Wednesday, April 16, 2014

College Credit

Credit Cards Can Be Your Angel (Indeed)

It's a long-held myth that credit cards are the source of all evil because they nurture the inner shopaholic and help us incur debt. However, used responsibly, credit cards can actually be very helpful.

Credit cards are convenient. They can be used practically anytime and anywhere. They come with exclusive discounts, cash dollar rewards, online booking, etc. The perks vary with the source. Some health insurance companies have even issued their own brand of credit cards, covering free health exams every year.

To me, the biggest benefit of a credit card is having the ability to pay in installments for quality items that I could not otherwise afford. I'm not saying that a credit card should be used as a free ticket to buy everything you can't afford to pay for outright. That's a sure way into debt. But everyone has something special to them that is worth the interest payments.

For me, that was a quality camera for my travels. I love to travel, and a good camera is an essential accessory. While a trip is soon over, the photographs from the voyage will last forever.   They are tangible evidence of an unforgettable time that I can share with others. I made a choice to pay a little extra in interest over time for a good quality camera to capture those experiences.

Credit cards also have benefits aside from short-term gratification. In the long term, credit cards can help build credit history and raise credit scores. Of course, that's only if you make your payments on time and DON'T charge up to the maximum limit. Having a good credit history will enable you to qualify for important loans in the future. After all, who would risk lending money to someone who never had a credit card or pattern of on-time payment behaviors in his life? In responsible hands, the credit card can serve as a symbol of growing up. A good credit history can enable you to take out a future business loan if you choose to go into business for yourself, or help you obtain a good mortgage loan on the home that you'll get to enjoy with your family.

Though credit cards have both short- and long-term benefits, they need to be handled carefully. Everyone should have a budgeting plan for their credit card payments. Mine is a little trick I call the "debit-credit card." I separate one-third of the money in my account and use that as my self-imposed credit limit. Once I've passed that limit, I don't allow myself to use the credit card anymore during that month. I also separate a portion of my income to pay for the installments.

It's true that if you use credit cards you'll end up with a significantly smaller amount of your salary every month, since you are going to need to spend some of your income on credit card payments. Still, credit cards give you a flexibility you couldn't get from cash. In case of any emergency, credit cards will be the first to help! So here's my advice: Do own a credit card. And if you're not completely certain that you can clear the balance each month, stick to the debit-credit card rule!

If you are looking for a great credit card, try a Destinations MasterCard.  In addition to the regular MasterCard, we have options for those just trying to establish credit or those who need to repair credit.  All offer low rates, no annual fees, and rewards points for every dollar spent.

Friday, April 11, 2014

IRA Investment: What you need to know to retire on your own terms

The average American between the ages of 35 and 44 has just over $22,000 dollars saved for retirement. For people who are entering their prime earning years, this is far too low. If you want to retire at age 65 and live on $50,000 a year, you'll need about fifteen times that much, assuming you live to the average age of 72. For most Americans, retirement seems like an always-distant horizon. They can always see it, but they never quite have enough money to reach it. As a result, they end up working long into their 70s.

There is a way you can save more for retirement while also saving on your tax bill and earning interest on your investment. It's called an Individual Retirement Account (IRA). It's a managed investment account, like a mutual fund, that will grow your wealth so you can enjoy your retirement.

If you work for a large company, you may have something like an IRA: a SIMPLE IRA (Savings Incentive Match Plan for Employees) or a 401(k). Even if you're maximizing your contributions to these programs, you can still use an IRA from your credit union. The extra money you save in an IRA can pay for the things you've always wanted to do. You can spend your retirement traveling the world or going back to school. All you have to do is start planning now.

Successful investing in an IRA is more about starting early. If, at age 18 you deposit $5,000 into an IRA and it earns 8% per year, you will retire with $164,000 dollars, assuming you make no other savings. Doing the same thing at age 39 will build a nest egg of a mere $40,000. The key to successful retirement savings, then, is good and early planning.

The deadline for contributions to count against your tax burden for 2013 is tax day: April 15, 2014. The time to start investing in a brighter retirement future is now. Let's take a look at some benefits of investing in an IRA:

IRA's come in two forms: Traditional and Roth. A Traditional IRA is tax-deferred. You don't pay taxes on the money you put into a Traditional IRA. Instead, you pay taxes on your withdrawals. If you'll have less income after you retire, a Traditional IRA can save you money on your tax bill.

You fund a Roth IRA with post-tax assets. You invest in a Roth IRA with your post-tax salary. Then, you don't have to pay taxes on the withdrawal. Roth IRA's make the most sense for people who expect to draw a significant post-retirement income. If you expect to have a significant pension or plan to start a profitable small business when you retire, a Roth IRA might be best for you.

The best part about retirement savings with an IRA is that it requires little direct management. You can set up direct deposit from your paycheck to your IRA, allowing you to grow your savings over time. You'll receive a monthly statement, just like you do from your checking account. It will show you how much your investments have grown.

IRA's at a brokerage company are also professionally managed. (One note of caution, however, these type of accounts are not generally insured and there is a risk that you may lose some of your principle.) A full-time financial analyst directs the growth of the fund. Your retirement savings are in the hands of a professional who knows the ins and outs of the market and can make your money work for you. Rates of return on IRA's tend to be higher than CD's or savings accounts due to the greater risk associated with the investment. This higher return can make sure you have enough money saved to enjoy your retirement.  

You should balance the amount you have in insured accounts (such as IRA Certificates at Destinations) versus the higher risk/higher long-term rates of a mutual fund or other investment in the market.

IRA's offer some flexibility. Withdrawals before retirement incur a tax penalty and other fees, but the money in an IRA is accessible in the case of emergency. You can also change the size of your contribution month-to-month. This flexibility means you can take advantage of sudden windfalls or expenses.

IRA's are large, managed funds. They can take advantage of economies of scale that are unavailable to individual investors. Managers working with more capital can make safer investments while maintaining good returns. Trying to manage your own retirement investments limits you to working with just the money you have. Investing in an IRA at your credit union allows you to use the added savings power of your entire community.

Relying on social security or other guaranteed income for your retirement is not a good idea. The demands that are placed on these programs keep going up and contributions to them keep going down. It doesn't take a professional financial analyst to see that these trends can't go on forever. Take charge of your financial future, and do it now. Stop by the credit union and speak to a representative about opening a Roth or Traditional IRA today!

Thursday, April 10, 2014

IRAs: Maximizing Tax Deductions With Proper Planning

April is Financial Literacy Month and this post is dedicated to helping members understand IRAs and planning for retirement.

Most Americans do not save enough for retirement.  According to research by the TransAmerica Center for Retirement Studies 69 percent of workers do not believe they can save enough to meet their retirement needs by the age of 65.

Obviously the younger you begin your retirement savings, the better off you will be.  If your employer offers a 401K, you should be contributing the maximum amount that you can from each paycheck.  If not, or if you can afford to supplement your 401K, you may want to think about an IRA.

What is an IRA?

An IRA (Individual Retirement Account) is a trust or custodial account by which the taxpayer directs income toward investments that can grow tax-deferred. There are various kinds of IRAs, including the traditional IRA, the Roth IRA, SIMPLE IRA and SEP IRA. Contributions to the Traditional IRA may be tax-deductible depending upon the taxpayer's income, tax-filing status and other factors. Withdrawals from the IRA at retirement are taxed as income.

What is a Roth IRA?

The Roth IRA is named after Sen. William V. Roth, Jr.  It was introduced as part of the Taxpayer Relief Act of 1997. It is structured so the assets in the Roth IRA become after-tax assets, which may create tax-free retirement income for you and maybe for your beneficiaries.  All transactions within the IRA have no tax impact, and withdrawals are usually tax-free.

 What are the guidelines for IRA contributions?

An IRA can only be funded with cash or cash equivalents. It is prohibited to attempt to transfer any other type of asset into the IRA. Doing so will disqualify the taxpayer from any beneficial tax treatment. Rollovers, transfers, and conversions between IRAs and other retirement arrangements can include any asset.

 Are there limits for IRA contributions?

IRA contribution tax deductions are based upon your income and your eligibility to participate in a workplace retirement plan. Your total contributions to either a traditional IRA or Roth IRA cannot exceed the lesser of your earned income for the year or the annual maximum amount. The maximum IRA contribution limit varies by year.

For 2013, the maximum for an IRA contribution is $5,500 for those under age 50, and $6,500 for those over age 50. In the year 2014, the limits for IRA contributions are the same. 

You also must be under age 70 1/2 to contribute to a traditional IRA. (Roth IRAs, by contrast, have no age restrictions.)

How do I calculate my earned income requirements?

Only people who have earned income can contribute to an IRA. Earned income consists of wages as reported on a W-2, tips, self-employment income from a business or farm, and alimony. Other taxable but unearned income, such as dividends and interest income, do not count toward this eligibility requirement.

When is the deadline for contributing to my IRA?

The cut-off date for contributing to a traditional IRA and potentially receiving a tax deduction is not until the filing deadline of your tax return. Typically, that means you have until April 15 of the year following the year in which you will receive a tax deduction. Contributions to IRAs can be considered retroactive to the previous tax year.

Where do I claim my tax deduction?

You can report your tax-deductible IRA contribution directly on Form 1040 or Form 1040A. You don't need to itemize to report this deduction.

My funds are currently in my employer's 401 (k) plan. Will it cost me to transfer funds to my IRA?

With a direct rollover from an employer-sponsored plan to your IRA, the distribution check is payable directly to your new trustee or custodian.  This will help you to avoid mandatory tax withholding.

When can I withdraw funds from my IRA?

Although money can be distributed from an IRA at any time, there may be penalties for withdrawing funds under certain circumstances. Once the owner reaches age 59 ½, the money can typically be withdrawn from the IRA penalty-free as taxable income.

Traditional IRA owners must begin taking distributions of at least the calculated minimum amounts by April 1 of the year after reaching age 70 ½, or they will incur penalties.  

If you are interested in looking at an IRA from Destinations Credit Union, visit our IRA page and request more information.  

Friday, April 4, 2014

5 Easy Steps for Credit Card Debt Freedom

Credit CardsApril is Financial Literacy Month, so Destinations Credit Union will provide several articles this month to help you financially.  This article deals with understanding how to reduce your credit card debt.

If your credit card spending has caused a stack of debt to pile up, it’s time to reverse the trend! With focus, discipline and patience, you can reduce and eliminate your credit card debt, no matter what the amount. Here are some tips…

  1. Create a detailed list of each debt, including the name of the debt, the amount, the current rate and the minimum payment due.
  2. Rank your list from the highest rate to lowest.
  3. Review your current household budget to determine how much you can put towards monthly debt repayment. If you are adding debt on a monthly basis, it means your discretionary income is actually negative. Start searching for items that you can reduce or eliminate from your budget. Keep in mind that your goal is to free up cash for debt reduction. While this will cause temporary discomfort, you’ll have freed up a tremendous amount of monthly cash flow when you get this debt repaid.
  4. Starting with the highest interest rate debt, apply 100% of the total new discretionary income (or the extra amount you’ve budgeted) to this account until it is repaid in full. Continue to pay the minimum amounts on all other cards. This is critical - don’t spread your monthly discretionary income across all debts equally.
  5. Once the highest interest card has been repaid in full, apply the original discretionary amount AND the amount from the paid off debt to the card that you ranked second one on your list. Repeat this pattern until each card has been paid in full.
And remember, this method can be used on ALL debt – not just credit cards.

 If you qualify, you may be able to consolidate all of your credit card debt on to a lower rate Destinations Credit Union MasterCard.  There are no balance transfer fees, so you may pay lower overall interest.  Then you can pay all of your discretionary income on to one credit card and simplify things.  The key, though, is not to continue using all of your credit cards.  Cut them up!

Wednesday, April 2, 2014

Financial Self Defense: Protect Yourself Against Pinterest Scams

Social media is an ideal place to relax and find people who share your interests. Sites like
Pinterest are great for keeping your recipes and projects organized. They're also a great way to keep up with the people in your life who you don't see every day.

Scammers have recognized these sites as ideal places to strike. A Better Business Bureau report from March 27, 2014 reveals that scammers have found a way to use Pinterest. They sell counterfeit products, push dubious work-from-home schemes, and fish for your personal information.
The scam works like this: you receive an e-mail that a friend has shared a "pin," which is what the site calls its scrapbook items. This link looks legitimate complete with a headline and a realistic photo.
You open the e-mail and click the link, which directs you to a fake login site that looks like the Pinterest log in page. You log in with your user name and password, which are then stored in the scammer's database. They can use this information to commandeer your other social media accounts. Then, they can spread the scam to all your friends, providing the ideal environment for continued growth of the scam.

Worse yet, they can use the information you've stored on your social media profiles as part of a social engineering scheme. Efficient hackers can use the information in your profile to pretend to be you for financial transactions. Gaining control over your social media accounts is a first step toward identity theft.
It seems that the price of recreation is eternal vigilance. Even when in the parts of the Internet that seem devoted to relaxing and unwinding, you must always be on your guard against identity theft. Here are some steps the Better Business Bureau recommends you take to avoid getting pinned in a social media scam.

Watch where you log in

Check the web address every time you log into social media sites. It should always be or or the trusted web address of your intended social media destination. If there's another word, or if there are a bunch of jumbled letters in there, it's a sure sign that someone is fishing for your password. Close the link immediately.

Also, practice good net hygiene. Log out of your social media accounts when you're not using them, and don't share your password with anyone. Keep your social media accounts separate and use different passwords for each. This will prevent scammers from accessing several accounts if one of them gets hacked.

See something, say something

Legitimate social media platforms hate scammers just as much as you do. They know that you'll only keep using their service if you trust it. You can use the "report this" link to let the administrators of the site know that something's amiss with the pin or page. They can investigate and close it down before it spreads further.

If you see a friend sharing something that seems out of character or suspicious, let them know. They may have been hacked without knowing it. Be a good friend and let them know so they can take steps to protect themselves.

Be security conscious

Choose complex passwords that include numbers, letters, and punctuation. Try to avoid using dictionary words. You can use names of streets, companies, or celebrities to get a password that's easier to remember but harder to crack.
You should change your password at least every six months. If you develop two or three strong passwords, you can rotate between them to make sure no one is sneaking into your account. If you suspect your account has been compromised, change your password immediately!

With a little bit of added security, you can continue to enjoy all the benefits of social media. So go ahead and share your wedding plans, your house remodel, or your arts and crafts. Just be careful what you share from others and pay attention to what you click on in your email inbox. You never know who might be on the other side.
For more personal finance tips and fraud alerts, please visit our website, follow us on Twitter, or "Like" us on Facebook.

Heartbleed: What It Is and How You Can Protect Yourself

If you've been keeping an eye on the news this week, you've no doubt heard about "Heartbleed," a security vulnerability in one of the most popular pieces of encryption software on the web. Some security experts are describing this as the biggest security breach in Internet history. Before we start lining bunkers with concrete, let's look at what Heartbleed is, who it affects, and what you need to do in response.

Heartbleed? What's that?

Heartbleed is the nickname given to a security vulnerability in OpenSSL. OpenSSL is a popular online encryption library. The vulnerability allows hackers to find the secret codes that websites use to identify themselves. These codes allow hackers to translate information that a computer sends to a website. Without it, this information would appear as indecipherable gibberish.

The worst part about this vulnerability is the fact that it's been around for two years and there's no way to know whether it's been used on a particular service. Security experts have only discovered and informed the public about the flaw over the past few days.

It's unlikely that this exploit was common knowledge before. The brightest minds in online security work for large, multinational corporations, charged with keeping data safe. Still, hackers could have compromised passwords, e-mail accounts, user names, and other personally identifiable information. That's a significant concern.

Who was affected by Heartbleed?

The biggest problem areas are Yahoo Internet services. If you use Yahoo e-mail, play Yahoo Fantasy Sports games, or use Tumblr, your password(s) may have been compromised. Some Google services, like Gmail and Google Drive, were also vulnerable. Social media sites like Twitter and Facebook may have been, too. If you filed your taxes through TurboTax or USAA, your data may have been vulnerable. The good news: Most online financial services use other modes of encryption and were not vulnerable.

The threat in this case isn't just in the fact that someone could gain access to your e-mail. The real problem is that most people use a small collection of passwords for most services. Hackers know this and will therefore use those user names and passwords on other, more lucrative services.

What can you do about it?

Understand, first, that the odds of any one password being released through this leak is small. This is an exploit that only a small number of the brightest minds in computing could find. There is no cause for panic, and this bug does not mark the end of the Internet.

If you use one of these services, change your password, both on these services and other services where you've used the same password. Pick a new password that is easy to remember and strong. Follow the same good password rules you always have to keep your data safe. Whether the services you use are identified as part of this breach or not, it would be wise to go ahead and swap out the old passwords for new passwords that are, again, strong and considerably different from what you had previously used.

Developers have released a new version of OpenSSL without the vulnerability in it. There is no need to change your online behavior. The services named above have all patched their encryption software to avoid this problem. You should have no less confidence in online shopping and banking than you did last week.

In the future, it makes good security sense to use a unique password for each site or service you access. Part of the reason Heartbleed has become such a big deal is the fact that it exposed a weak link in the system. Your passwords are only as secure as the least secure means you use to store them. Using more passwords and multiple variations of them helps keep your personal information safe and secure. It avoids putting your finances in the same security system as your social media.