Savvy Banking: Money advice for 2017

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In Savvy Banking you’ll find the answers to a variety of pressing money questions submitted by Northwest Arkansas moms. This month’s question is:

Q: What are some good money tips for the beginning of a new year?

Don Paul, an investment executive with First National Investment Services, offers some advice here:

As 2016 comes to a close and we prepare for 2017, it doesn’t hurt to consider a few “Best Practices and Strategies” for investing in the new year.

First, consider a systematic investment plan that is consistent each month. Even if it’s just $25 per month, investing it, will add up over time. You will be amazed at how fast it will grow.

Secondly, consolidate all of your old traditional 401k money into your own traditional IRA account. If you worked somewhere in the past and left but didn’t roll over your 401k, a new year is a great time to consolidate that money and get it working for you.

Last but not least, let go of “fear” when it comes to your money and investing. A prudent and wise investor is not fearful.  Be sure that you have money saved in an emergency savings account and then start investing. Fear can prevent you from making good decisions. As the song says, let it go!

Let’s recap.

1.       Start investing systematically and consistently every month

2.       Consolidate old 401k money and roll into your own traditional IRA

3.       Make 2017 the year you start investing without fear

From my home to yours, may you have a very Merry Christmas and Happy New Year!

Don Paul, FNBDon Paul is an investment executive for First National Investment Services. He has been working with individuals and families in the areas of financial services for over 23 years specializing in Financial and Retirement Planning. Don is a graduate of the University of Arkansas and is the father to three boys. He and his wife Terri live in Fayetteville.

The fine print: Arkansas Insurance Producer License #32555 located at 3706 Pinnacle Hills Pkwy, Rogers, AR 72757. Securities and Insurance Products offered through Cetera Investment Services LLC, member FINRA/SIPC.

Advisory services are officered through Cetera Investment Advisors LLC. Neither Cetera Investment Services nor Cetera Investment Advisors is affiliated with the financial institution where investment services are offered. Investments are: Not FDIC Insured · No bank guarantee · May lose value · Not a deposit · Not insured by any federal government agency

Savvy Banking: How to automate your savings for college, emergency fund

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Money. It’s on our minds a LOT, right?

That’s why we love this money advice category, Savvy Banking. Moms submit the questions and our sponsor, First National Bank of NWA, always does a great job of finding the best person at the bank to answer them.

Today we’ve got Holly Wheeler helping us out. Thank you, Holly! This month’s question is:

Q: What are the best ways to automate your savings so you build up an emergency fund or save for college, vacations, etc.?

Next to losing weight and eating healthier, saving money is one of the top New Year’s resolutions people make each year. Unfortunately it’s also one of the top commonly broken resolutions.

We all have good intentions, but sometimes good old-fashioned willpower just isn’t enough. Luckily, there are a couple of ways that you can easily automate your savings.

♦ Most banks will allow you to set up a recurring transfer from your checking account to your savings account at regular intervals – every week, every two weeks, every month, etc.  Set up the transfer to co-inside with the days you get paid, and just think of it as another monthly bill you have to pay. However, in this case you are actually paying yourself.

♦ Another easy way to automate your savings is to set up a direct deposit with your employer that automatically splits part of your pay check between your checking and savings accounts. That way the money never goes into your checking account and you aren’t tempted  spend it. Out of sight; out of mind.

♦ Some banks offer a variation of this. First National Bank of NWA has a Save the Change program that automatically rounds up every debit card purchase you make to the nearest dollar and puts the difference in your savings account. If you purchase something for $1.50, Save the Change would debit your checking account $2 and put 50 cents into your savings account. This is a great program for debit card users.

A good rule of thumb is to have enough money in savings to cover at least 6 months of living expenses, preferably a year’s worth, as a safety net for any unforeseeable emergencies.  Additional savings could be earmarked for vacations, Christmas gifts, college, etc.

The trick to building your savings is not to touch it. If you decide to automate your savings by using one of these methods but continuously transfer some of it back to your checking account, you are defeating the purpose.

You can avoid the temptation by not linking your savings account to your debit/ATM card or by removing the ability to see your savings account on line. Most banks have these options available.

Good Luck and Happy Savings!!!

Wheeler Holly Headshot_croppedHolly Wheeler is a Vice President of Lending  for First National Bank of NWA She has 14 years of banking experience in the NWA market. She obtained her bachelors degree from the University of Arkansas and is an Honor’s Graduate from the Arkansas Bankers Association’s School of Lending. She is a Sustaining member and past board member of the Junior League of NWA, as well as the treasurer for both the NWA Delta Delta Delta Alumni Association and Housing Corporation. She is the proud mom to her sons Ross and Charlie and wife to her husband Britton.

Note from the mamas: Click here to read previous Q&As with First National Bank of NWA which focus on money questions like how much your child should save from that first summer job, pumping up your credit score and deciding how much house you can (really) afford.

Savvy Banking: How do you calculate your personal net worth?

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In this nwaMotherlode segment, Savvy Banking, you’ll find the answers to a variety of pressing money questions submitted by Northwest Arkansas moms. Our sponsor, First National Bank of NWA, always does a great job of finding the best person at the bank to answer these questions.

This month’s question is:

Q: What determines my ‘net worth’?

A: Written by Kyle Kerwin:

“The truth in my verses, versus, your metaphors about what your net worth is” – Jay Z

Yes, a middle-aged boring banker just dropped Jay Z at the beginning of his post.  Well, “I’m just schooling the youth. They can’t lock me down ‘cause my tool is the truth.”  Whaaattt? NWAMotherlode.com is about to crazy up in here today!

I can’t help it that I find inspiration about an article on net worth in the rap industry. If there’s a more entertaining area to look, then I challenge you to find it for me. For my money (no pun intended), the lyrical geniuses in the rap industry provide some interesting commentary about personal net worth.

There is some serious braggadocio that goes on, and hilariously many of them are not good at calculating their own net worth. Many of them way overestimate (shocker).  If you get a free moment you can check out this entertaining one and a half minute video produced by Bloomberg News on some of rap’s biggest names and how accurate they are in measuring their own net worth.

Even if you don’t watch the video, it doesn’t take a genius to know that net worth is an easily-inflatable number, because much of it can be related your own estimate of what your assets are worth. What is net worth? Simply put, your personal net worth is your personal assets minus your personal liabilities.

Assets are anything of economic value owned with an expectation that in the future it will provide a potential benefit. Assets can include cash in the bank, real estate owned, stocks, bonds, retirement accounts, autos, recreational vehicles, extensive collections of jewelry, art, etc.  Like I mentioned, assets can be difficult to value, but once you’ve listed your assets and what the values are you add those figures together to get your “total assets.”  The internet is a great tool when you’re trying to estimate values on your assets.

Liabilities are your legal debts or obligations. Liabilities can include loans like home, auto, personal, etc, and credit cards. And let me answer a commonly asked question by the “funny” customers I have – no, your spouse or your children are not liabilities, BUT if you do have student loans then by all means those should be included as well! 

money2If you co-signed for a family member on a loan or with partners (sometimes referred to as contingent liabilities) you need to list that as well. So, if you signed with Uncle Rico on a loan and he bails to Mexico to live life as a nomad wandering the beaches with no intentions of paying back the debt, then I will be calling on you to make good on the remainder of the loan. Once you have listed your creditors and how much you owe each one then you add those figures together to get your “total liabilities.”

Once again, your total assets minus your total liabilities equals your net worth (TA-TL=NW).

It’s advisable to update your personal financial statement at least yearly especially if you have a significant net worth and/or borrow money frequently for investment or business purposes. There are many places online and applications for your phone that implement a net worth tool that can help you figure out yours.  There are .pdf forms that you can fill out in Adobe, or print up and fill out by hand.

Many people will even use basic software like Microsoft Office and type out their personal financial statement. At First National Bank of NWA, we have a standard Personal Financial Statement that we can email or print up for customers and prospects to fill out to figure out net worth.

The personal financial statement is something those of us in the commercial lending department see and review on a daily basis when reviewing loans the bank holds, or when reviewing potential loans the bank is looking to make. If you have questions filling out a personal financial statement form always feel free to ask your banker or someone you trust, but please remember this is a document you should fill out and sign yourself. Also remember if you are married and include assets owned jointly (like a house or a business) then you need to include your spouse on the statement as well along with their signature.

Hopefully this article will help in calculating your personal net worth, but don’t get too caught up in being overly concerned about your net worth or lack thereof, because life is not all about net worth.  Many times, “the more money we come across, the more problems we see.”

kyle-kerwin-savvy-banking-fnbnwaKyle, his wife Rebekah, and their daughter Caroline have called NW Arkansas home since 2001.  He is a front runner so you will find him cheering for the Razorbacks, OU Sooners, and OSU Cowboys at various times throughout the year depending upon who is doing better.  He is an avid sports fan in general and enjoys playing golf, reading, writing and he and his family are active members of Keypoint Church. Kyle claims to like almost everyone at #FNBNWA.

Savvy Banking: The Top 5 Things That Impact Your Credit Score

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In this nwaMotherlode segment, Savvy Banking, you’ll find the answers to a variety of pressing money questions submitted by Northwest Arkansas moms. Our sponsor, First National Bank of NWA, always does a great job of finding the best person at the bank to answer these questions.

This month’s question is:

Q: What should I do to make sure my credit score’s not negatively impacted?

Holly Wheeler: Understanding credit scores and how they are calculated is often very confusing for consumers. A credit score, also called a FICO® score generally ranges from 300-850. The higher your score, the better credit risk banks think you are, which typically results in lower interest rates and easier loan approvals.

Ninety percent of top U.S. lenders use FICO® Scores when making loan decisions. The three national credit bureaus that creditors report to are Transunion, Experian & Equifax.

So, what makes up this all-important credit score? Here’s the list:

credit reportPayment History:  This makes up 35% of your score. This one is simple: Pay your bills on time. Creditors will report late payments to the credit bureaus once they are 30 days past due.

If you have a few late payments on your credit report, don’t panic. We’re human and mistakes will happen. An overall good credit picture can outweigh one or two late credit card payments. However, a late house payment can be a little less forgiving because mortgage loans are weighted heavier than other types of credit.

Amounts Owed: This makes up 30% of your score. This is also what a bank/lender will look at to determine if you are overextended on credit.

Credit utilization on credit cards and lines of credit is a main point to focus on. Try to keep your credit card balance around 25% – 30% of your credit limit. (Tip: One thing many people don’t know is that even if you pay off your credit cards in full each month, you could still have a high credit utilization ratio. This is because some creditors use the balance on your statement as what they report to the credit bureaus. A possible way to avoid this would be to make multiple payments throughout the month.)

Length of Credit History: This makes up 15% of your score. There is a common misconception that once you pay off a balance, you should all the credit card company and close it out. Don’t do this, especially if you’ve had a good payment history.

Once you close an account, you have essentially erased positive credit history. Even if you have a few late payments on that old card, it will fall off your credit report in 7 years. If you don’t want to use the card anymore, just cut it up, but leave it open.

Credit Mix: This makes up 10% of your score. It will help your score to have a good balance of secured loans, such as car loans and home loans and unsecured loans, such as credit cards. Contrary to popular belief, it’s not necessarily a bad thing to have a department store credit card, especially if it’s from a place that you frequently shop and if it offers special discounts.

The rates on these cards tend to be on the high side, so it’s a good idea to pay off the balance in full each month. However, it’s not a good idea to open this type of credit card all over town. The credit bureaus could assume that you are desperate for credit, when realistically you just want those exclusive coupons.

New Credit: This makes up 10% of your score. It’s a good idea not to open a lot of new accounts in a short period of time because new accounts will lower your average account age, resulting in a negative impact on your overall score. Another common misconception is that your credit score will drop if you apply for new credit or have too many recent inquiries.

A few things to know about credit inquiries:

  • piggy bank with coinInquiries usually have a small impact on your score
  • Many types of inquiries are completely ignored, such as the ones that you make to monitor your credit and the “soft inquiries” made that generate the “pre-approved” credit card offers that you get in the mail.
  • You are allowed to “Rate Shop” without a negative impact. This means that if you are in the market to buy a new house or car and want to shop the rates between different banks, your score will not be impacted by each inquiry. It is in your best interest to compare rates, but do it within a two-week period to be safe.

Other items that will negatively impact your credit score include:

  • Tax Liens
  • Collections (Medical collections, Cell phone company collections, etc.)
  • Bankruptcy

Now that you know what makes up and affects your credit score, here are a few things that surprisingly won’t affect it:

  • Age, Race, Nationality, Marital Status & Education
  • How much money you make
  • Your net worth
  • Paying rent or utility bills on time
  • Debit card usage
  • A criminal record
  • Receiving welfare

Few consumers probably know that different lenders use different versions of FICO® Scores. You could have more than one score depending on what type of credit you are applying for. For example, mortgage lenders use a FICO® scoring model that has been tailored to the needs specific to the mortgage industry. Auto lenders and credit card companies are the same way. This is why a credit score you obtain on your own may slightly moneydiffer from one obtained by a lender.

It’s also important to note that most consumer creditors – such as credit card companies and auto lenders – will use a FICO® score from just one of the three credit bureaus when making a credit decision. Mortgage lenders, however, usually take into account the scores from all three bureaus.

Credit monitoring is extremely important, especially with the very real threat of identity theft that seems to be everywhere these days. Federal law allows you to obtain a free copy of your credit report every 12 months from each of the three credit bureaus in order to ensure that the information on all of your reports is correct and up to date.

The official site authorized by Federal law to provide these reports is www.annualcreditreport.com. A detailed and consumer friendly report is provided, but each credit bureau requires a small fee to retrieve your actual credit score. There are several other sites that offer free credit scores, but most don’t provide the full detailed report.

I’ll leave you with this: If your current credit situation isn’t perfect, it won’t haunt you forever! Think of your credit score as a “snapshot” of your risk at a particular point in time. As you make positive changes to improve the way you manage your credit, your past credit issues will impact your scores less as time passes.

Wheeler Holly Headshot_croppedHolly Wheeler is a Vice President and Private Banking officer for First National Bank of NWA She has 14 years of banking experience in the NWA market. She obtained her bachelors degree from the University of Arkansas and is an Honor’s Graduate from the Arkansas Bankers Association’s School of Lending. She is a Sustaining member and past board member of the Junior League of NWA, as well as the treasurer for both the NWA Delta Delta Delta Alumni Association and Housing Corporation. She is the proud mom to her sons Ross and Charlie and wife to her husband Britton.

Savvy Banking: Traditional savings account or money market?

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In this nwaMotherlode segment, Savvy Banking, you’ll find the answers to a variety of pressing money questions submitted by Northwest Arkansas moms.

This month’s question, answered by David Cherry, is:

Q: What is your recommendation on how much someone should have in savings? Is it better to save in a traditional savings account OR money-market account? What are the pros & cons?

These are some good questions, so let’s start with the first one. A good general rule is to keep at least three month’s worth of living expenses saved up. Of course, if you don’t have a savings account yet you have to start somewhere.

The first goal then would be to build up $1,000 to put in savings for an emergency fund. You could do this by selling items around the house, pulling what you can from checking, and cutting back on non-essential spending like eating out or shopping for a while.

This $1,000 will be your first line of defense in the case of an emergency, like a car repair or a trip to the doctor. It can be frustrating to have to spend this hard-saved money, but it’s better than having to put it on a credit card that will eventually end up costing you more in the long run.

A traditional savings account is the best place for this money because money market accounts generally have a higher minimum balance requirement of say $1,000 and if you fall below the minimum you will have a monthly fee.

Savings account rates aren’t high right now, averaging about .05% APY, but this is a safe investment vehicle that will only drop in value if you pull the money out. You can also tap into your savings whenever you need to, but you are limited to six withdrawals per month. Most savings accounts have a minimum balance requirement so you will incur a small fee that month if you fall below the minimum.

Once you’ve accumulated upwards of $5,000-$10,000 you would certainly want to look at placing some the funds in a money market held at the bank which would earn a higher rate than in a traditional savings account.

moneyMoney market rates are usually tiered, meaning you earn more interest if you keep a higher balance. As your balance increases, so does the rate. As your balance decreases the rate will decrease as well.

The interest you’ve earned up to that point stays in the account. Money market accounts pay interest on the daily collected balance then the interest is credited to the account either monthly or quarterly depending on the institution.

Like a savings account, you are able to draw the money out whenever you want. The difference with a money market is you are allowed to have six withdrawals per month, three of which may be by check. If you exceed your six withdrawals per month however you may incur a fee for each withdrawal or be asked by the bank to change the account over to checking account that would allow unlimited withdrawals, thus also losing the higher interest rate.

As you can see, savings accounts and money market accounts are similar with slight differences such as rates, balance requirements and withdrawal methods.

The bottom line is you’ll want to start out with a savings account, keep adding to it as you can, then open up a money market when your balance allows. Saving can be hard sometimes, but you always want to pay yourself something each time you get paid. Even if it’s a small amount.

Before you know it, you’ll have that $1,000 saved.

David Cherry FNBNWADavid Cherry is the Commercial Services Officer and Retail Team Leader for the FNBNWA Pinnacle Branch. David has over 11 years of banking experience in every area from retail banking, lending, and business development. David lives in Fayetteville with his wife of ten years Laci, his five year old daughter Scarlett, and his two year old son Silas. Their family enjoys spending lots of time outdoors working and camping, eating dinner together, reading stories, and attending services at the Johnson Church of Christ.

Note from the mamas: Click here to read previous Q&As with First National Bank of NWA which focus on money questions like how to save for your kids’ college, how to bank from your smartphone and deciding how much house you can afford.

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