< Previous10 | The Daily News | Financial Planning | April 2022 T he price of the average car continues to rise. The average transaction price of a new vehicle now hovers at roughly $36,000, accord- ing to analysts at Edmunds. Few people can walk into a car dealership and pay such a price in cash, which means that savvy shoppers need to familiarize themselves with the financing process in order to get their dream rides. In addition to finding the perfect car or truck, buyers must spend time researching the ideal way to pay for it. Car loans are key to the car-buying process. Too often shoppers wait until they’re in the negotiating seat at the dealership before they even know what they can spend, and this can be a mistake. A poor financing deal hurts buyers over the long run and may lead to defaulting on the loan and deal- ing with the credit fallout that defaulting produces. Vehicle financing is a step- by-step process that should begin long before consumers even pick out a car. • Examine your spending and saving. Start by looking at your finances and establish a budget. How much cash do you have on hand for a down payment? Also, how much can you comfortably devote to a new car payment and requisite auto insurance? You can use automotive loan calculators to get a rough idea of what a particular car will cost you in terms of monthly payments. • Know your credit stand- ing. Great credit will give you financing leverage. Understand your credit score and which fac- tors may be bringing it down. Resolve any issues well before you apply for financing, so a bad score will not hurt you. • Visit lenders. The fi- nancing deal offered by the dealership might not be the best price possible. You can get preapproved/prequalified for an auto loan the same way you do for a home mortgage at banks and credit unions. This helps you secure the best interest rate possible. It also provides negotiating power. A preapproval letter puts you in the position as a stronger “cash buyer,” according to the financial resource NerdWallet. • Set a firm buying price. Preapprovals and working with a third-party lender gives you a specific amount of mon- ey you know you can borrow. Use this as a tool to keep the negotiated price low because you cannot exceed your pre- approved amount. It also may be a way to push dealership finance mangers to contact their own captive lenders to try to beat the rate offered by your existing lender. — Metro Creative Connection Buyers’ guide to financing a vehicleApril 2022 | Financial Planning | The Daily News | 11 Galveston • Pearland • League City • Friendswood • Alvin • www.HomeTown.Bank OOOOO Five-Star “Superior” rating by BauerFinancial, Inc., awarded March, 2022 OOOOO Dreaming of a swimming pool, a new addition or a remodeled kitchen? Maybe your home needs better insulation, a generator, solar panels or plumbing repairs? HomeTown Bank loan officers are available on the phone to walk you through the process, step by step. You’ll notice the difference at HomeTown Bank, the community bank where we take pride in personal service. HOME EQUITY LOANS Contact a HomeTown Bank Loan Officer Soon: Galveston Main Bank: (409) 763-1271 Scott Kusnerik • Cesar Hernandez Brandon Rogers • Traci Shugart Garcia Friendswood Downtown: (281) 996-4900 Allan Rasmussen • Scott Asimakis Friendswood Bay Area: (281) 648-9000 Steve Owens • Tyron Collins Alvin: (281) 388-5000 Ray Rusk • Chad Dudley League City: (281) 554-3265 Bill Provenzano • Jim Goebel Pearland: (281) 412-8000 Sean Murphy • Donna Rizzo I nvesting is a key com- ponent of long-term financial planning. By choosing the right investments, investors can ensure their money outgrows inflation, mak- ing it possible for them to realize their retirement goals and live comfort- ably long after they have stopped working. Risk is a part of invest- ing, and many veteran investors recognize that. However, the fear or losing their hard-earned money might compel would-be beginners to avoid the markets altogether. That can be a costly mistake, and it’s one research suggests millennials are mak- ing, choosing to keep their money in savings accounts, which pro- vide very little return in terms of interest, rather than invest in the markets. A 25-year-old millennial who is not investing today and does not invest until he or she retires at 65 could lose out on more than $3.3 million in retire- ment savings, according to a recent analysis from the online financial re- source NerdWallet. It can be nerve-wracking for novices to begin invest- ing their money, but these three investment strategies can help calm those nerves and pave the way for a bright financial future. 1. Identify your risk tolerance. Young investors may be told that they’re in prime position to choose risky investments be- cause they have less responsibilities than older investors and more time in the workforce to make up for losses. While that’s true, young investors only should be as risky as they’re com- fortable being. Beginners should identify their risk tolerance before investing, the financial experts at Principal ad- vise. Investments with a high potential for return, which might include emerging markets and limited partnerships, also generally have a higher potential risk for loss, and vice versa. Investors only should accept a lev- el of risk they’re comfort- able with. 2. Diversify your investments. One way to manage risk is choose a mix of investments from various asset classes, according Principal. For example, stocks and bonds traditionally move in different directions. So when stocks are up, bonds may be down, and vice versa. Investing in different types of as- sets is known as diversi- fication, which can help investors protect them- selves against risk. 3. Make changes as you age. As investors age, their aversion to risk should grow. The closer you get to retirement the closer you are to needing all the money you have invested and earned over the years. Speak with a financial planner about how to re- allocate your investments as retirement draws near. — Metro Creative Connection 3 tips for beginner investors12 | The Daily News | Financial Planning | April 2022 O nce a couple walks down the aisle and returns home from their honey- moon, various tasks must be performed. Couples should not overlook the importance of tending to their financial futures. One of the first steps is merging and managing bank accounts. The number one cause of divorce in the United States is fighting over money and other finan- cial problems, according to a study from Kansas City University. Therefore, being on the same page concerning finances and maintaining financial transparency can help reduce the propensity to clash over cash. Merging bank ac- counts can be a good idea for newlyweds for various reasons. Improve efficiency Having one account makes it easier to track income and spending and can make keeping track of money less complicated. Also, having only one bank means cutting down on state- ments or correspondence from multiple institutions. Greater communication Some people are natural spenders and others savers. It’s easy to gloss over financial indiscretions when there are separate accounts. A joint account makes it easy to talk about spending habits and the flow of money in and out of an account. Create accountability Not being able to hide debt or large expendi- tures or withdrawals makes couples account- able to each other. This creates transparency in a relationship and may help couples become closer as a result. Good in emergencies Having a joint bank account can ensure that a surviving spouse has uninterrupted access to funds in the event his or her partner dies, accord- ing to the financial re- source Money Under 30. This may not be the case with individual bank accounts until the estate goes through probate. Get better banking Certain financial institu- tions may offer perks like no fees if customers main- tain a specific balance or meet the criteria of debit card usage per month. Such requirements may be reached more easily with two people utilizing the account. Combine with ease It’s particularly easy to merge when individ- uals already were using the same bank or credit union, financial expert Dave Ramsay said. Simply showing up with identifi- cation and transferring the balance of one account into the other and adding a signer is all that’s need- ed. In instances where couples use different banks, select a convenient institution and open up a new account together after closing the individu- al ones. — Metro Creative Connection The benefits of joint bank accounts Traditional IRA Traditional IRAs are very popu- lar, according to data from the Investment Company Institute. Classic features include a tax break of up to $6,000 initially, and investment earnings are not taxed as long as the money remains in the account. One advantage of a traditional IRA is that contributions can be taken as tax deductions in the tax year they are made, accord- ing to Money Management International. This type of IRA might be good for someone who anticipates being in a lower tax bracket upon retir- ing, since taxes are paid when funds are withdrawn. Roth IRA A Roth IRA is different than a traditional IRA in various ways. Contributions to a Roth IRA are not tax-deductible, but funds will grow tax-free. Also, with a Roth IRA, the taxes are paid upfront, so account hold- ers will not pay taxes when the money is withdrawn. This is beneficial for those who ex- pect their income tax bracket to rise after retirement. Simplified Employee Pension (SEP) IRA This type of IRA is a tradition- al IRA, but one set up and funded for employees by an employer. SEP stands for simplified employee pension. Employers must contribute equally to all employee ac- counts, and personal contribu- tion limits are much higher for these accounts than on other tax-favored accounts. Spousal IRA Spousal IRAs are either tra- ditional or Roth IRAs funded by a married taxpayer in the name of his or her spouse who has less than $2,000 in annual compensation, according to the financial resource The Motley Fool. The couple must file a joint tax return in the year of the contribution. Education IRA (EIRA) Not all IRAs are strictly for re- tirement funds. EIRAs help pay for higher education. No tax deductions are allowed, but deposits and earnings may be withdrawn tax-free so long as they are used to pay for higher education. Know the various types of IRAs “The number one cause of divorce in the United States is fighting over money and other financial problems.” KANSAS CITY UNIVERSITY — Metro Creative ConnectionApril 2022 | Financial Planning | The Daily News | 13 A strong financial history benefits consumers in myriad ways. Individuals with a history of pay- ing their bills on time and avoiding significant consumer debt may be eligible for lower interest rates on big ticket items like homes and cars, po- tentially saving them tens of thousands of dollars over their lifetimes. Though there are many ways to build a strong financial history, avoid- ing debt is always part of that equation. Credit scores are used to deter- mine consumers’ cred- itworthiness in the eyes of lenders and can affect How to build and maintain a strong credit rating eligibility for loans and the terms of those loans. Understanding credit scores and how to build and maintain a good credit rating can be vital to individuals’ financial futures. WHAT IS A CREDIT SCORE? A credit score is a three-digit number be- tween 300 and 850. The higher the number, the better an individual’s credit rating is. The lower the number, the less credit- worthy consumers become in the eyes of lenders. The average credit score in the United States in February 2021 was 698, according to Equi- fax, which along with Experian and TransUnion is one of three credit reporting agencies. IS 698 OR 650 GOOD? The average rating falls into the “Good” range. However, consumers should aspire for scores that are higher than the average. A credit score above 720 is considered “Excellent,” and individu- als with scores above 750 are in even better shape, according to the online fi- nancial resource NerdWal- let. Such individuals may have access to financial products or be eligible for loan terms that people with lower scores are not privy to. Making the most of those advantages can save consumers consider- able sums of money over the course of their life- times and may help them build the type of genera- tional wealth millions of people aspire to. HOW CAN INDIVIDUALS ACHIEVE HIGH CREDIT SCORES? The best way to build and maintain a high credit score is to under- stand the factors that influence that score. FICO is a data analytics firm that provides credit scoring services. Equifax notes that FICO scores consider five categories from individuals’ credit histories: • Payment history • Amounts owed • Length of credit history • New credit accounts • Mix of credit used Each of these catego- ries are weighted, and none bears more sig- nificance than payment history. Consumers who have demonstrated an ability to pay their bills on time and limit the amounts of debt they car- ry at any given moment are doing themselves a favor as they look to achieve and maintain a high credit rating. IS ALL DEBT THE SAME? It’s important that consumers distinguish consumer debt from stu- dent loan debt. Though each type of debt will be reported to the three major credit bureaus, stu- dent loan debts that are paid on time each month are generally considered “good debt” because they demonstrate an indi- vidual’s ability to make installment payments on time over a significant length of time. That’s what consumers will need to do if they hope to purchase a home in the future and finance it with a mortgage loan. Unlike student loans being repaid in install- ments, consumer debts like credit card balances must be paid in full each month for consumers to avoid potentially hefty interest charges. Consumers who can’t pay those balances in full each month are not demonstrating credit- worthiness in the eyes of lenders, and that will have an adverse effect on their credit ratings. Understanding credit and how to build and maintain a strong rating is vital to individuals’ financial futures. — Metro Creative Connection Debt that increases an individual’s net worth or future value is considered “good debt,” while debts that do not positively affect net worth are considered “bad debt.” What does ‘good debt’ mean? 1. STUDENT LOAN DEBT Student loan debt can be tricky, but it’s generally considered good debt. That’s because education has long been linked to a greater earning po- tential. Taking on a high amount of student loan debt to earn a degree in a historically low-earning field could make it harder to make ends meet down the road. That won’t nec- essarily make the debt “bad” in the eyes of lenders, but it could force borrowers to wonder if they made the right decision. 2. MORTGAGE DEBT Mortgage debt is perhaps the most undeniable source of good debt. Historically, the appreciation value of real estate has made home ownership a worthwhile goal, even if home buyers have to finance their home purchases with bank loans. Real estate historically has increased in value on a yearly basis. That certainly qualifies mortgage debt as “good debt.” 3. BUSINESS LOANS A business loan may carry more risk than a mortgage loan, but it still can turn out to be very good debt if the business ultimately succeeds. However, that’s a big “if.” Data from the Bureau of Labor Statistics indicates that 65 percent of new businesses fail within a decade of opening. Many small-business own- ers use personal guarantees to secure business loans, meaning the debt is theirs should the business ultimately fail. But owning a successful business can be a great way to build personal wealth, which is why business loans can be considered good debt. — Metro Creative Connection14 | The Daily News | Financial Planning | April 2022 Sign up now for 2022. Call us today! 214-507-5237 Evan Brauman Fetter North Dallas Bank Tower 12900 Preston Road, Suite 615, Dallas, TX 75230 DON’T MISS OUT! FOR ESTATE PLANNING, WILLS AND TRUSTS. WWW.MBSLAWYER.COM McFatridge & Associates, P.C. KEITH W. MCFATRIDGE, JR. ATTORNEY AT LAW 2228 MECHANIC, SUITE 200 GALVESTON, TEXAS 77550 KMCFATRIDGE@MBSLAWYER.COM PH: (409)-766-7966 FAX: (409) 766-7955 R etirement is something millions of professionals aspire to. Retirement isn’t necessarily when a person stops working forever. In fact, many retirees contin- ue working as part-time volunteers and consultants. Individuals have retired at the age of 65, traditionally. However, the normal retirement age (NRA) is the age at which retirement bene- fits are equal to the pri- mary insurance amount, according to the United States Social Security Administration. Prima- ry insurance amount is based on a certain for- mula that includes year of birth. For most people born in 1960 and later, NRA is 67. Choosing to retire earlier may result in reduced benefits. But people who have planned financially for an early retirement may not view a decline in SSA benefits as a deterrent. If early retirement is a goal, these strategies could make it happen. • Use a retirement formula. The basic for- mula for retirement is to accumulate 25 times your annual expenses and then plan to draw down no more than 4 percent of that value every year, ac- cording to the retirement planning resource New Retirement. Budget to re- alize that savings goal. For those who have trouble calculating retirement fig- ures, utilize this planner: www.newretirement.com/ retirement/planner- signup/, which offers vari- ous retirement strategies. • Trim extra expenses. Reduce your spending to put more cash toward your future. Comb through credit card statements and look at various bills to see where you can save. • Reduce your biggest expenses. Food, trans- portation and housing comprise most people’s largest expenditures. Instead of routinely buy- ing new cars, look for certified pre-owned mod- els, which are equally reliable. Carpool to save money on commutes. Reduce food expenses by shopping sales and mak- ing eating out a luxury and not a regular thing. Downsize your home, or rent out a room to offset mortgage costs. • Consider a govern- ment gig or another pension-backed job. Pensions used to be part of many companies’ benefit packages, but now they’re harder to come by. Focus employ- ment on companies or careers that offer re- tirement perks that go beyond what a 401(k) offers. A pension wait- ing for you may mean you don’t have to do as much personal scrimping and saving for an early retirement. — Metro Creative Connection How to make early retirement a realityApril 2022 | Financial Planning | The Daily News | 15 MoodyBank.com/Managing-Wealth 409.632.5247 Since 1928, Moody Bank Wealth & Trust has grown into one of the largest wealth management entities in Texas. Through unmatched personalized attention, unwavering dedication, and sound strategies for our clients’ unique needs, we do more than just manage wealth, we build legacies. GUIDANCE. TRUST. A COMMITMENT TO BRING YOUR VISION TO LIFE. 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