Q: With interest rates falling and home prices rising, it seems like a great time to tap into my home’s equity using a home equity loan. What’s the best way to use these funds?
A: A home equity loan, or a HEL, can be a fantastic way to source extra funds during a falling-rates environment. Tapping into your home’s equity, or the positive difference between what is owed on a home and its current value, will give you the funds you need for a large expense with no additional strings attached. With low interest rates on a IRFCU Home Equity Loan , the repayment plan is always affordable. If approved, you’ll receive the funds in one lump sum within a few days. There are no restrictions on how to use these funds, but since you’re essentially risking the loss of your home with this loan, it’s important to choose wisely when deciding how to use the funds. Here are four forward-thinking uses for a home equity loan: 1. Home improvements One of the most popular uses for home equity is for home renovations and improvements. These can be as major as adding a 1,000-square-foot extension to your home, as minor as replacing old carpet with new hardwood flooring or anything in between. Using your home’s equity for home improvement projects is a smart choice for multiple reasons. For one, the money you put into the renovations acts as an investment. If you choose improvements that increase your home’s value, you can make back the money you spent or even see a return when you sell your home. Also, if you use the funds from a home equity loan to increase your home’s value, you may be able to deduct the interest paid on the loan from your taxes (be sure to consult with your tax adviser if you plan to go this route). If you plan to use your home equity funds for home improvements, be sure to choose wisely. It’s best to go for improvements that add lasting value to your home instead of blowing big bucks on superficial remodeling projects that may look dated just a few years down the line. 2. Debt consolidation Another popular use for a home equity loan is to consolidate high-interest debt. Paying off multiple debts at high interest rates can be cumbersome and difficult to manage. Worse, the heavy interest rates mean more of the borrower’s money goes toward the lender and less goes toward paying down the principal of the debts. Using a home equity loan to consolidate debt to a single and no-interest or low-interest loan can slash a pile of debt by several thousands of dollars and help shorten repayment time by several years. 3. College education When interest rates are falling, funding a college education through a home equity loan instead of a high-interest student loan can be a smart choice. Similarly, homeowners struggling to meet their student debt payments without defaulting on the loan might want to use their home’s equity to pay off the debt quickly and replace it with a more manageable low-interest loan. It’s important to note that paying off a federal student loan with home equity might not be the best choice, as these loans are sometimes eligible for partial or complete forgiveness. Before you take out a home equity loan A home equity loan can provide homeowners with the funds they need for a home improvement project, to get their debt under control, pay for their college education or to build an emergency fund. However, before making either of these moves, it’s important to run the numbers so you are sure you can easily meet the regular loan payments. Otherwise, you risk defaulting on the loan and losing your home. If you’re ready to take out a home equity loan, look no further than Ingersoll-Rand FCU. Our rates and terms are always competitive. Give us a call at 570-888-7121 or stop by Ingersoll-Rand FCU to get started on your loan application today. Your Turn: How did you use the funds from your home equity loan? Tell us about it in the comments.
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About half of parents admit to using cash or other incentives to get their kids to behave, according to a new study by Vouchercloud. Two-thirds of them have some hesitation about the amount they’re paying, suggesting that most parents feel fairly uncomfortable with this parenting strategy. Like most parenting techniques, though, this one always comes down to the details.
Instead of thinking of paying your child as a process of whine and cave-in, think of it as a negotiation. Work with your child to establish a fair price for work around the house and other positive behavior, and then ensure they see the hard work that goes into picking a new toy or other reward. If money is tight, consider using privileges as a form of currency instead. A child who puts in an hour of extra work around the house might be rewarded with an extra hour before bedtime on a weekend. Whatever you decide, it needs to be in consultation with your child. This will help develop negotiation skills that will help later in life. Another form of payment is “matching funds” toward a purchase goal or savings account. By telling your children you will match money that they save toward a car, a college fund or a retirement fund, you can enlist their help in paying for those things. What’s more, you’ll be teaching older children about the value of saving toward goals. Other parents may employ a matching funds system for part-time jobs. Jerry Verseput, an independent financial adviser, says he matched his daughter’s wages with contributions to a Roth IRA in his daughter’s name. This helped his daughter see both the value of hard work and the joy of saving for the future. Of course, this strategy does assume your children act rationally. When your child is screaming in the supermarket, rational, calm negotiation may be the last thing on your mind. It can be difficult in those moments to stick to your guns and remember the deal you and your child agreed to, but patience is your best friend. Just remember, no one parents perfectly, and any decision you make out of love is best for your children. Q: My accountant suggests I review my paystub to see if any changes need to be made to the amounts withheld, but I’m finding that to be an impossible task. I always receive my paycheck via direct deposit and I can’t make heads or tails out of the numbers or information on my paystub. Where do I begin?
A: Having your paycheck directly deposited into your checking account can be super-convenient, but it can also lead to being unfamiliar with your paystub. It’s important to review your paystub occasionally to check for possible errors and to review the deductions, as your accountant suggests. No worries, though, Ingersoll-Rand FCU is here to help! We’ll walk you through a typical paystub and break down all the numbers and information so, going forward, you can do it on your own. Navigating your paystub Before reviewing the actual numbers, let’s take a moment to explore the way a paystub is structured. A typical paystub will have your employer’s information in the upper left-hand corner, followed by the pay period for that paycheck. The upper right-hand corner will be stamped with the date the payment was issued. Moving downward on the left-hand side, a section titled “Gross Pay,” will list the employee’s gross salary per pay period, along with any additional payments, such as overtime pay and benefits. Running parallel to these numbers will be two columns, one labeled “Current,” and the other labeled “YTD,” or year-to-date. The right side of the paystub will be designated for tax information and deductions. Each of the items listed here will have separate numbers for current amounts and YTD. Finally, the paystub will summarize all the information and provide a total for net pay. Now let’s talk about what each of these items means. Gross pay Gross pay refers to the total sum of money earned in a pay period before taxes or deductions are withheld. This number represents the employee’s taxable income for the pay period. The columns labeled “Current” and “YTD” help the employee track how much they’ve earned and paid in taxes and deductions for the pay period, and for the entire year through the respective pay period. The “Gross Pay” section often includes the employee’s rate per hour and the number of hours worked in the pay period. When multiplied, these two amounts should be equal to the total gross pay. There may also be various other payments listed here, such as overtime pay, bonuses and commissions. Taxes In this section, the paystub lists the various taxes the employee and employer pay each pay period. Here are the most common taxes listed on paystubs: Federal income tax Uncle Sam takes a bite out of every employee’s paycheck. The employer will use several pieces of information to determine an employee’s annual tax liability, including the employee’s marital status, income level and the amounts of allowances listed in their W-4. The estimated tax liability will be divided by the number of pay periods in a year to reach the amount that appears on the paystub. The employer will send this tax directly to the federal government. At the end of the year, the difference between the employee’s actual tax liability and the amount withheld will either be refunded to the employee or collected from them, as necessary. Employees can choose to have more or less money deducted from each paycheck by adjusting the number of allowances listed in their W-4s. State taxes Some states collect state income tax for each pay period. Federal Insurance Contributions Act (FICA) This refers to the law that requires every employee to contribute to the Social Security and Medicare programs with each paycheck. These contributions sometimes appear separately. By law, every employee must pay 6.2% of their gross income to the Social Security fund. Employers must contribute an additional 6.2% for each employee. Self-employed workers must pay both the worker and employer portions of this tax, effectively doubling their Social Security tax liability. Medicare tax liability is calculated as 1.45% of a worker’s gross income. Employers must pay an additional 1.45% for each employee they hire. Here, too, the self-employed must cover both contributions and pay 2.9% of their earnings to Medicare. Most paystubs will separate the employer’s tax liability for these programs and the employee’s tax burden. Deductions Besides for these mandated taxes, many workers will find additional deductions on their pay stubs. These include deductions for insurance coverage; deductions for a health savings account, which allows employees to set aside pre-tax dollars to be used for medical expenses; child care deductions; and deductions for retirement savings plans, including contributions to a 401K or IRA account. Some paystubs will include a sub-section for employer contributions. This refers to any employer-sponsored contributions for retirement, healthcare costs and other benefits. In summary The final section of a paystub will summarize all the information listed above it and highlight the employee’s net pay, or the amount of money the employee will actually see on their paycheck. This section will also list any reimbursements, or money the business owes the employee for using their own funds for business-related expenses. In addition, the summary will include gross earnings, deductions and contributions and finally, the actual check amount. Now that you know what each item on your paystub means, you can easily review it and check it for errors. You work hard for your money — don’t lose out from a careless mistake. Refresh your credit card knowledge
Understanding the way a credit card works can help the cardholder use it responsibly. A credit card is a revolving line of credit allowing the cardholder to make charges at any time, up to a specific limit. Each time the cardholder swipes their card, the credit card issuer is lending them the money so they can make the purchase. Unlike a loan, though, the credit card account has no fixed term. Instead, the cardholder will need to make payments toward the balance each month until the balance is paid off in full. At the end of each billing cycle, the cardholder can choose to make just the minimum required payment, pay off the balance in full or make a payment of any size that falls between these two amounts. Credit cards tend to have high interest rates relative to other kinds of loans. The most recent data shows the average industry rate on new credit cards is 13.15% APR (annual percentage rate) and the average credit union rate on new credit cards is 11.54% APR. Pay bills in full, on time The best way to keep a score high is to pay credit card bills in full each month — and on time. This has multiple benefits:
Brush up on billing There are several important terms to be familiar with for staying on top of credit card billing. A credit card billing cycle is the period of time between subsequent credit card billings. It can vary from 20 to 45 days, depending on the credit card issuer. Within that time frame, purchases, credits and any fees or finance charges will be added to and subtracted from the cardholder’s account. When the billing cycle ends, the cardholder will be billed for the remaining balance, which will be reflected in their credit card statement. The current dates and span of a credit card’s billing cycle should be clearly visible on the bill. Tip: It’s important to know when your billing cycle opens and closes each month to help you keep on top of your monthly payments. Credit card bills will also show a payment due date, which tends to be approximately 20 days after the end of a billing cycle. The time frame between when the billing cycle ends and its payment due date is known as the grace period. When the grace period is over and the payment due date passes, the payment is overdue and will be subject to penalties and interest charges. Tip: To ensure a payment is never overdue, it’s best to schedule a time for making your credit card payments each month, ideally during the grace period and before the payment due date. This way, you’ll avoid interest charges and penalties and keep your score high. Allow a minimum of one week for the payment to process. Spend smartly Credit cards can easily turn into spending traps if the cardholder is not careful. Following these dos and don’ts of credit card spending can help you stick to your budget even when paying with plastic. Do:
Don’t:
Using credit cards responsibly can help you build and maintain an excellent credit score, which will make it easier to secure affordable long-term loans in the future. Your Turn: How do you use your credit cards responsibly while keeping your score high? Share your best tips with us in the comments. |
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