United Bank & Trust Blog

This is a question being asked by millions of consumers in today’s world of uncertainty. There is no silver bullet or magic. It will take time, but more importantly it will take dedication and commitment, but it can be done. Recently, several leaders at United Bank & Trust facilitated a 12-week class using Dave Ramsey’s Financial Peace University material with 30 United co-workers completing the course. The participation and level of commitment by employees and their spouses was phenomenal. I will briefly share with you Dave’s Philosophy for reducing debt, but first let me share some really good news that was recently reported on MSNBC.

The amount consumers owed on their credit cards dropped to its lowest level in eight years. Today’s card holders continue to pay off balances in this uncertain economy. This is GREAT NEWS! 

The average combined debt  for bank-issued credit cards – those with a MasterCard or Visa logo – fell to $4,951 in the second quarter, down 13 percent from $5,719 last year.* This is the first time since first quarter 2002 that credit card debt fell below $5,000.

It was also reported that more borrowers made payments on time. This is a great signal that consumers are working really hard to keep their credit cards in good standing, but even more importantly, the desire to reduce credit card debt.

If you are in debit, and looking for a tool, here is what Dave Ramsey says about reducing debt and a tool he refers to it as “The Debt Snowball.”

There is no better time than today to feel like you are in control of your finances. Please let us know if you would be interested in attending a Financial Peace University Class sponsored by United Bank & Trust. We feel great about our pilot test and have a strong passion to take this to our community. Your feedback would be greatly appreciated. I do encourage you to try this method of the “debt snowball.” When you can successfully accomplish this step, you will begin to experience financial peace.

United Bank & Trust is very committed to helping our co-workers, clients and our communities to better understand how to manage their finances. Every day we see that all of us could sharpen our skills around managing our personal finances and we want to be a great resource to our clients and our community.

Have a GREAT DAY!

* Information was reported to TransUnion, a credit reporting agency.

Kathy McCrate

With more of our financial activities occurring over the Internet, it is important to be aware of risks these activities entail and steps you can take to reduce the risk that someone will illegally gain access to your private information or financial accounts.

Common Internet Scams

• Auction fraud – This may take many forms including emails saying you have a second chance to buy an auction item, non-delivery of an item purchased in an auction, defective merchandise or receiving cheaper merchandise.
• Advance payment frauds – Emails asking for help in getting money out of a country or advising you that you won a lottery lead to requests for money to cover legal fees, taxes, bribes, processing costs and taxes.
• Phishing – Emails notifying you that an institution or store need confirmation of account information lead to a fake (or spoofed) website that looks legitimate but is just a place to disclose personal information to fraudsters.
• Hot stock promotions – Emails, online newsletters and bulletin boards may be nothing more than a scam artist’s attempt to have you drive up the price of a stock so they can sell their shares.  This is often used with cheap and thinly traded stocks.

Protecting Your Online Activities

• Be careful using public computers. Using a computer at a cyber café or a free computer at a trade show can be dangerous. If you do use this type of computer make sure no one is looking over your shoulder to memorize your personal data and be sure to sign off when you are done.
• If you are using the Internet for financial transactions, be sure the sites you visit are secure. Most secure sites have URLs that start with “https://” instead of the normal “http://.”  Some websites may display a logo indicating it is secure, but make sure you know the site is one you trust.
• Wireless Internet networks have become common and convenient. Be careful using wireless networks that are free and not secure. Wireless home networks deserve attention as well. It may be time consuming or more expensive to have a secure network at home, but that is better than having a fraudster sitting in a car on your street monitoring your activities and gaining access to your files and information.
• It is important to install anti-virus software on your computer and keep it up to date.  The same holds true for firewalls and security patches for your operating system.

Passwords

Many websites you visit require a user name and password.  Having a strong password will make your online activities safer.  Unfortunately, many passwords are chosen to be easily remembered rather than to protect the user.  Some common passwords that hackers could easily guess are password, user name, your real name, your address, 123456, abcdef, or just a number. With just a four digit number, there are only 9,999 combinations and a sophisticated hacker could probably figure that out in seconds.

• Strong passwords are at least six characters long and preferably eight.  They should contain a mixture of upper and lower case letters, numbers and special characters (#, $, ^, &,!,?, {, >, etc).  They should not be based on personal information and not be based on words found in a dictionary.
• The difficulty of long and mixed passwords is that they can be hard to remember.  One suggestion is to create a password from a sentence that you are likely to remember.  For example, start with the sentence “My children John and Mary are 12 and 16 years old.”  Then use the first letters of the words, characters and the numbers to create the “McJ&Ma12&16yo” password.

Changing passwords often and using different at different websites also increases protection.  Keep any written record of your passwords in a safe location.

To learn more about protecting yourself against identity theft and account fraud, join us for a FREE webinar on April 21. Register today.

Joe Williams

Over 43% of all married couples argue over money issues, making it one of the major reasons couples fight. I think it is very important for people planning on getting married to do several things:

1. Don’t have secrets – I am absolutely amazed by the high percentages of couples who don’t discuss their finances or credit before walking down the aisle. A successful marriage is one that starts on a solid foundation. I really encourage full disclosure by both individuals.
2. Decide on Joint or Individual Accounts – Best practices that I have seen are when couples choose a system that incorporates both a joint account for household expenses and individual accounts for personal expenses and former debts. There are advantages and disadvantages, but the key is to decide together how the finances are going to be handled.
3. Set Financial Goals Together – Set specific financial goals that you would like to achieve. This could include retirement, building an emergency fund, getting out of debt, and purchasing a home. It is very important that the two of you create a strategy and a timeline so that you can realistically achieve these goals in a timely manner.
4. Create a Budget – Most people are afraid of creating a budget because it creates accountability.  A budget does not have to be “cast in stone”, but should be a spending road map or guideline. I have found that those couples who create a spending plan are considerably more likely to meet and achieve their financial goals. I would encourage sitting down together on regular basis to review your spending plan. These are checkpoints that allow each of you to see if you are doing ok or if you need to make adjustments.
5. Most Important – COMMUNICATION – COMMUNICATION – Effective Communication often emerges as the most difficult obstacle to establishing goals and expectations, and developing a financial plan. Most people have been taught since childhood that discussing money is somehow inappropriate. This is so wrong. Couples must understand that it is not only appropriate but absolutely necessary to managing finances in a marriage. You must communicate in spite of any difficulty.

I believe “Managing Money” is one of the most challenging things for individuals and Couples. Most couples learn it from their parents, who learned it from their parents and the cycle goes on. Before I start working with a couple or teaching a class I tell them “I don’t know anything about you, but if you let me look at your checkbook I can tell you what your priorities are and if you are headed for financial disaster”. This is very frightening to people and it should not be.

There is a great deal of resources for couples who need or want help. However, often times they don’t want to take the time, or only one person from the couple feels that it is important, or they just don’t know where to go. Look for a financial planner, talk to your bank, look for a church that teaches financial classes or find an organization that supports Marriages.

Gary Haapala

It is that time of year, are you ready for a gut check? If you are like most, the hope of sustaining the New Year resolutions has come and gone. Take me for example, I have had some mild success eating healthy and exercising regularly during January and part of February, so it is time to reward myself and head back to the snack food and cheeseburgers. Unfortunately, 45 days of discipline will not cover the rest of the year. Let’s not let our short term success cloud our ability to achieve the goal we set in the first place. The same thing holds true for our investments.

The short term success of the stock market has been impressive, the S&P 500 up over 50%+ from year ago levels. So the trap has been set. Are you prepared to remain disciplined, focused on your long term goal? As I have suggested in the past, this will be a year of volatility for the market. Here is why.

1. Americans are grappling with weak job growth and little to no income growth for the past several years.
2. While at the same time trying to repair their personal net worth.
3. This is keeping a lid on consumer confidence.
4. In turn, spurring people to spend less and save more.
5. This directly impacts our economic engine because we are a consumer driven economy, which takes us back to number 1.

The good news is we continue to see economic indicators heading in the right direction — but volatility will continue. Now is the time to remain disciplined regarding your investment program. Remember your New Year resolution? Don’t forget what 2008/2009 was like. The key is to stick to a proven investment program.

Our investment professionals will be conducting the 2nd of our 4 part educational series regarding market conditions and investment strategies on May 19, 2010, through a webcast event. Register today at www.ubat.com.

Kathy McCrate

Webopedia.com defines phishing as (fish´ing) (n.) The act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft. The e-mail directs the user to visit a Web site where they are asked to update personal information, such as passwords and credit card, social security, and bank account numbers, that the legitimate organization already has. The Web site, however, is bogus and set up only to steal the user’s information.

Phishing, also referred to as brand spoofing or carding, is a variation on “fishing,” the idea being that bait is thrown out with the hopes that while most will ignore the bait, some will be tempted into biting.

Pretty scary stuff. So how can you protect yourself? There are some basic tips to always remember that can help protect your identity and your accounts.

1. Never send personal or financial information via email and never provide this information during an unsolicited telephone call – no matter how authentic the institution or person sounds.
2. Know the companies you deal with. If you receive an email or message from a company you have never heard of, do not provide any information without doing your research first.
3. Do not reply or click on any links in an e-mail message from an unknown sender.
4. If you have antivirus software, use it and keep it up to date. If you don’t have it, get it.
5. Regularly review your account statements for unauthorized transactions.

There are a lot of great resources out there to help you learn more about phishing or other identity theft scams, how to protect yourself against them, and how to respond if you fall victim to one. The Federal Trade Commission is a great first place to start. Their website Fighting Back Against Identity Theft is a great resource for consumers, businesses, and law enforcement alike.

Don’t Get Caught! If you are a victim of Identity Theft Report It immediately.

Marilyn Buka

There has been a wave of bankruptcies in the past year, some because people were irresponsible, but mostly because they’ve been backed into a corner by the economy. For instance, someone loses a job and they start using credit cards to keep up, and suddenly they’re in too deep.

We’re seeing people in bankruptcy we don’t usually see. Seniors, for example. They’re retired and have seen their investments shrink dramatically, but they still have expenses; so again, they use credit cards. The problem is that the home equity loans they may have used just aren’t available anymore because of falling home prices. Many times, bankruptcy is their only solution.

Bankruptcy affects us all — whether through tightened loaning restrictions, to banks having less to loan, to credit card companies passing on the costs of defaults. But the important thing to remember is that it’s not the end — you can emerge from it more money-savvy than you were before.

In recovering from bankruptcy, my number one rule is: Take It Slowly. Take a common sense approach. Make a budget, and figure out how to have more money coming in than goes out. Get one credit card, period, and pay it off at the end of every month. Try to pay cash for purchases. Start a savings account and pay yourself based on your budget every month. Take control of your finances, realize that you have to make concessions, and plan for the unexpected. Save up for big purchase or for holiday and birthday gifts. Don’t let yourself get into a financial bind again because you suddenly have to buy a new set of tires or refrigerator.

We don’t like to deny loans, but sometimes we have no alternative but to deny the loan request. We don’t do anyone a favor by overburdening their finances. When we must deny a loan, I’ll sit down with the client and a budget sheet to help them understand, and perhaps show them how to budget better.

Times have been hard, but hopefully, we’re all learning lessons about fiscal responsibility. Hopefully, we’ll all emerge from this more willing to save, to budget, and to make wise choices.

Gary Haapala

Times have changed, and our ability to adapt to our circumstances has been proven — again. As consumers, we have reduced our thirst for consumption, and this is evident in two key areas. First, personal debt levels have been reduced – not all by choice – but we have taken our medicine and have begun the financial rebuilding process. Secondly, savings rates have increased dramatically. According the Bureau of Economic Analysis (www.bea.gov) the savings rate peaked at 6 percent in May, and remained above 3 percent for the past six months, compared to near zero to negative savings rates of the past few years.

The past two years has clarified our understanding of risk. We now have a clearer view of the possibility of job loss, market volatility (the stock markets go up AND down), and the value of our home can decrease so we shouldn’t use it as a checkbook. This created an environment of fear and general lack of confidence in the financial system. So what should we do now with our savings?

Here is a four-step process to help answer the question. You should implement this strategy in order.

Step 1: Build a necessity fund. You should consider this to be your emergency fund. Stuff happens. You need to have resources ready and available to handle the unexpected. Open an FDIC insured savings account and build it up to a balance that equals six to nine months to cover absolute necessities (rent, utilities, food, transportation, etc.). The key here is safety, so you will not get the greatest return on your money, but you know it will be there when you need it. Only use it in an emergency, and then replenish it.

Step 2: Build a sleep-at-night fund. The next step is to build an account to cover your living expenses. I suggest you consider certificates of deposits or a money market account. This account should have a balance that equals another six to nine months to cover your lifestyle expenses, in addition to your necessity fund. The key here is to remain conservative so you can sleep at night knowing that your necessities and living expenses are covered for the next 12 to 18 months. Use this fund to fill gaps in temporary changes in lifestyle, and then replenish it.

Step 3: Build a feel-good fund. Most people need an accountability partner to build a long-term investment portfolio, 401(k), IRA, or trust account. This partner can be a spouse, parent, friend, or financial advisor. The key is to work with someone who can remove the emotion out of the decision-making process, and can ensure that a disciplined process is followed. This person should be able to objectively help you to identify your goals, understand your tolerance for risk, agree on an asset allocation approach, and ensure a diversified selection of investments for your portfolio. Use this fund to execute against your long-term goal.  For example, your goal might be to retire by age 60, and this fund would be your income source for retirement.

Step 4: Build an extracurricular fund. All too often this is where we begin, the play money fund. I don’t think I need to explain this fund, we all already understand it. Remember money is a tool. We need to use the appropriate tool to accomplish our goal.

Times will change — again —and we will be tempted to forget the past and become thirsty consumers. It can be much different if you take care of steps one through three first.