Investing
Published by Rock Valley Publishing 2024
IN YOUR FUTURE
PAGE 2 • 2024 • INVESTING IN YOUR FUTURE
The basics of
consumer credit A strong credit score is an undeniable asset for consumers. A strong standing in the eyes of potential creditors can save consumers money on relatively shortterm expenses like vehicles and long-term purchases like homes. Consumer credit is so influential in the lives of the average person that it pays to have some knowledge of what it is and how individuals can use it to their advantage.
A host of variables are considered when determining a credit score, and these According to the credit reporting agency include: • Payment history Equifax, a credit score is a three-digit • Credit utilization ratio, which is the number which represents an individual consumer’s credit risk. Credit risk refers to amount of credit used versus the total the likelihood that a borrower will pay their available credit • Types of credit accounts a consumer bills on time. has. This includes revolving credit Scores are typically between 300 and accounts, like consumer credit cards, 850, and the higher the score, the more creditworthy and less risky a consumer is in and installment accounts, which include Who issues mortgages and auto loans. the eyes of creditors. • Credit history length consumer credit? • Frequency of credit inquiries How credit scores (numerous inquiries in a short period of Consumer credit is typically issued by time generally lower a consumer’s credit banks and retailers. One common question are calculated score) consumers have is who owns credit cards, Three different consumer reporting which are among the most recognizable and agencies (CRAs), including Equifax, widely used forms of consumer credit. determine credit scores. That’s why it’s not Why a credit score Many credit card companies, including is so important Visa, are now publicly held companies after uncommon for a single consumer to have three different scores. Those scores should years of being owned by banks. However, Credit scores are so significant because be similar, and if they’re not it’s likely that many major banks, including Capital One they can cost or save consumers a one or more CRA reports has an error or and Bank of America, issue credit cards as substantial amount of money. errors. well.
What is a credit score?
Consumers with poor scores, which are generally considered scores between 300 and 669, may not be eligible for auto or mortgage loans and may only be able to secure credit cards with high interest rates. By contrast, consumers with scores considered very good to excellent (740 and above) generally get more favorable interest rates on sizable purchases like cars and homes, which can save borrowers tens of thousands of dollars over their lifetimes. Managing credit is a vital component of financial planning. Knowing the basics to consumer credit can set individuals on a sound financial path.
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Credit scores are significant because they can cost or save consumers a substantial amount of money. Consumers with poor scores may not be eligible for auto or mortgage loans and may only be able to secure credit cards with high interest rates. METRO CREATIVE PHOTO Investing in Your Future
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INVESTING IN YOUR FUTURE • 2024 • PAGE 3
Steps to secure your financial privacy Safeguarding personal financial data has never been more important, as an increasingly digital world has made online banking that much more prevalent. Cyber crimes are a significant concern. According to the Federal Bureau of Investigation, no less than 422 million individuals were impacted by cyber crime in 2022, and nearly 33 billion accounts were anticipated to be breached by the end of 2023 – figures not yet known. Cyber crimes are happening every day, even if the public only hears about the largest data breaches. Financial institutions as well as retailers and other businesses that require the use of personal financial information are obligated to safeguard customer data. According to the Federal Trade Commission, financial institutions protect the privacy of consumers’ finances under a federal law called the Financial Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act. That law governs banks, securities firms, insurance companies, and companies providing many other types of products and services. The law dictates how financial institutions can collect and disclose customer’s personal financial information. Individuals also have key roles to play in protecting themselves. Though even the best precautions cannot completely secure your financial privacy, every little effort is worth it to reduce your risk of being victimized by data theft. These tips from the Financial Industry Regulatory Authority can help individuals safeguard their privacy.
information, or Social Security numbers through email. Verify all communication with the financial institution by contacting that institution directly at the number listed on your account statement or bill. • Be aware of where you click online. Never click on a questionable link or download a suspicious email attachment. • Strong passwords can keep accounts more secure. Resist the urge to use the same password across many accounts. Once that password is compromised, the cyber criminal may be able to try it on your other accounts. Consider using a password manager to suggest and save strong and unique passwords for each account. • Utilize multifactor authentication whenever it is available. MFA adds an extra layer of protection by using a password as well as a unique code or biometric to unlock the account. • Conduct all financial business on a personal device on a secure network. Delete the cache and history frequently to avoid leaving a digital trace. These steps can help protect financial security. Individuals need to be diligent in safeguarding their information from cyber criminals.
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• You have the right to opt out of the sharing of some of your personal information with affiliates and nonaffiliates of a financial institution. For example, you can opt out of receiving prescreened credit offers by way of credit bureaus selling information about you to
lenders or insurance. • Increase awareness of phishing scams. These often are emails that appear to come from legitimate firms or financial regulators asking for personal information. These entities would never ask for account numbers, passwords, credit card
Cyber crimes are a significant concern in an increasingly digital world. The Financial Industry Regulatory Authority offers several tips that can help individuals safeguard their privacy. METRO CREATIVE PHOTO Investing in Your Future
How long to hang on to your tax returns As individuals attempt to more effectively organize their homes, they may come across a familiar pile of documents that they might hesitate to discard. Conventional wisdom has suggested taxpayers hold on to their tax returns for at least seven years. However, the Internal Revenue Service indicates that the sevenyear timeline is not necessarily applicable to everyone. The IRS recommends taxpayers speak with their insurance company or creditors to see if they require account holders to hold on their tax records longer than the IRS.
If they don’t, individuals can follow these guidelines, courtesy of the IRS.
1. 2.
Keep records for three years if situations (4), (5), and (6) below do not apply to you. Keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
3.
Keep records for seven years if you file a claim for a loss from worthless securities or bad debt deduction.
4.
Keep records for six years if you do not report income that you should report, and it is more than 25 percent of the gross income shown on your return.
5. 6. 7.
Keep records indefinitely if you do not file a return. Keep records indefinitely if you file a fraudulent return.
Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
These can serve as guidelines taxpayers can follow if they are attempting to declutter at home but don’t want to discard tax returns they might someday need. Taxpayers also can consult with their accountants or tax preparers for advice on how long to keep their returns. In addition, those who want to keep their returns can scan relevant return documents and then store them digitally on an external hard drive. This frees up space in a home and can calm any fears about discarding returns taxpayers may have.
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Investing IN YOUR
Future
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EDITOR:........................................ Melanie Bradley EDITOR IN CHIEF.......................... Heather Ruenz CREATIVE DIRECTOR:..................... Heidi Schulz ADVERTISING DIRECTOR:......Vicki Vanderwerff SECTION DESIGNER:.......................Jen DeGroot
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PAGE 4 • 2024 • INVESTING IN YOUR FUTURE
Finding the right credit card for you Credit cards are a preferential method of payment for millions of consumers. They make buying items online convenient and provide more security than debit cards, which are directly tied to a bank account. The modern credit card was invented in 1950 and was known as the Diners Club card. The idea came from Frank McNamara and business partner Ralph Schneider, who conceived of a way to pay without carrying cash after McNamara had forgotten his wallet while out to dinner in New York. Since that fateful, forgetful night for McNamara, the credit card industry has boomed, and WalletHub notes that consumers now have more than 1,500 credit cards to choose from. Having so many options can make finding the right card somewhat challenging. Explore these methods to narrow down your prospects.
The next step is to identify which type of cardholder you are. WalletHub says cards Know your credit score are designed for specific types of users and are geared toward particular groups’ Before applying for a new credit card, interests and financial needs. it is important to know your credit score. These can include cards for students, The better your credit score, the greater the
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Credit cards also are broken down by their perks. Cardholders need to think about what they want out of a card. For example, some credit cards are marketed to travelers and enable cardholders to earn travel miles or points toward hotel stays. Other cards offer cash back on a percentage of purchases, like 2- to 5-percent back on qualifying categories. Some credit cards help you improve your credit when it’s limited or damaged, says NerdWallet.
Balance transfer policies and interest rates Another consideration on credit cards is whether they offer introductory low- or no-interest rates on balance transfers that enable you to transfer balances from highinterest cards to the new card. Although it’s always best to pay off your credit card balance with each statement, that isn’t always possible. When shopping for a card, it helps to find one with a low
annual percentage rate (APR).
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those for people with poor credit histories, small business cards, or cards for general consumers.
Some credit cards will offer tools such as charts that can help you keep track of spending categories or will automatically advise you of your credit score. Secured or student cards can incrementally raise your credit limit as you establish good credit history. A card that has no late fees or penalty interest rate increases also can come in handy. There are various factors to consider when shopping for a new credit card. By narrowing down the major points of comparison, consumers can find a card that suits their specific needs.
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INVESTING IN YOUR FUTURE • 2024 • PAGE 5
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How to save some money on travel Many people are feeling the pinch of a higher cost of living, as prices for everything from food to gasoline to utilities have increased over the last few years. Some individuals are being much more budget-conscious and scaling back their discretionary spending. Travel may have fallen victim to this perfect storm of rising costs and personal financial austerity. Rather than giving up travel altogether, which can be a detriment to personal health and well-being, individuals concerned about vacation costs can look to ways to save some money. Avoid checked-bag fees – Packing light can help travelers avoid paying extra for checked baggage or overage fees on heavy suitcases. Maximize space in carry-ons so you won’t need to confront higher costs at the airport. Use a flight search aggregator – Sites like Google Flights will pull together several flight options based on the criteria entered. This helps customers figure out where they can get the best deals on flights. Flying out of an airport that’s a little further away may help travelers save some money. Travel off-season – Avoiding peak seasons for certain desirable destinations will help travelers save on everything from transportation to accommodations. Furthermore, tourists will be less plentiful when the season isn’t at its peak. Travel at off-peak times – Similar
to traveling off-season, try booking trips earlier in the week, as Monday, Tuesday and Wednesday could translate to better deals on flights and hotel rooms. Utilize a mileage credit card – Credit cards often have built-in perks. Some give cash-back on a percentage of money spent while others geared toward travel may offer airline mileage or discounts on hotels or resorts. For those who will be spending anyway, it can pay to use a card that will reward that spending on travel. Sign up for a loyalty program – Hotel chains may waive certain fees for loyalty members. Often loyalty clubs are simple to sign up for and include perks like extended check-in or check-out times, meal vouchers or even discounted rates. Consider an Airbnb – The debate over the merits of a traditional hotel or an Airbnb continues. While one is not inherently cheaper than the other, an Airbnb could be a better bet for large families or those traveling with extra people. That’s because Airbnb lodgings may have extra square footage that prevents the need to secure two or more hotel rooms. Also, being able to cook some meals on premises will reduce dining expenses in the long run. Many are concerned with travel costs. However, by exploring money-saving tips, it’s possible to enjoy an affordable getaway.
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Financial mistakes anyone can avoid
Earnings go a long way toward determining an individual’s financial security. However, high wages do not guarantee long-term financial security any more than lower wages ensure a future marked by a lack of financial flexibility. Individuals are a unique variable in any financial equation, and those who can exercise and maintain some fiscal discipline are more likely to secure longterm security than those who cannot. One way anyone can improve their chances at a secure and flexible financial future is to identify and avoid some common mistakes. Avoiding the following mistakes can increase the chances individuals at various income levels enjoy a secure financial future.
Spending beyond your means
The post-pandemic increase in cost-ofliving has garnered considerable attention in recent years, when inflation has driven up the cost of just about everything. There’s little consumers can do about the rising cost of living, but making a concerted effort to curtail spending is one way to combat the spike. However, surveys indicate many people earning significant salaries are living paycheck-to-paycheck. For example, a recent report from LendingClub Corporation found that nearly 40 percent of individuals with annual incomes greater than $100,000 live paycheck to paycheck, with 12 percent reporting they are struggling to pay their bills. An assortment of variables undoubtedly contribute to that stark reality, and one might be a tendency for
can pay their balances in full each month, they’re only exacerbating the already high cost of living by using credit for daily expenses.
Buying too much house
consumers to spend beyond their means. Individuals who are struggling to curtail their spending are urged to seek the help of a certified financial planner who can help them devise a budget and alleviate some of the stress and pressure associated with overspending or living paycheck to paycheck.
Delay saving for retirement Conventional wisdom says it’s never too early to begin saving for retirement. Despite that, surveys indicate many adults are behind on saving. A recent survey from Bankrate found that 55 percent of respondents indicated they were behind on their retirement savings, while 35 percent reported being “significantly behind.”
Though laws governing retirement contributions have made it easier for people to catch up, it’s still better to begin saving once you enter the professional arena, which for most people is some time in their early to midtwenties. The longer you delay saving for retirement, the more precarious your financial future becomes.
Poor use of credit Credit cards can be a financial safety blanket, but that blanket can soon smother consumers who don’t know how and when to utilize credit. Reserve credit cards for emergency situations and resist the temptation to use them for daily expenses, such as groceries and gas. Credit card interest rates tend to be in the double digits, so unless card holders
Overspending on housing is another financial mistake, and arguably the one that’s the most difficult to avoid. It can be hard to walk away from a dream home, but such a decision could secure your financial future. Unfortunately, data indicates far too many individuals are spending more on housing than conventional financial wisdom recommends. The most recent Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics found that spending on housing accounted for 33 percent of the average household’s monthly expenses and that the average household spent 88 percent of its aftertax income each month. That latter figure is especially troubling, as conventional financial wisdom recommends a saving rate of 20 percent. Overspending on housing greatly affects a person’s ability to save and invest, so resisting the temptation to buy that expensive dream home could be the difference between a secure or scary financial future. Avoiding some common mistakes can help individuals be more financially flexible and secure over the long haul.
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Avoiding some common mistakes – such as buying too much house – can increase the chances individuals at various income levels enjoy a secure financial future. METRO CREATIVE PHOTOS Investing in Your Future
PAGE 8 • 2024 • INVESTING IN YOUR FUTURE
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