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October

October 2020 E-Newsletter

If Doing Less Means Saving More, Try These 5 Money Moves


Staying Home
The coronavirus has upended countless jobs, schools and bank accounts. But while undoubtedly more people are struggling than not, those who are still working may have seen their expenses actually drop, due to canceled travel, limited dining options and more time at home.

If you’ve managed to end up with extra money during the pandemic, here’s how to take advantage of those savings.

Start or fill out an emergency fund
2020 has served as a stark reminder that unexpected things can happen, and when they do, it’s a good idea to be prepared.

“We say if you have a steady job, your contingency fund should be three to six months of expenses,” says Tara Unverzagt, certified financial planner and founder of South Bay Financial Partners in Torrance, California. “I would bulk it up even more because of uncertainty. I've never known anyone to be upset because they had too much cash, but have known lots of people who were upset they didn't have enough.”

That level of savings is a stretch goal for many people; an extended period of reduced expenses may provide you with the opportunity to finally reach it. Establishing an emergency fund is one of the best things you can do for your future self, and if you put it in a high-yield online savings account, it will benefit from a higher interest rate than a regular savings account.

You don’t want to invest your emergency fund because your primary goal for that money is accessibility, not growth. The stock market goes up and down, and there's a real risk that it could go down just when you need the money. At best, that could mean having to sell your investments at a loss to pull cash out. At worst, it could mean your money won't be there when you need it most.

Invest for retirement
If you haven’t ventured into the world of investing yet, it may feel like a scary time to start given all the volatility in the market lately. The good news is that volatility doesn’t cause much harm when you’re investing for a long-term goal like retirement: The peaks and valleys due to the coronavirus will likely appear much smaller over time.

If you haven’t started investing, there are two easy jumping-off points: your employer’s 401(k) if it offers one and an IRA. Both are accounts that can help you invest for retirement with some tax benefits. Roth IRAs, for instance, allow your money to grow and be taken out in retirement tax-free.

Even if you’re already contributing to a 401(k) or an IRA, you may want to consider upping that contribution. Every extra bit you can put toward retirement goes a long way. Let's say your reduced expenses mean you can save an extra $500 a month over the next year. If you have 30 years until retirement and you earn a 6% return, that $6,000 you invest could add over $34,000 to your retirement balance — a significant boost.

And because you can always change how much you’re contributing, you can decrease the amount you’re putting toward retirement if and when your spending habits return to normal.

Save for nonretirement goals
Retirement is a common goal, but it likely isn’t the only one you have. If you’re on track for retirement, consider putting extra funds toward other things: college for your kids, a new car or a dream vacation (which you’ll have plenty of time to save for, since most people aren’t traveling right now).

Investing can help you achieve those goals faster than just saving, but keep in mind that you generally don’t want to invest money you’ll need within five years. (Like an emergency fund, savings for near-term goals should go into safer options, like a high-yield savings account). On the other hand, if you’re starting a college fund for a newborn, that money will have approximately 18 years to take advantage of the market’s returns.

If you’ve found yourself in a position of privilege during this global pandemic and have been able to save some extra money, you may also want to consider increasing your charitable contributions. Keep in mind, you may be able to deduct your charitable donations when tax time rolls around.

Explore real estate investments
If you’re interested in investing in real estate, you don’t have to start renovating an old barn or putting up shiplap. One of the easiest ways to invest in real estate is to invest in real estate investment trusts. REITs are companies that own (and sometimes operate) real estate that generates income, such as apartment buildings. Publicly traded REITs are bought and sold on exchanges, just like stocks, and have similar liquidity, meaning you can sell them with relative ease.

The article, If Doing Less Means Saving More, Try These 5 Money Moves, originally appeared on nerdwallet.com

A Friend Or Family Member Needs Money. What Do You Do?

Woman on phoneEach of the millions of Americans who’ve recently filed for unemployment is somebody’s child, parent, sibling or dear friend. Say it was someone close to you who lost their job or who otherwise felt financially strained from the COVID-19 pandemic. How could you help?

Understandably, your first thought may be to write a check that would seem to make everything better. But it’s rarely that simple. “You have to be serious about the risk that you’re taking with your assets,” says Sarah Newcomb, behavioral economist for investment research firm Morningstar and author of “Loaded: Money, Psychology, and How to Get Ahead without Leaving Your Values Behind.”

If you’re thinking about loaning or giving money, “pause, take a beat and think before you offer,” says certified financial planner Lynn Ballou. Here’s what to think about.

What to consider before loaning money
Scrutinize your cash flow and financial goals, like those related to retirement, paying off debt or saving for a house. “The issue is not ‘what can I afford to give today?’ It’s ‘what can I afford to give today without losing my plans for the future?’,” Newcomb says. In other words: “You need to know that if you never got that money back, you can still live the life you want to live.”

Working with a certified financial planner can help you determine how much (if any) you can afford to loan or give without compromising your goals. Another key player in this decision? Your spouse, assuming you share finances, says Autumn Campbell, a Tulsa, Oklahoma-based certified financial planner with The Planning Center. Loop in your partner, she says, adding: “The amount doesn’t matter. For many people, it’s the principle of it.”

The borrower and his or her risk
Given that you likely know the borrower well, “you may be able to have more insight into the person’s long-term reliability and solvency than a bank,” Newcomb says. If you expect repayment, as opposed to giving a cash gift, what’s the likelihood that he or she will be good for it? “We often have a gut feeling about that, or a lot of evidence,” she says.

Another way to help you determine whether to lend: Have the borrower present a plan for what he or she will do with the loan and how it’ll be repaid, Newcomb says. Then “the lender needs to decide if that’s credit-worthy,” she adds.

The reality of the situation
Even if you’re confident that your loved one will repay you, “have low expectations,” Campbell says. He or she may not be able to come up with the money, especially given that it’s hard to anticipate the longer-term financial effects of COVID-19, Ballou points out. For example, maybe your borrower winds up unemployed for months longer than anticipated.

“You need to be OK with that money not coming back,” Campbell says, which may help you determine exactly how much money you can really lose, if any. At least figure out what you would do if you’re not repaid. “Are you going to part with it and consider it a gift?” Campbell asks. “Or, if that’s not an option, then how comfortable are you addressing that with them, with the potential of influencing the relationship in a negative way?”

Reckon with emotions and perhaps the inability to help
Emotions will want to play a part in your decision. Newcomb warns: “Be very wary and careful about feelings of guilt and obligation.” The seriousness of the situation — his rent’s due in two weeks! — may compound these feelings. “We can often lose sight of what’s important, because we’re thinking about what’s urgent,” she says.

Acknowledge emotions, but focus on the long-term and more concrete factors: your finances, your borrower’s risk and the fact that you may not be repaid. That reflection will give you a clearer indication of if you can afford to lend money and, if so, how much. If it turns out that you can't part with any money, it's OK to say no to friends or family members, Newcomb says. There are other ways to help. More on that later.

If you loan money, communicate the terms
Given those emotions and your closeness with the lender, “there’s so much more to navigate beyond the numbers,” Campbell says. If the loan doesn’t go as planned for you or your loved one, you risk hurt feelings and, possibly, damaged relationships.

Crystal-clear communication should help you sidestep drama and misunderstanding. First and foremost, tell your loved one whether you’re giving or loaning them money. (If it’s the former, read up on gift taxes.) In either case, set expectations by telling your friend or family member the total amount you will give or loan. Ballou suggests even adding something like: “That may not be everything you need, but that’s all I can afford.”

For a loan, agree on when and how it will be repaid and at what interest rate, if any. Consider formalizing the terms with a family loan agreement.

Explore other ways to help
There are other ways to help if lending or giving money doesn’t make sense for you. Some of the options below require money; others do not.

Pay for a bill
If you’re not convinced that the money you’d loan or give would be used wisely, Ballou suggests paying directly for a specific bill. (This means you give money directly to the utility company or medical team, for example, as opposed to the friend or family member.) “That way, you know where the money went,” Ballou says. “You also feel good about it, because you’re giving it for the thing that they need.” Like a loan, communicate how much you would pay toward this bill and for how long.

Buy groceries or other necessity
Do they need something expensive, like a new stove? You could offer to buy it for them if your budget allows.

Give them time and energy
Not all support comes with a price tag. Offer to mow your friend’s or family member’s lawn, virtually help his or her child with homework, or drop off a homemade meal (at a distance). Or simply ask what you can do to help, Ballou says. Giving your time can make someone “feel incredibly valued,” Campbell says. It can also reduce that person’s stress, which may, in turn, help him or her make better money decisions.

Another priceless gift: being a friend. “You can help by listening,” Newcomb says, “and by redirecting their attention from financial stress to who in their life cares about them.”

The article, A Friend Or Family Member Needs Money. What Do You Do?originally appeared on nerdwallet.com

Coulee Bank Mortgage: Get Your House Hunting Checklist

Searching for a HouseThere’s a lot to consider when you’re searching for a home. You have to ask important questions: Which features are must-haves and which ones are simply desirable? How far are you willing to commute to work, grocery stores and other frequently visited places?

Some of the decisions you have to make during your home search are a little bit more fun, like which architectural styles you prefer and what fixtures and finishes you’d like to have. And it’s important to note these details.
If you’re looking for remodeling projects that will get you a return on your investment, you may want to focus on these:

So once you’re preapproved for a mortgage, start your search off on the right foot with a house-hunting checklist. Bring it with you while touring homes, checking things off and taking notes so you can more easily compare each option.

Get the checklist below to make your next home search go smoothly.
House Hunting Checklist

Need help covering the costs of your next home improvement project? Get in touch to learn about refinancing, home equity loans and other options. Reach out to a Coulee Bank mortgage lender today for a personalized recommendation.
 

Coulee Security Tip: Securing Your Home Network

Internet Security














A protected home network means your family can use the internet more safely and securely.

Most households now run networks of devices linked to the internet, including computers, gaming systems, TVs, tablets, smartphones and wearable devices that access wireless networks. To protect your home network and your family, you need to have the right tools in place and confidence that family members can use the internet more safely and securely. The first step is to keep a clean machine and make sure all of your internet-enabled devices have the latest operating system, web browsers and security software. This includes mobile devices that access your wireless network.

A wireless network means connecting an internet access point – such as a cable or DSL modem – to a wireless router. Going wireless is a convenient way to allow multiple devices to connect to the internet from different areas of your home. However, unless you secure your router, you’re vulnerable to people accessing information on your computer, using your internet service for free and potentially using your network to commit cybercrimes.

Here are ways to secure your wireless router:

  • Change the name of your router: The default ID – called a service set identifier” (SSID) or “extended service set identifier” (ESSID) – is assigned by the manufacturer. Change your router to a name that is unique to you and won’t be easily guessed by others.
  • Change the preset passphrase on your router: Leaving a default passphrase unchanged makes it much easier for hackers to access your network. You should change it as soon as possible. A strong passphrase is a sentence that is at least 12 characters long. Focus on positive sentences or phrases that you like to think about and are easy to remember (for example, “I love country music.”). On many sites, you can even use spaces!
  • Review security options: When choosing your router’s level of security, opt for WPA2, if available, or WPA – these levels are more secure than the WEP option.
  • Create a guest passphrase: Some routers allow for guests to use networks via separate guest passphrases. If you have many visitors to your home, it’s a good idea to set up a guest network.
  • Use a firewall: Firewalls help keep hackers from using your device to send out your personal information without your permission. While antivirus software scans incoming email and files, a firewall is like a guard, watching for attempts to access your system and blocking communications with sources you don’t permit. Your operating system and/or security software likely comes with a pre-installed firewall, but make sure you turn on these features.

Protect yourself with these STOP. THINK. CONNECT

  • Keep security software current: Having the latest security software, web browser and operating system is the best defense against viruses, malware and other online threats.
  • Protect all devices that connect to the internet: Along with computers, smartphones, gaming systems and other web-enabled devices also need protection from viruses and malware.
  • Plug & scan: USBs and other external devices can be infected by viruses and malware. Use your security software to scan them.
  • Protect your $$: When banking and shopping, check to be sure the sites is security enabled. Look for web addresses with “https://,” which means the site takes extra measures to help secure your information. “Http://” is not secure.
  • Back it up: Protect your valuable work, music, photos and other digital information by making electronic copies of your important files and storing them safely.
Coulee Security Tips are provided by Coulee Bank's IT Network Risk Manager, Quentin Fisher. He is always on the lookout for ways to keep our customers' information safe, here at the bank, at work and home.

Coulee Investment Center: IRA 101: Know The Facts


Individual retirement accounts (IRAs) are one of the most common assets people rely on to save and invest for retirement. In fact, more than a third of households in America own an IRA. If you’re thinking of opening an IRA for the first time, it’s a good idea to review the rules. Even if you have had an IRA for years, note that laws change.

The Different Types
There are two main types of IRA accounts to choose from: traditional and Roth. The timing of the tax advantages is the main difference between the two. For a traditional IRA, contributions are tax deductible and tax is paid upon withdrawal. Roth IRA contributions are taxed in the year they are made, and qualified withdrawals are tax-free. Both types are almost equally popular: 36% of American households have Roth IRAs 35% of American households have traditional IRAs 26% of American households contribute to both There are also employer-sponsored IRAs. These may fall into either of the two categories.

Contribution Limits
The IRS set a 2020 annual limit of $6,000 for people under 50 years old. People who are 50 years and older can make a total contribution of $7,000. What some breadwinners do to maximize contributions is to file joint tax returns and open a second account for their spouses. They then make additional contributions to this account. The IRS states that the combined contribution cannot exceed the lesser of the couple’s taxable income or the contributor’s individual limit times two.

Eligibility
The IRS considers net income from self-employment, gross wages and gross salaries as qualifying income. Too much income, however, and IRA contributions can get reduced or prohibited altogether:
Qualifying Widower or Married Filing Jointly: The regular contribution rules apply up to $196,000. From $196,000 to $206,000, the IRS reduces the contribution limit. No contributions are allowed after $206,000. 
Single, Married Filing Separately (did not live together) or Head-of-household: Filers who earn less than $124,000 follow the usual contribution rules. More than this up to $139,000, the IRS reduces the contribution limit and after $139,000, contributing is not allowed.
Married Filing Separately (lived together): The IRS reduces the contribution amount for less than $10,000 and prohibits contributions for $10,000 in income or more.

Tax deductions
How much income you make determines how much of your total contribution you can deduct from your taxable income and whether or not your contribute to an employer sponsored retirement plan:
Qualifying Widower or Married Filing Jointly: Filers who make $104,000 or less can take tax deductions up to the full contribution limit. More than this up to less than $124,000, people can get a partial deduction. Beyond this, there is no deduction. 
Single or Head-of-household: For total incomes of $65,000 or less, the individual can take the full deduction. More than this up to less than $75,000, there is only a partial deduction. Beyond $75,000, there is no deduction.
Married Filing Separately: There is a partial deduction for income up to $10,000. After $10,000, there is no deduction.

Distributions
Like any retirement account, you do not need to wait until retirement to claim your distributions. Here’s what you need to know:
  • There is no penalty for traditional IRA withdrawals after reaching age 59 and a half.
  • Traditional IRA distributions get taxed at the rate that is current at the time of withdrawal.
  • Roth withdrawals are not taxed because taxes were already paid upfront.
  • Roth IRAs do not have mandatory withdrawal rules, but traditional IRAs require distributions by April 1st of the year you turn 72 or there are considerable tax penalties.

There is no one-size-fits-all solution when it comes to choosing and funding a specific type of IRA account. 
Reach out to Shari Hopkins, LPL Financial Advisor, for a personalized recommendation.

Traditional IRAs are funded with tax-deductible contributions in which any earnings are tax deferred until withdrawn, usually after retirement age. Unless certain criteria are met, IRS penalties and income taxes may apply on any withdrawals taken from Traditional IRAs prior to age 59 ½. RMDs (required minimum distributions) must generally be taken by the account holder within the year after turning 72.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax-free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This material was prepared by LPL Financial, LLC


Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (Member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Coulee Bank and/or Coulee Investment Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Coulee Investment Center, and may also be employees of Coulee Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of Coulee Bank or Coulee Investment Center. Securities and insurance offered through LPL or its affiliates are: 


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