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September 2018 E-Newsletter

3 Simple Things Anyone Can Do to Stay Out of Debt

With a swipe here and a swipe there, it can be easy to live your life on plastic and pile up debt. You’re not alone: U.S. households carried credit card balances that totaled $815 billion in debt in the first quarter of 2018, according to the Federal Reserve Bank of New York.
Sticking to a budget, spending wisely and focusing on your financial goals can help you use your money for the things that are most important to you — without taking on the burden of credit card debt. Here are three strategies to help you avoid the debt trap.
Set a budget to know your limit
Staying out of debt starts with knowing how much you can (and can’t) spend. A realistic budget is the foundation. Take into account everything you spend money on, such as movie tickets, loan payments and groceries.
“Think of your budget as a rulebook to follow,” says Lacey Langford, a financial coach based in Summerfield, North Carolina. “You can’t make a game plan or stay on track if you don’t understand how much money you have going in and coming out. Once you have that, you have a good gauge for making financial decisions.”
An easy option is the 50/30/20 budget:
  • 50% of your income goes to necessities, such as housing.
  • 30% can be used for wants, like eating out at restaurants.
  • 20% goes to pay debt and save money.
Be sure to also consider expenses that don’t occur monthly, like annual membership fees or car maintenance, which could derail a carefully planned budget, Langford says.
Spend strategically (and frugally)
When managing your budget and disposable income, spend where your priorities and goals are and cut costs elsewhere to avoid debt. This approach can also free up more cash for your goals, such as saving to buy a home or retire early.
You may end up making changes to your budget to help align spending with your goals, such as:
  • Buying a used car instead of a new one.
  • Packing lunch or making dinner instead of eating out.
  • Making purchases on sites like Craigslist and Facebook marketplaces.
“Make your principles the priority, then spend accordingly,” says Brandy Baxter, a Dallas area financial coach. “For me, family is very important, so I’ll spend more on things for my family and less on other material possessions.”
You can also trim expenses by shopping smarter. Small savings from using things like coupons and price comparison apps before making a purchase can add up.
Save money to prepare for the worst
It’s inevitable: A hospital stay will leave you with bills that you didn’t plan for, or your car will break down. Unexpected expenses can clobber even the most carefully planned budget, but an emergency fund can help you weather the storm.
“Having money to help you pivot when something happens will help you avoid going into debt,” Langford says. “You need a surplus of cash to buffer your budget for when things happen.”
Start small. Examine your budget to find $50 or $100 you can put aside each month for an emergency fund. Once you’ve saved enough to cover a few months of expenses, see if you can keep it going. Set up automatic transfers into a designated emergency savings account, so you can build up a reserve without having to think about it.
More From NerdWallet Sean Pyles is a writer at NerdWallet. Email: Twitter: @SeanPyles.
The article 3 Simple Things Anyone Can Do to Stay Out of Debt originally appeared on NerdWallet.

Your House Isn't A Piggy Bank

Your home equity could keep you afloat in retirement or bail you out in an emergency — but not if you spend it first.
U.S. homeowners are sitting on nearly $6 trillion of home value they could tap as of May 2018, according to data provider Black Knight. Lenders are eager to help many do just that through home equity loans, home equity lines of credit and cash-out refinancing.
The rates are often lower than other kinds of borrowing, and the interest may still be deductible, despite last year’s tax reform changes. But you can lose your home to foreclosure if you can’t pay back the loan, which is why financial planners generally frown on using equity for luxuries, investing or consolidating credit card debt.
Many planners point to the foreclosure crisis that started a decade ago as an example of what can go wrong when people binge on home equity debt.
“Having equity in your home is a huge financial advantage that can provide for significant flexibility, security and peace of mind,” says Howard Pressman, a certified financial planner in Vienna, Virginia. “It is not an ATM that can be used to supplement your lifestyle.”
You may need that money later
Retirement experts predict many Americans will need to use home equity to support them when they stop working. They may do that by selling their homes and downsizing or by using a reverse mortgage, which doesn’t require payments. Reverse mortgages give people 62 and older access to their equity through lump sums, lines of credit or a series of monthly checks, and the borrowed money doesn’t have to be paid back until the owner sells, dies or moves out.
Home equity also can be used to supplement emergency funds, planners say. Pressman recommends home equity lines of credit to his clients who don’t have debt problems and who are disciplined and won’t spend the money frivolously.
Put your own limits on borrowing
Before the Great Recession, several lenders allowed people to borrow over 100% of their home’s value. These days, the maximum is typically 80%. (Black Knight used this 80% loan-to-value standard to calculate how much tappable equity people have, based on current home values and existing home loans. The answer: $5.8 trillion.)
Homeowners would be smart, though, to set their own limits lower to ensure they still have access to equity in an emergency and are able to pay off all of their mortgage debt before retirement.
Is the potential benefit worth the risk?
Financial planners generally frown on using equity for luxuries such as vacations, high-risk ventures such as investing in the stock market or starting a business, or for debts that should be paid off more quickly. (The typical mortgage lasts 30 years, while home equity loans and lines of credit can stretch for 20 or more years.)
“If the money is being used to pay down credit cards or buy a car, then think twice about doing it at all,” says Monica Dwyer, a certified financial planner in West Chester, Ohio. “Those kinds of debts should be paid off in the short term, not with long-term borrowing.”
Many people use home equity to pay college bills for their kids, but planners urge caution since it’s easy to overspend on higher education. In general, parents shouldn’t borrow more for college than they can pay off before retirement, and the debt shouldn’t prevent them from saving enough for that retirement. Federal education loans may be a better option, since they have fixed rates and consumer protections such as forbearance and deferral.
Investing in home improvements can be a good use of home equity, financial planners say, as long as the projects add value to the home. (The IRS has said that interest on home equity borrowing may still be deductible if the taxpayer itemizes deductions and the money is used to “buy, build or substantially improve the taxpayer’s home that secures the loan.”)
Even then, Kristin Sullivan, a certified financial planner in Denver, likes her clients to have a plan to pay off the loan within five years. That’s “a reasonable time period to pay off something you don’t really need,” she says.
This article was written by NerdWallet and was originally published by The Associated Press. 
More From NerdWallet Liz Weston is a writer at NerdWallet. Email: Twitter: @lizweston.
The article Your House Isn’t a Piggy Bank originally appeared on NerdWallet.

What You Can Do to Stop Elder Abuse

Elder abuse is a growing issue across Wisconsin and the entire nation. Over the next two decades, Wisconsin's 65 and older population will increase by 72 percent. In 2017, one in nine seniors reported being abused, neglected, or exploited. Law enforcement, advocacy groups, and Wisconsin's bankers are working together to prevent financial exploitation of our state's seniors, and you can help, too! Here's how:
First, understand what financial exploitation is. The U.S. Centers for Disease Control (CDC) defines elder financial abuse as "the illegal, unauthorized, or improper use of an older individual's resources by a caregiver or other person in a trusting relationship, for the benefit of someone other than the older individual." Common examples include forgery, misuse or theft of money or possessions, and use of coercion or deception to surrender finances or property. 
Second, learn to recognize the red flags of financial abuse. Keep a close watch on your elderly family members and friends and look for signs such as unusual spending or withdrawal patterns, frequent purchases of unusual or out-of-character items, unpaid bills and/or utilities being turned off, or the presence of a new "best friend" who is accepting generous "gifts" from the older adult.
Finally, know who the typical perpetrators are. Unfortunately, in most cases the abuser is someone the elderly person knows and trusts. Many times the perpetrator is a family member. They may express feeling that the elderly person's belongings are rightfully theirs. The abuser may have financial difficulties such as a tendency to gamble. They may also express fears that the victim will "use up" all of their savings and deprive the perpetrator of an inheritance. Non-relatives may move from community to community in order to avoid detection. They may also try to gain access to elderly persons by masquerading as a counselor or by finding a job as a caretaker. 
Elderly persons who are most at risk are lonely, isolated, unfamiliar with financial matters, and may have lost someone recently or have mental or physical disabilities. 
By using the information above to identify possible elder financial and reporting it to the authorities, you can help stop or prevent this injustice. 
The Wisconsin Bankers Association and its members have worked closely over the past few months with Wisconsin Attorney General Brad Schimel and his Elder Abuse Task Force in creating an awareness video addressing the issue of elder financial abuse for frontline bank staff. Even though the video is designed to educate bank staff, family and friends of Wisconsin's elders will also find it full of useful information. You can watch the video on YouTube here.
An archive of Consumer Columns is available online at

Coulee Bank Q-Tip: Cyberbullying

Cyberbullying can range from embarrassing or cruel online posts or digital pictures, to online threats, harassment, and negative comments, to stalking through emails, websites, social media platforms and text messages.
Every age group is vulnerable to cyberbullying, but teenagers and young adults are common victims. Cyberbullying is a growing problem in schools and has become an issue because the internet is fairly anonymous, which is appealing to bullies because their intimidation is difficult to trace. Unfortunately, rumors, threats and photos can be disseminated online very quickly.
Help protect kids against cyberbullying with these tips:
  • Limit where your children post personal information: Be careful who can access contact information or details about your children’s interests, habits or employment to reduce their exposure to bullies that they do not know. Limiting the information about them online may also limit their risk of becoming a victim and may make it easier to identify the bully if they are victimized.
  • Avoid escalating the situation: Responding with hostility is likely to provoke a bully. Depending on the circumstances, consider ignoring the issue. Often, bullies thrive on the reaction of their victims. If you or your child receives unwanted email messages, consider changing your email address. The problem may stop. If you continue to get messages at the new account, you may have a strong case for legal action.
  • Document cyberbullying: Keep a record of any online activity (e.g., emails, web pages, social media posts), including relevant dates and times. Keep both an electronic version and a printed copy of each document.
  • Report cyberbullying to the appropriate authorities: If you are experiencing cyberbullying yourself – or if your child is being bullied or threatened online, report the activity to the local authorities. Your local police department or FBI branch are good starting points. There is a distinction between free speech and punishable offenses. Law enforcement officials and prosecutors can help sort out legal implications. It may also be appropriate to report it to school officials who may have separate policies for dealing with activity that involves students.
Follow these STOP. THINK. CONNECT. ™ Tips to better protect yourself and your family online.
  • Own your online presence: When available, set the privacy and security settings on websites to your comfort level for information sharing. It’s OK to limit how and with whom you share information.
  • Safer for me, more secure for all: What you do online has the potential to affect everyone – at home, at work and around the world. Practicing good online habits benefits the global digital community.
  • Post only about others as you have them post about you. The Golden Rule applies online as well.
Q-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 Corner: Leaving the Company? Know Your Retirement Plan Options

Your retirement plan may offer you several options for managing your retirement plan assets when you change jobs or retire. Understanding these choices will help you narrow down your choices.
Your Options
Following are the options that may be available to you. Note that these selections apply to your contributions, the vested portion of your employer's contributions, if any, and the earnings attributed to both.
  • Keep your money in the plan. You may be able to leave your savings in your employer's retirement savings plan. Usually, annual required minimum distributions must begin after you reach age 70½. Although you can no longer make contributions, you can still control how the money is invested.
  • Roll over your money to another retirement account. You may move your money into an individual retirement account (IRA) or, if you are changing jobs, into your new employer's retirement plan, if permitted by your new employer. With a "direct rollover," the money goes directly from your former employer's retirement plan to an IRA or to your new plan -- you never touch the money. This option also allows you to continue deferring taxes. If you touch the money, you may be subject to a 10% additional tax.1
  • Take a cash distribution. You can choose to have your money paid directly to you in a lump sum or in installments (if you are retiring). However, you will be subject to income taxes, and if you are younger than age 59½, a 10% additional tax. In addition, your employer will withhold 20% of your distribution to put toward your federal income tax obligation. Therefore, if you are under age 59½, the amount you receive could be significantly less than you expect.1
Avoiding an Immediate Tax Bite
If you receive a distribution, you can avoid an immediate income tax bite and the penalty if you roll over the entire amount into an IRA or a qualified employer plan within 60 days. You will receive your distribution minus 20% in withholding for federal income tax, but you can make up the withdrawal amount from your own pocket. The withheld amount will be recognized as taxes paid when you file your regular income tax.
Think carefully before making any decisions about the money in your retirement plan. It may also be a good idea to discuss your options with a tax advisor.

1Withdrawals will be taxed at then-current rates. Withdrawals prior to age 59½ are subject to a 10% additional federal tax.

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