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E-newsletter August 2014

Back to School Savings Tips

 Summer may be in full swing, but fall will be here before you know it. That means back to school shopping is on its way. Have you budgeted for school supplies and new clothes yet? Here are a few tips to keep your back to school shopping from squeezing the family budget.

Shop Smart
Sometimes quality trumps price. One example: Backpacks. Spending a bit more upfront to purchase a good backpack will save you money in the long run because the higher-quality item will last for years, whereas a cheaper one may need to be replaced in a matter of months. Clothes and shoes are on the other end of the spectrum, however. Children outgrow clothing so fast it doesn't make sense to spend extra money on brand names.

Start Looking for Sales and Coupons Early
Going back to school shopping last minute is a sure-fire way to spend more than you need. Start going through that pile of "junk mail" flyers you get every week for school supplies you'll need. Spreading out the shopping over several weeks not only makes it easier on your budget, but is a good way to make sure you buy as many items as you can while they're on sale (rather than getting everything in one giant trip and only buying a few discounted items).

Make a List and Stick to It
Before hitting the stores, make sure you actually need everything on your list. Many items on teachers' supply lists for the year may be lying around your home office. Common items like scissors, rulers, and simple calculators don't wear out enough in one year to justify buying new ones annually. The same rule applies to clothes. Go through the closet before deciding what needs to be replaced. Once you've narrowed down your shopping list to what you actually need, stick to it when you shop. Extra supplies and unlisted items, while they may be popular with the kids, will probably never get used and just leave your pockets empty.

Organize a Back to School Swap
Round up a couple of other families with kids the same gender as yours but different ages, and host an annual clothes swap. You can trade toys and books, too, for additional savings. Many schools that have uniforms organize this type of event, so be sure to check with the school office to see when and where the swap will take place, as well as the condition requirements for clothing to be swap-able.

Have the Kids Help
You can use back to school shopping as an opportunity to teach your kids about budgeting and price comparing. Give teens a set budget for their items, and then go through their list with them to separate the "wants" from the "needs" before shopping. Have younger children participate by decorating plain binders, folders, and notebooks (which are cheaper than character-decorated items) to personalize them.


Security Q-Tip: Secure Online Shopping

When you’re shopping online, it’s important to take precautionary steps to protect your finances and your identity. Here are 4 quick tips for secure online shopping:

  1. Use unique passwords for storefront logins (Amazon, Target, ebay, etc.). If your password is compromised from a news site, email service, or a blog, the first thing attackers do is try the compromised login information on sites like Amazon, ebay, and PayPal. Using unique login information for various sites can help keep you secure.
  2. Emails can be easily spoofed to appear to be from major sites. If you see an item in your inbox that is “on sale” or you find a posting on a third party site, always go to the company’s homepage and search for the item yourself to ensure you are not clicking on malicious links.
  3. All legitimate online storefronts use HTTPS login and require CVC codes at checkout. If the site you are making a purchase on does not use both of these methods, we advise against making the purchase.
  4. The most important thing to remember is to trust your instincts. If the price appears too good to be true or the company is one you have not heard of and cannot easily find information on, it most likely is a company you want to avoid.

Source: Quentin Fisher (Q), IT Network Risk Manager at Coulee Bank 

Tips for Boomerang Parents - How to Teach Financial Independence

More and more parents who had been looking forward to the "empty nest" years are currently playing landlord to one or more adult children. These "boomerang parents" often struggle with determining how to address financial issues with their grown children living at home. Should they be charging rent? Requiring the child to pay for items like groceries and the electric bill? It's a confusing situation for many. Even if the adult child has a job, living at home can be an appealing cost-saving option. So, how can parents help their new roommates achieve financial independence?

Set Limits and Expectations
The first and most important step to take when your child moves back home is for both of you to establish acceptable limits. That means a time limit for how long they'll be at home, space limits (do they get the whole basement or just their old room), and money expectations (will they pay you rent, gas, groceries, etc.?). The best way to do this is to establish a budget together, and then stick to it. This creates good money habits that will last a lifetime.

Start Paying off Loans
Even if your child is able to defer payments on student loans due to unemployment or under-employment, if they can afford to start making payments right away, it's a good idea to do so. Not only will this save on interest, but they're better able to make payments while living at home because of relatively few other expenses.

Don't Do Everything for Them
Having adult children living at home makes it easy for parents to continue "helping" their children by doing everything for them. However, at this stage of their lives, they need to learn to be more independent, and that includes financially. Encourage your child to take the initiative by setting an example for them to follow and by offering incentives. For example, you could set up a system where if they pay their student loan on time each month, they get free rent. If they make a late payment, they also owe you rent for that month.

Encourage Savings
Strongly encourage your child to start saving for the future. It will be very tempting for them to spend all of their excess income (if they're employed). However, this is a fantastic opportunity for them to save up for a down payment on a house, or to jump-start their retirement fund. Even if they only have a part-time job while they're searching for a career position, putting money aside each month should be a top priority.

Ultimately, parents ready for an empty nest and graduates wanting to be independent both need to realize that the situation is temporary. Establish a plan to save, practice fiscal responsibility, and take advantage of the opportunity to learn from each other.


How to Take a Vacation from Your Small Business

Here’s a sign the economy’s on a good track: More small business owners plan to take a full week off this summer than in any year since the recession began.

That’s according to a survey by American Express OPEN that suggests entrepreneurs are feeling more confident about the economy. AmEx’s Small Business Monitor survey shows that 60 percent of respondents are planning a one-week vacation this summer, the highest since 2006. Alice Bredin, small business adviser to AmEx, says small business owners are feeling more optimistic, getting easier access to capital, and seeing a lift in sales. “So they’re doing what they know they should be doing, which is taking a break.”

Here’s some advice for getting your summer vacation right:

  1. Take What You Can: Too many entrepreneurs put off vacation until they can spend three weeks in Machu Picchu or go on a Greek cruise, but “it never happens,” Bredin says. Arrange a week in the mountains where you can work remotely in the mornings and take every afternoon off, she suggests. Even if all you can manage is a four-day weekend with a daily check-in at work, that’s still better than nothing.
  2. Get Yourself Prepared: Pay the bills, get up to date with your suppliers, put off big projects, let big customers know who they can contact in your absence, and brief key employees. Preparation is hard to do, but well worth it for the peace of mind you’ll have on vacation.
  3. Plan for Reentry: Make a list of things you want to tackle when you get back in the door. It makes coming back a little less painful, and it’ll refresh your mind so you remember what you need to work on next.
  4. Check In—or Don’t: Joyce Maroney, director of the Workforce Institute at Kronos, recommends unplugging from work and giving out your contact information only for emergencies. But some business owners are more comfortable staying in touch. “While I trust my team to manage in my absence, regular checking on e-mail gives me peace of mind that all is well and means I don’t come back to hours of catch-up,” says Christine Barney, chief executive of rbb Public Relations. During a recent 11-day Italian vacation, she checked her work e-mail daily. “Thirty minutes a day reading and responding only to urgent matters meant much greater enjoyment of my vacation time,” she says.
  5. Treat it as a Test Run: “All entrepreneurs should have key employees they are grooming for succession,” Maroney says. “Make sure they can handle 90 percent or 95 percent of what comes along, and then put them in charge. It’s a good exercise, seeing if they can handle a planned absence, for some point when they might have to step in on an unplanned basis.”
  6. Look Forward: Between the packing and the worrying, entrepreneurs sometimes dread vacations. But anticipating time off can be almost as rewarding as taking it. “There is something about creating these events that we look forward to, and in some cases people get as much pleasure out of the anticipation of a vacation as they do the actual vacation,” Maroney says.


9 Money Habits That Can Help You Get Wealthy

While a six-figure inheritance or high-paying job can land you in the top 1 percent of earners, it’s the little things—your money habits—that often make the difference between a life of prosperity and one of constant financial stress.

Just ask LearnVest Planning Services CFP® David Blaylock, who doesn’t simply advise his clients on the merits of good money habits; he practices what he preaches. For example, “I do a periodic review of all the subscriptions I have—the ones that hit my credit cards each month,” says Blaylock. “You’d be surprised at how many subscriptions we all have and how many go unused. You could create some significant savings each month just by looking at those things.”

Taking inventory of your recurring subscriptions and services is just one habit that can get you on the road to better fortune. “If you look at the average amount of money you will earn over your lifetime, and figure out how many years you are working, most people earn more than a million dollars. However, very few people become millionaires,” says Nancy Butler, a Certified Financial Planner™. “How they manage what goes through their fingers usually makes the difference.”

So what are these easy changes that can help move you further along the road to prosperity? We asked two financial planners for their favorites.

1. Reverse Your Thinking
We know: After taxes are taken out and the bills are paid, your paycheck can seem a little anemic—which can make the idea of having to save for retirement seem like a real stretch. But to build wealth, a change in mindset is required. Namely, instead of spending the rest of your take-home pay, you’d actually take another cut of your paycheck and put it toward your biggest financial goals.

“Most people spend some money, pay their bills, and save what’s left,” says Butler. “And that’s backwards: You should be saving for your financial goals first, paying your bills, and then consider spending the money you have leftover.” Another trap is putting your good money habits off till “later,” when life will get easier. The thing is, somehow the minute your income increases, the demands on your money seem to as well.

Now, keep in mind, we’re not suggesting you sock all of your money away and live on rice cakes. As Blaylock puts it, “I’m not asking you to put $1,000 away a month, I’m asking you to put away $50, or a small amount that you can afford. We really can’t underestimate the power of starting small, because most of the time that momentum builds, and once we see progress, we tend to repeat behaviors.”

2. Look Where You Want to Go
Just as performance athletes imagine themselves making the shot over and over again, knowing what you want your money to do for you gives your goals a better chance of being reached.

To get going on saving for the future, financial experts often suggest having a five-year plan, where you create specific money goals you’d like to achieve in five years and what you need to achieve those goals. For example, saving six months of income for an emergency fund, or saving for a big event, like a down payment on a house.

“Anytime we have a specific goal in mind, that helps us to save,” says Blaylock. “Whether that goal is emergency savings, saving for a trip, or saving for college, it doesn’t matter.”

3. Adopt Your Own Private Mind Tricks
What if not spending $1,000 on a designer purse or new gadget were as easy as following a rule that says you can’t spend more than $300 on something that isn’t essential to your life? The good news is you can create financial rules just like that for yourself; in fact, doing so can be a great habit to get into.

Also known as “heuristics,” these rule-of-thumb strategies we create for ourselves—such as not spending more than $15 on an item of baby clothing—can help simplify the many choices we make in a day. Behavioral economists believe that adopting good heuristics can help one develop good money habits. If creating a great heuristic seems like an overwhelming task, Blaylock suggests starting with something simple, such as eating out only twice a week, or “not getting a cart at Target.”

4. Live Like a 'Secret' Rich Person
For some, the image of a millionaire conjures visions of sprawling mansions and shiny Bentleys. But most millionaires don’t live large like that—rather, they tend to live well below their “means” and do more saving than spending. In other words, they’re not flashing their money, according to Dr. Thomas J. Stanley, co-author of “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy.”

Stanley’s book, which details more than two decades worth of surveys and personal interviews with millionaires, reveals that much of the wealth in America is more often the result of hard work, diligent savings, and living below your means. Las Vegas–based David Sapper, who owns a successful used car business, and his real-estate broker wife make a combined income of $500,000 per year. Yet they live like “secret” rich people, only spending $2,500 per month on all bills and extracurricular expenses like eating out, unlike many of their peers.

By putting 90 percent of his income into savings and investments, Sapper says he’ll be able to retire early. His advice? “Find the point that you get what you need and you’re happy and comfortable, and just stay there,” says Sapper. “I had an ‘aha!’ moment when I was watching MTV, and LL Cool J was saying, ‘I lease a Honda Accord for $399 a month,’ while other rappers are going broke.”

5. Tackle Retirement Now
If you’re in your twenties or thirties, retirement can seem eons away, and saving for it might not seem like a priority. It’s easy to understand: In between paying to attend weddings (which average something like $600 per guest), saving for a down payment on a home, and using anything leftover to put toward “necessities” like vacation, how are you supposed to save anything for retirement?

Unfortunately, the later you start saving, the more you’ll have to save. But the sooner you sock money away, the more time it has to compound and grow. If, for example, you’re 30 and putting $50 a month into a retirement account with a 7 percent rate of return, that $50 a month would turn into $56,000 in 30 years, says Blaylock. Should you wait to age 40, you would need to contribute $110 per month to get to that same goal. This is because your money has less time to grow, which minimizes the impact of compound interest.

6. Know What’s Coming In, and What’s Going Out
Most of us have good intentions when it comes to saving money. But if you don’t know what’s coming into your bank account and what’s going out, chances are you don’t know how much you can devote to your goals. Most people generally don’t track their income and spending, says Blaylock. “It really is shocking to me that clients I work with don’t always review their pay stub,” he says.

You can track your expenses, set goals, and save with free apps like Mint (a Personal Finance, Budgeting and Money Management application). Remember: Knowledge is the first step to lasting change. “If I don’t know how much you spend on eating out, how can I expect you to change that?” says Blaylock. “You kind of have to become the chief financial officer of your household.”

7. Getting out of Debt
Everyone has debt at some point in their life. But if you have bad debt—not student loans and mortgages, but credit card debt, where you’re paying high monthly interest rates—nixing it and getting out of the habit of being a debtor should be priority number one. “I want somebody to develop a plan to have them out of that debt in 36 months or less,” says Blaylock. “It’s hindering you from making progress on your other goals.”

At the same time, emergencies happen and a $600 car repair can hit anytime. That’s why Blaylock advises putting half the money you could put into paying down debt into an emergency savings account. Instead of paying $600 toward credit card debt, consider putting $300 toward emergency savings and $300 toward credit card payments. While this means it will take longer to get out of credit card debt, you’ll have money stored up for an emergency.

“Credit card debt is a result of the ‘uh-oh’ moments,” says Blaylock. “We still don’t have any savings built up because we put it all toward our credit card. So while you’re also working to pay your credit card down, you should consider putting an equal amount to an emergency savings account. I often tell clients that their emergency savings are their insurance policy against falling into credit card debt ever again.”

After you get out of debt, Butler suggests only having one credit card, and come to an agreement with yourself (or your significant other) that it will only be used during an emergency. “Let’s say the car broke down and you can’t fix it—that’s an emergency,” says Butler. “Something’s on sale, and I know I’m going to need it in six months—that’s not an emergency.”

8. Increasing your Earnings
There are two ways to increase your net worth: Spend less or save more. Spending less is only part of it – you have to save, and when appropriate, invest the rest, says Natalie Taylor, a CFP® with LearnVest Planning Services. “Earning more often doesn’t lead to higher net worth because lifestyle expenses grow along with it.”

But if you grow your income, and set some of those earnings aside, you can grow your bottom line. Aside from getting a raise or winning the lottery, there are a few ways to get more money flowing in.

One suggestion: Diversify your income streams by working a second, part-time job doing something you love. As far as earning more, there are a few things one can do. “For those who cannot cut their expenses enough, I love the idea of working part-time,” says Blaylock. “I have a great friend who is an attorney. She has a big travel habit that she is unwilling to pull back on. So, she works at a flower shop on Saturdays during wedding season. It’s a win for everyone: The flower shop has a dependable employee, and my friend loves flowers so she does not think of it as work.”

Another idea: Look for investment opportunities or other ways to get income to come to you. “I think retirement income should come from multiple sources such as rental income, part-time income, and retirement assets,” says Blaylock.

9. Consider Consulting an Expert
There are times in life when consulting an expert pays you back in spades. Even if you’re doing everything you can to start good money habits, using a qualified financial planner can help keep you on track—and help you see the big picture.

“Often times most of us are too emotionally involved in our finances to make really good decisions,” says Blaylock. “So what you’re looking for when you’re getting a professional is accountability and an outside view of what you’re doing.”


Coulee Investment Center: Need to Save for College?

The great thing about saving for college (just like saving for retirement) is that the sooner you start, the easier it is!  For example, if you have a three year old child and start saving for him or her to go to UW-La Crosse1, you will need to save $413/month2. If you wait until your child is 15 years old, you will need to save $1,111/month3. That is a hefty monthly payment for waiting!

There are many ways to save money for college, but by far the most popular way is by using a 529 plan. A 529 plan allows you to save for higher education and receive tax deferral on the growth (similar to an IRA) and it is TAX FREE for higher education expenses. So, this means that all of those years and years of growth is tax free when you take the money out to pay for your child’s college. This is a huge benefit because compound growth, as we are familiar with from saving through retirement accounts, will get you to your goal faster!

529 plans may also have a state incentive. Wisconsin will allow up to $3050 (in 2014) per beneficiary to be deducted from Wisconsin taxable income for contributions to Tomorrows Scholar; Wisconsin’s 529 plan! This amount increased this year from $3000 and will be indexed to inflation going forward. Contributions in excess of the maximum annual deductible limit may be carried forward to one or more future years and deducted up to the annual maximum deductible amount each year, until all amounts invested have been deducted from Wisconsin taxable income.

Another new benefit to Wisconsin’s 529 plans is now any Wisconsin taxpayer may claim a deduction for contributions to any account. So grandparents, aunts, and uncles can start or keep giving your child cash gifts that will be used for higher education through the Tomorrow Scholar WI 529 plan and receive the same tax incentive as the parent or account owner. The contribution deadline was changed this year to be April 15th for the prior year’s contribution, which means this year you have until April 15, 2015 to contribute for the 2014 tax year to either try to reach the maximum deduction of $3050, or try to maximize the savings for your child. 

The maximum a contributor can give per year per beneficiary follows the annual gifting guidelines, also called the annual exemption (now indexed to inflation) which is $14,000 in 2014. A couple that elects to split gifts can contribute $28,000 per year per child without paying a gift tax. There is an exception to the annual exemption of $14,000 that allows a 5 year lump sum gift to a 529 plan, which would allow a contributor to make a $70,000 lump sum contribution and choose to treat it as having been made ratably over a 5 year period ($140k for a married couple splitting gifts).The maximum lifetime account balance per beneficiary for all WI 529 plans for that same beneficiary is $330,000.

It makes sense to save for your children’s higher education – especially with all the benefits I have just mentioned - versus borrowing the money to pay for college.  To drive this home with an example, let’s compare using a loan to saving through a 529 plan.  If you were to borrow enough money to send your 3 year old to UW-La Crosse (when they reached college age) for 4 years, your loan repayments would be $1,6854 per month. Compare that to saving only $413 per month. Or for the 15 year old going to UW –La Crosse for 4 years, the loan payments would be $9385 per month. For the late planners, the $938 may sound great since you would need to save $1,111 per month in this situation, but don’t forget that interest continues to accumulate until you pay off the loan! If it takes 10 years to pay off the 4 years of college to UW-L at the current interest rate of 4.66% for federal loans (loans beginning in July 2014*), you will be paying $112,596 versus $80,015 for the family that saved for the 15 year old in this scenario.

Let’s say you were great at planning for your child’s higher education and you aren’t stressed about your child getting through college because you have it covered in your child’s Tomorrows Scholar 529 plan. Then, you find out your child gets a 4 year scholarship! That’s great news, but what about all that hard work saving? Don’t despair – an amount equal to the scholarship can be withdrawn from the 529 plan without penalty6.  If this child (beneficiary) does not use all the money in the 529 plan for their college expenses, you can transfer the account to another beneficiary7 to benefit from the account without paying a 10% penalty.

There’s much to learn and so many options; what should you do?  Schedule an appointment with your Certified Financial Planner Professional to discuss your situation to make the best decision for you. If you don’t have a relationship with a CFP® or if you do and want another opinion, call Shari Hopkins, CFP® and Financial Consultant at Coulee Investment Center located at Coulee Bank, direct phone 608-784-3904.

1 Cost information from the Tomorrows Scholar 529 College Cost Calculator for a WI resident attending UW-La Crosse for 4 years.
2,3 Assumptions include a 5% inflation on college costs and a 7% rate of return on investments.
4,5 Assuming $18,011 per year cost of college with a 5% inflation rate, borrowing using a federal loan with an interest rate of 4.66% paid back over 10 years.
6 A penalty of 10% on the growth is assessed by the federal government if money is withdrawn from a 529 plan that is not used for higher education purposes.
7 Beneficiary transfers can occur without adverse federal income tax consequences as long as the new designated beneficiary is a member of the family of the current beneficiary as described in the Tomorrows Scholar Program Description and Participation Agreement (pg. 17) dated May 1, 2014.
*Information from Based on a federal direct subsidized undergraduate loan starting on July 1, 2014 with a rate of 4.66%.

Securities offered through LPL Financial, Member FINRA/SIPC.  Insurance products offered through LPL or its licensed affiliates.  Coulee Bank or Coulee Investment Center are not registered broker/dealers and are not affiliated with LPL.

 Not FDIC Insured  Not Bank Guaranteed  May Lose Value
 Not Insured by any Federal  Government Agency  Not a Bank Deposit