’t with an app or calendar reminder. It’s all right there at your fingertips. ProMedica FCU has multiple alert functions available on checking and credit card transactions. We can even alert you when your credit card payment is due.

5. Make a Commitment to Yourself to Save. Those who make a commitment to themselves and their family to save usually save more than those who don’t. Think of this as your New Year’s Resolution. ProMedica FCU can show you how easy it is to systematically save. We even have an account that automatically does it for you based on your transaction habits.

A new financial you is an achievable goal for 2017. Please let ProMedica FCU know how we can assist
with your savings endeavors. Let’s make 2017 you best saving year ever!

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Finances

Don’t let holiday magic make your finances disappear

While the excitement of the holidays and gift-giving season can be a magical time for children, adults face a plethora of additional expenses during the last two months of the year. Whether its gifts, food, decorations, the perfect outfit for that holiday party, or airfare to visit family – there’s no denying the holidays can put a dent in the wallet.
According to a 2016 Mid-Year Consumer Survey, conducted by the Ohio Credit Union League, 22 percent of respondents spend more than $1,000 on holiday expenses, 35 percent between $500 and $1,000, and 28 percent between $300 and $500. During last year’s holiday season, the average American spent $734 on gifts, $120 on food, $78 on decorations, and $85 on flowers and cards, according to AOL Mass Media.
Traveling can be another major expense throughout November and December. AAA reports that due to low gas prices, 41.9 million people took a road trip last Thanksgiving, and another 36.1 million journeyed by plane. In Ohio, 21 percent of survey respondents said they plan to trek more than 100 miles this holiday season.

With so many additional expenses in a month, it’s surprising how few people set money aside throughout the year for year-end holiday expenses. With no additional income during the holidays, cutting costs may be necessary to stay financially afloat during November and December.

Tips to cut costs for the holidays:

• Credit card rewards: Many credit cards including ProMedica FCU’s Platinum VISA® offer reward points for using their card. These points can be used like cash to purchase merchandise such as gift cards or electronics. Try cashing in your points to cover the cost of someone’s
gift. If you don’t have a rewards credit card, contact ProMedica FCU.

• Bargain shop: Check online sites such as slickdeals.net, Woot!, and Brad’sDeals to search for the best bargains. If you haven’t signed up for Amazon Prime yet, it may be worth it just for the free shipping, especially if you do a lot of online shopping for the holidays.

• Shop early: The optimal time for holiday shopping is between Oct. 1 and Dec. 1. Spending a small amount on gifts each week before the holiday rush is a good way to avoid putting a large chunk of debt on a credit card at one time. Shopping early also relieves the feeling of rushed, last-minute shopping, which can result in purchasing gifts regardless of price.

• Holiday Club Account: Although not applicable for this year, consider enrolling in ProMedica FCU’s Holiday Club account to start saving for next year’s holiday expenses. It’s basically a savings account that you stash money in all year, and have limited access to until the holiday season rolls around.

To learn more about how ProMedica FCU can help you save for the holidays, call 419.479.4040.

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