August 2019 A Special Supplement to
Bureau County Republican
Home Improvement
6 options for funding your next home improvement project
Making the Plan Never Too Late
Explaining financial plans and why you need one
4 simple ways to save more for retirement
Where people spend most
(MS) - Who hasn’t tallied up monthly bills or looked at a credit card statement and pondered if they’re spending a little too much? The average person also may wonder how their expenditures compare to other people around the country and what they need to do to enjoy financial freedom in retirement.
According to the U.S. Bureau of Labor Statistics, the average American household spends just about $57,000 each year between necessities and luxuries. Canadians are spending even more than their neighbors to the south. Statistics Canada indicates that, in 2016, the average annual expenditure on goods and services per household totaled $62,183. So how are people allocating their funds? The results may surprise you and indicate where it’s possible to trim some fat and save big bucks. Across North America, housing is the largest line item in people’s budgets. Various sources suggest that housing and shelter needs account for anywhere from 30 to 40 percent of most household budgets. By making housing decisions based on areas with the most efficient cost of living, individuals can save considerably over the long run. The second largest expenditure category is transportation. This accounts for the cost to finance or lease a vehicle and insure it, and it also includes urban dwellers who rely on public transportation or ride-share services to get around. Keeping transportation budgets in check can be great a way to save. Food is the next largest expense. While everyone needs sustenance to stay alive, how that money is allocated can make a big
What is KASASA?
difference in saving versus spending. The BLS says that food at home costs around $4,000 annually, while spending on dining out amounts to around $3,100, for a grand total of $7,100 each year. Statistics Canada notes that Canadian households spent an average of $8,784 in 2016 on food and that 26 percent of that spending was on dining out. Cutting back on dining out can be a great way to save money, as can becoming a more sale-conscious grocery shopper. Healthcare, utilities and entertainment are the next most costly expenditures, respectively. But each of those items are considerably less expensive than the top three. Therefore, making changes to where one lives, how one gets around and how one eats can certainly add up to considerable savings
It's like your money went on a stress-free vacation
2.50 APY* %
on balances up to $25,000 if qualifications are met
0.03 APY* %
on balances if qualifcations are not met
Celebrating 80 Years of Community Banking
1693 N. Main St., Princeton • 90 N. Main St., La Moille firststatebank.biz
2
f a l l
1 9
What affects credit score?
(MS) - Credit is defined as a customer obtaining services or products before payment with the trust that payment will be made in the future. Credit affords people purchasing power they would not have if they had to pay for something outright at the time of checkout. In addition, credit enables men and women to finance expensive automobiles, buy homes or furnish those homes, contributing much to the foundation of a strong economy. A strong credit history and score is vital to personal finance. The steps people take concerning their finances can greatly affect their credit. Identifying the behaviors that may be detrimental and those that are beneficial can help customers reevaluate their habits and improve their creditworthiness in the eyes of lenders. Payment history The financial advisement resource Credit Karma says one of the most important factors affecting credit scoring is payment history. Having a long history of making payments on time is essential for a strong credit score. Missed payments and a reputation for paying late can drive ratings down. It can take some time to recover from late payments. Failure to recognize late or missed payments may result in bankruptcy or tax liens, which are a heavy black mark on credit. Credit utilization rate Credit utilization refers to the amount of credit you have available, based on credit card limits, compared to the amount of credit you’re actually using by way of the balances on credit cards, advises the credit tracking company Experian. Lenders prefer to see ratios of around 30 percent or less. To calculate credit utilization rate, divide your credit card balance by your credit limit. So if your balance is $600 and your limit is $1000, that’s a utilization rate of 60 percent.
Number of accounts The number of open accounts you have affects your credit score. Scoring models often look back and consider how many accounts are open and if there are any outstanding balances. Length of credit history The length of your credit history is another factor that affects your score, according to Investopedia. Credit scoring takes into account the age of your oldest account, if you’ve used that account recently, as well as the average age of all your accounts, including the newest. Closed accounts can stay on your credit report for up to 10 years, but when an account closes, this will affect your credit history average. Credit scoring rubrics will determine just how the ratio of new to old accounts and frequency of use will impact your score. Credit scores are important. Understanding them further can help people secure their financial futures.
How do you plan your financial future?
We will help you with a personal and local approach based on your needs.
Melissa Brisbin
Executive Assistant melissa@kbelliott.com
Come in and see us! Jaimie Rosenthal
Tracy Makransky
jaimie.rosenthal@central-bank.com
*Steve Bouslog
Senior Financial Advisor steve@kbelliott.com
NMLS #1087072
Real Estate Loan Officer
Real Estate Loan Officer
815-875-3468
815-872-9800
Princeton area experts in home loans!
306 Backbone Rd. East • Princeton, IL
VA • USDA • Convenonal • Construcon Home Ready • Down Payment Plus
815-915-8646
210 S Main St. - Princeton
Visit us online at kbelliot.com
*Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with KB Elliott Financial Advisors.
tracy.makransky@central-bank.com
NMLS #1253864
SM-PR1667562
central-bank.com
f i n a n c i a l
p l a n n i n g
g u i d e
3
6 options for funding your next home improvement project (MS) - Before starting a home improvement project, either on one’s own or with the assistance of a professional contractor, homeowners must first consider the costs involved. According to the home improvement resource HomeAdvisor, more than one-third of homeowners do not understand what hiring a professional will cost, and then cannot successfully budget and secure financing once they have set their sights on a renovation project. HomeAdvisor says that some of the more popular projects, such as remodeling a kitchen or bathroom or building a deck, can cost, on average, $19,920, $9,274 and $6,919, respectively. Homeowners may find that the more expensive renovations require them to secure some type of financing. Those who have never before sought such financing may want to consider these options. 1. Cash-out refinancing: With cash-out refinancing, a person will begin the mortgage process anew with the intention of paying off the current mortgage balance, and then taking out additional funds for other purposes. Cash-out refinancing is a way to tap into a home’s existing equity for use on improvements or other expenses, such as college tuition. 2. Home equity line of credit: The financial experts at Bankrate indicate that a HELOC works like a credit card, with the house as collateral. There is a credit limit, and borrowers can spend up to that limit. The interest rate may or may not be fixed. However, the interest may be tax-deductible if the financing is used to improve, buy or build a home.
4
f a l l
1 9
3. Home equity loan: Individuals also can borrow against equity in their homes with a fixed interest rate through a home equity loan. Most lenders will calculate 80 percent of the home value and subtract a homeowner’s mortgage balance to figure out how much can be borrowed, according to the financial advisory site The Simple Dollar. 4. Personal loan: Homeowners can shop around at various financial institutions for competitive personal loans to be used for home improvement purposes. Funds may be approved within one business day, which can be ideal for those who want to begin their improvements soon. 5. Personal line of credit: A personal line of credit allows borrowers to borrow only the money needed at the time, and offers a variable interest rate that is generally lower than fixed loan rates. Again, like a credit card, PLOC gives a person a maximum borrowing amount and is ideal for ongoing purchases. 6. Credit cards: In a pinch, credit cards can be used to finance improvements, but they do come with the cost of very high interest rates if the balance is not paid in full by the time the bill comes due. However, for funding smaller projects and maximizing rewards points through home improvement retailers or specific credit card company promotions, credit cards can be a way to earn various perks in addition to the benefit of improving a home. Homeowners looking to finance their next improvements should speak to a financial advisor and shop around for the best types of funding for them.
Explaining financial plans and why you need one (MS) - A clear understanding of personal expenditures and savings rates is essential for securing a strong financial future. A financial plan can help everyone from the extraordinarily wealthy to those struggling to make ends meet. The Financial Planning Association says a financial plan identifies goals and objectives that take finances to achieve and creates a plan for making those things happen. A financial plan can serve as a road map that people can look to for years to come as they work toward securing their financial futures. Whether you aim to retire by age 50 or to reduce your debt, a financial plan can be just what you need to turn your dreams into a reality. Here are some steps for devising a financial plan. 1. Identify what you want. You must identify what you want to achieve. Goals may include buying a home, retiring early, providing for a child’s education, or having more time and money for travel. Putting your goals on paper may inspire you to pursue them more vigorously. 2. Audit your finances. Conduct an audit of your finances so you can get a clear grasp of your current situation. Make a list of all of your assets, and then subtract existing debts to figure out your net worth. While you’re tabulating, find out how much you bring in and spend each month so you can get a clear picture of your spending habits. This will help you make smart choices in regard to spending and saving. 3. Eradicate existing debt. One of the key parts of a financial plan is to pay down high-interest debt to free up money for the future. Focus on paying off credit card balances, high-interest loans or
balances for other accounts where interest is high. A debt consolidation loan may be worth exploring if you’re having trouble paying down high-interest debt. 4. Start saving. Building savings is essential to reaching many goals. It also is key to help avoid financial ruin during emergency situations, such as home or car repairs, disability that takes you out of work, etc. Start small by having a certain percentage of money deposited into a separate account automatically. Then watch it grow. Investing in the right products also can help you grow your savings. Financial advisors can help individuals devise plans to meet their shortand long-term goals.
Stop in to see Sacha today! Best customer service around! Princeton Location 124 South Main Street | Princeton, IL 815-872-1900
www.commlenders.com
SM-SPAD0819152912
f i n a n c i a l
p l a n n i n g
g u i d e
5
Tax-advantaged investing (MS) - Investing has always been a means for people to grow their wealth and make their money work for them. Investors know that protecting investment earnings is important, and that often can be achieved through tax-advantaged investments. Tax-advantaged investing, also called tax-efficient investing, allows investors to maximize the profits they can keep after taxes are filed. Investment selection and asset allocation are important factors affecting returns, but minimizing taxes and other costs is also crucial, according to the Schwab Center for Financial Research. There are some ways for investors to keep more of their assets. A qualified financial advisor can help navigate the waters of the best tax-advantaged options. When investing on an annual basis, there are some general accounts people can use to their advantages. • A 401(k) or 403(b): These accounts are an ideal way to get “free” money. Funds in these accounts are put away pre-tax. Because your adjusted gross income is lowered, so is your federally taxable income. In addition, some employers may match contributions up to a certain percentage. Companies also may offer Roth 401(k) plans, which differ from traditional plans in regard to when you pay taxes. With Roth plans, you pay taxes up front. When the money is eventually withdrawn, those withdrawals are tax-free.
health plans and allow account holders to use the funds for qualified spending. Working with a financial planner can help investors maximize their investments to be as tax-efficient as possible. Financial experts understand funding limits and the timeline in which to invest for tax advantages.
• IRAs: Individual retirement accounts are similar to 401(k) plans in that they’re tax-deferred. However, they generally offer greater freedom in investment choices. Roth IRAs, like the Roth 401(k) plans, must be paid with after-tax dollars. But the advantages are higher contribution amounts, withdrawals that are tax-free and no mandatory withdrawals when a person reaches a certain age. • Tax-Free Savings Account (TFSA): Canadian investors can explore TFSAs. These are accounts that do not tax any contributions, interest earned, dividends, or capital gains, and can be withdrawn tax-free. It is available to individuals ages 18 and older in Canada and can be used for any purpose. • College savings accounts: Investing in a 529 plan can be wise for parents. While money is invested after tax, it is tax-free when withdrawn for qualified higher education purposes. • Health savings accounts: To get a tax deduction on health expenses, an HSA is the way to go. HSAs are linked to high-deductible
A conversation about life insurance now can make a big impact on your family (and even your retirement) later.
Callll AAnna Ca nnaa Ar nn Arte Arteaga teag te agaa ag Vice President NMLS# 461075
• LLoans tto PPurchase, h bbuild ild or Refinance • First-Time Home Buyer Program Available • In-House Servicing on All Loans • No Points - Competitive Closing Costs Se habla español
LET’S TALK TODAY. Lorita Hellman, Agent 324 N Main St Princeton, IL 61356 Bus: 815-875-2393 www.lhellman.com
YOU ONLY LIVE ONCE. THAT’S WORTH PROTECTING.
6
f a l l
www.eurekasavings.com State Farm Life Insurance Company (Not licensed in MA, NY or WI) State Farm Life and Accident Assurance Company (Licensed in NY and WI) Bloomington, IL 1708142
1 9
1300 13th Ave • Mendota, IL 61342 815-539-5656
MEMBER FDIC
4 simple ways to save more for retirement (MS) - It’s never too early to begin saving for retirement. While millions of people have no doubt heard or read those very words before, surveys indicate that few people are taking that lesson to heart. A 2018 survey from Bankrate.com found that 20 percent of Americans don’t save any of their annual income. Things aren’t necessarily rosier in Canada, where the financial institution CIBC reports that 32 percent of people nearing or on the cusp of retiring have nothing saved for retirement. Saving for retirement can seem impossible in households where every dollar counts. But the following are four simple ways to save more for retirement without making dramatic lifestyle changes. 1. Turn raises into retirement savings. According to the WorldatWork 2018-2019 Salary Budget Survey: Top Level Results, salary budgets in the United States are projected to rise by an average of 3.2 percent in 2019, while those in Canada are expected to rise by 3 percent. Working professionals can save more for retirement by converting some or all their raises into retirement savings. Pre-tax retirement accounts allow working professionals to put aside money before taxes are paid, so weekly paychecks will not be greatly affected if you choose to increase the percentage of your income you deposit into such accounts. Do this each time you receive a raise and your retirement savings will grow considerably.
is issued is a great way to save more for retirement. Contribution rates can then be returned to normal the following pay period. 3. Downsize your home. Empty nesters nearing retirement age may benefit by downsizing their homes. Doing so can reduce utility bills, property taxes and other expenses, and those savings can then be redirected into retirement accounts.
2. Put bonuses to work. Professionals who receive bonuses can speak to their employer and request that their retirement contribution rates be increased when bonuses are issued. Many 401(k) retirement plans allow workers to contribute as much as 80 percent of their paychecks. While that’s not sustainable for most people every pay period, increasing your contribution rate dramatically when your bonus
4. Reinvest tax returns. Working professionals accustomed to receiving tax returns can use that money to catch up on their retirement savings. Rather than spending tax returns or depositing them into traditional savings accounts, reinvest them into a retirement account. Speak with a financial planner to help you figure out how to accomplish this goal. Even if it requires opening a new account, the long-term benefits or reinvesting returns are substantial. Saving for retirement is important, and it’s never too late or too early to start setting aside more money for your golden years.
FINANCIAL PLANNING EXPERTS!
Think Differently, Invest Differently Free Social Security Analysis 401K to IRA Transfers
(815) 925-7501
SM-PR1688076
www.CyrFinancial.com
CYR FINANCIAL, INC. IS A REGISTERED INVESTMENT ADVISOR
f i n a n c i a l
p l a n n i n g
g u i d e
CYR-1-424
Comprehensive Retirement Planning
7
Do you know how valuable you are?
We do. Your family knows too. If something happened to you, would they be able to stay in their house, keep up with bills, and would your kids have money for college? Protect the ones you love by insuring their most valuable asset – you! Give me a call today.
Jim Scruggs Princeton
Crane Schafer Spring Valley 815-664-4145
815-872-3333
Ron Behrends Tiskilwa
Tyler Hansen Walnut
Ben Schmidt Princeton
815-872-3333
815-646-4121
Dan Kniss Agency Manager, Princeton
815-221-3075
8
f a l l
1 9
815-379-9297
Mike Morris Princeton
815-872-0914
Life insurance policies issued by COUNTRY Life Insurance Company® or COUNTRY Investors Life Assurance Company®, Bloomington, Illinois. 0618-121