3 Reasons Not to Pay Off Your Loan Early

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You may hear acclaimed financial experts talk about the benefits of paying off your loan early, and what they say is right…mostly. However, are there circumstances when paying a loan off early could be more hurtful than helpful?

Let’s take a look.

While paying loans off early can have some benefits like freedom from debt and money saved in interest, there are times when paying a loan off early isn’t to your benefit.

Here are three instances when it benefits you to keep a loan and put your extra funds somewhere else:

1. You waited too long. Maybe paying off your loan early would have been a good idea … years ago. Some loans (your mortgage for example) have you paying the largest chunk of the interest in the early years of the loan. If you’re many years into your mortgage, while you might choose to pay off the loan a little early – you’re not really going to see the great financial benefits of paying extra each month toward the end of the loan.

2. You’re not financially prepared. Paying off debt should not come at the expense of larger goals – such as saving for retirement, making investments, or funding college for your kids. Even more important is growing (or replenishing) your emergency savings. Too often people pay off debt, only to have an unexpected expense come up soon after and have to take out another loan to cover those expenses.

3. You could be penalized. If your loan is subject to pre-payment penalties, you’ll be charged a fee if you pay it off early. Not all loans come with pre-payment penalties and even if yours does, the penalties vary depending on the loan and the lender. Be sure to check your loan documents and terms to make sure that the loan you want to pay off is not subject to pre-payment penalties first.

Wondering if paying off your loans is the best use of your money? Just ask! We’ll be happy to review your credit report, help you do the math, and layout the options that will most benefit you.

Tips for Buying a Home in the Current Housing Market

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If you are currently in the market for a home, you are probably well aware that the nationwide housing inventory is at a record low, and the shortage is causing a problem for many prospective buyers. The current market can even create problems for sellers, because sellers still need to live somewhere after they sell their home. Between bidding wars, cash purchases, and low available inventory – here are a few strategies to help you navigate the current housing market.

Know where you stand. Being aware of your credit score, borrowing power, and housing budget is the key to security in today’s market. Sit down with your lender, financial planner, or real estate agent to talk about realistically, what can you afford. It’s especially important to know exactly how high you can go in a bidding war, because homes are often selling above value and at record speed.

Get expert advice. A real estate agent familiar with the current housing market conditions can advise you when homes you’re looking at are priced too high, and provide tips and leads you normally wouldn’t be able to get on your own. Agents who are familiar with your target neighborhood may know of possible pocket listings too – homeowners who may want to sell without putting their house on the market. In these instances, you may be able to get a home before the competition ever finds out.

Be first in line. The competition is definitely heating up these days. If you want a home badly enough, you’ll have to be ready to put in an offer as soon as the home is listed. Even if the seller decides to let the public bid on their home, if you’re prepared – you’ll get a chance to tour the home as soon as it’s listed if your buyer’s agent is active in the local area, and be one of the first bids in.

Get pre-qualified by your lender before you shop. Having pre-qualification paperwork to present when you place your offer is impressive to a seller and will get you a step ahead of the process in normal market conditions. In today’s market, having proof that you can afford the home you are bidding on is the bare minimum. Right now being pre-approved for a certain amount is very important in terms of competing offers. You’ll also want to be sure you can provide proof of where the down payment is coming from too.

Show that you want it, but don’t get too caught up in a bidding war. It’s tempting to keep placing higher counter offers if you’re outbid on a house that you love, but don’t let your emotions get the best of you. Stick to your budget and it’s okay to bow out if bids increase drastically above value. You can also send a letter to the owner as well. This tactic frequently works. Sellers are often emotionally attached to their homes and memories they’ve made in it, so it may help your offer get selected by letting them know just how much the home would mean to you and your family.

In the end, you may just have to be patient and try not to get discouraged. You don’t want to get stuck with a mortgage you can’t afford either, and eventually – the housing market will normalize again. When that does happen, you’ll be happy you held out for a home you could comfortably afford.

When you’re ready to take that leap – come talk to First Financial. Take advantage of our great mortgage and refinance rates, easy application process, and we’ll help you get pre-qualified before you shop.* Give our lenders a call, they’ll be happy to answer your questions with no commitment required!

*Subject to credit approval. Credit worthiness determines your APR. Rates quoted assume excellent borrower credit history and are for qualified borrowers. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. Higher rates may apply depending on terms of loan and credit worthiness. Available on primary residence only. The Interest Rates, Annual Percentage Rate (APR), and fees are based on current market rates, are for informational purposes only. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. See Credit Union for details. A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

Article Source: Moneyning.com

4 Ways to Teach Your Kids About Money

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Mother’s Day is this upcoming weekend (Happy Mother’s Day to all our First Scoop reading Moms!), and in thinking about this important holiday and all you’ve taught your children in life up to this point – here are a few significant pointers you can teach them about their future finances.

  1. Let your kids earn some money. It’s rather difficult to teach your children about money if they don’t physically have any. Though just giving it to them without explaining the value of earning money based on hard work, won’t teach them anything either. Instead, give them some responsibilities around the house (taking out or walking the dog, age appropriate chores, etc.) and provide them with a weekly or bi-weekly allowance so they will know that money needs to be earned through consistent work.
  2. Teach your kids to save money. If your kids just spend their allowance on whatever they want, whenever they want – this isn’t helping them or teaching them about the importance of savings. Talk to your children about saving for a rainy day, retirement savings, and compound interest. You can even try setting savings goals for your kids and reward them for saving by giving them a little bit extra when they meet the goal.
  3. Allow your kids to spend some money too. Instead of just buying your children whatever they ask for, teach them the significance of making responsible purchases and to really think about their purchase before buying something. This will show them that they can get an item of their choice, but in order to do so they are also learning about saving, budgeting, and spending money too.
  4. Show your kids it’s okay to be frugal. One of the most important lessons you can instill in your children is the value of saving their money for things that really matter. Teach them to comparison shop, use coupons whenever possible, and not to buy things for the sake of just buying something.

The best way to teach your children to be financially responsible is to be an example for them. Don’t be afraid to talk to your kids about your own personal money experiences too!

Article Source: CUInsight.com

Here’s How Much You Should Have Saved for Retirement by Your 30’s

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Start saving for retirement while you’re young. It’s easier said than done when you are just starting out, especially if you have student loan payments taking a huge percentage of your paycheck.

First, let’s determine how much you should have saved for retirement by the time you reach the end of your 30’s. Retirement plan provider Fidelity recommends having the equivalent of your salary saved by the time you’re in your 30’s. In other words, if your annual salary is $50,000, your goal should be to have the same amount in retirement savings by the end of that decade of your life.

How do your savings stack up against others your age? The average 401(k) balance for individuals between the ages of 30 and 39 is $50,800, according to data from Fidelity for the fourth quarter of 2020. However, the average employee contribution rate for Americans in this age group is only 8.3%.

One easy way to kick start your retirement savings is by taking advantage of any retirement matching program your employer offers. Those matching funds from your employer can add up fast and help you get closer to your savings goals. Not sure if your employer offers a program like this? If you don’t ask, you could be missing out on a huge benefit to you. Find out the details from your Human Resources Department if you are unsure.

Did you know First Financial has an Investment and Retirement Center which offers complimentary retirement consultations to our members?*

Stop in or call to make an appointment with one of our Financial Advisors today!

*Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and The Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using The Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or The Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

Not Insured by NCUA or Any Other Government AgencyNot Credit Union GuaranteedNot Credit Union Deposits or ObligationsMay Lose Value

Why is Everything so Expensive Lately?

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Houses. Cars. Gas. Why is everything so much more expensive than it was a year ago?

If you think you’re spending more on things like gas and food than you were at this time last year, you’re right. That’s because we seem to be reopening to a more expensive economy than the one that existed pre-pandemic.

It’s not necessarily price gouging. In fact, it has a lot to do with a shortage of materials that manufacturers need to make their products. When supply is low, prices climb for manufacturers – and consumers ultimately often end up paying more for the end product.

It seems silly, but even the cereal Grape-Nuts, has been hard to come by. Kristin DeRock, the Grape-Nuts brand manager, said in a recent interview that making the unique breakfast cereal involves “a proprietary technology and a production process that isn’t easily replicated, which has made it more difficult to shift production to meet demand during this time.”

You’ve probably also noticed it’s been hard to get your hands on things like fitness gear, sofas, and lumber too. The shortages and price increases have to do with several factors. The work from home economy put never before seen pressures on companies that both struggled to estimate demand, and were forced to halt production for safety reasons.

As imports have picked up speed on the back of surging (and erratic) consumer behavior, U.S. shipping ports have become unusually congested. The early 2021 freeze in Texas also compounded these problems, suspending oil production and impacting the manufacturers who rely on it.

Tight capacity, low inventory, and fiscal stimulus have created the “perfect storm” causing both big-ticket and everyday items from hot tubs and bikes to meat and cheese, to cost a whole lot more because of the unusual conditions created by reopening.

So how long will these high prices last?

Experts agree and anticipate these disruptions may last until early 2022. Until then, the stimulus will continue to drive demand and the pandemic will continue to rattle the movement of everyday goods, keeping prices higher into early next year.

Be Aware of Tax Scams this Tax Season

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The Internal Revenue Service (IRS) recently announced that the 2020 federal income tax filing deadline for individuals would be extended from April 15th to May 17th in response to the ongoing recovery efforts surrounding the COVID-19 pandemic, and to help provide taxpayers some ongoing relief.

In the midst of tax season, it’s important to be reminded that there is often an increase of fraud attempts and tax scams. Annually, the IRS shares and emphasizes certain scams that may be of risk to taxpayers. This year, scams related to Coronavirus tax relief continue to target taxpayers.

Here are a few things to be on the lookout for this tax season, as extensions can create confusion and make tax payers more susceptible to fraud attempts. The IRS recently announced the following to be aware of for the 2021 tax filing season:

  • Phishing Scams: Taxpayers should be alert to potential fake emails, texts, phone calls, or websites looking to steal their personal information.
  • Phone Scams (Vishing):  These scam phone calls work hard to instill a sense of urgency, and often threaten arrest, deportation, or some type of retaliation if a tax bill is left unpaid.  
  • Charity Scams: These schemes share bogus information about a charity to trick people into sending money or into providing personal information. This is often attempted with a fake website, using names similar to legitimate charities, or unsolicited communication. 
  • Social Media Scams: Social media scams frequently use events (lately COVID-19) to trick people into disclosing personal information. Typically, this involves convincing a potential victim they are dealing with a person they trust via email, text, or social media direct messaging.
  • Refund Theft Scams: Refund and Economic Impact Payments (EIP) as provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act have been targeted in recent scams with identity theft and filing false tax returns to divert funds to the wrong address or bank account.
  • Elder Fraud: Seniors are more likely to be targeted and victimized by scammers due to unfamiliarity or uncertainty on how to respond across digital channels. 
  • Offer in Compromise (OIC) Scams: Misleading tax debt resolution companies can exaggerate chances to settle tax debt through an Offer in Compromise (OIC) and submit false applications for candidates. OIC offers are available for a bill reduction, but taxpayers must typically meet very specific criteria under law to qualify.
  • Payroll and HR Scams: Phishing scams are designed to steal W-2 and other tax information. This scheme has increased with many businesses still closed and employees working from home due to COVID-19. W-2 forms contain sensitive information and are highly valuable for identity thieves.
  • Ransomware Scams: This cybercrime targets human and technical weaknesses to infect a potential victim’s computer, network, or server. Once infected, ransomware looks for and locks critical or sensitive data with its own encryption. 

Consider these preventative tips to keep your personal and financial information safe this tax season:

  • Be cautious of communication: Communication requesting personal or financial information – tax related or otherwise, should be treated with caution. The IRS and state tax authorities will never reach out by phone, email, text, or social media.
  • Pay attention to how money is requested: The IRS does not require that taxes or bills be paid with a prepaid/reloadable debit card, gift card, or money wires through services like Western Union or MoneyGram.
  • Report threatening messages: Calls demanding immediate payment or threatening legal action are more than likely scam attempts. The IRS or state of residence will not call to discuss taxes you owe without first mailing you an official bill.
  • Don’t open attachments or click on links: This is especially true if you have suspicions about the communication source you received, which may contain a malicious code or virus that will infect your device. Cybercriminals will often use a phishing email to trick a potential victim into opening a link or an attachment containing ransomware.
  • Be wary of rejected file requests due to duplication: If an e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS, or an unexpected receipt of a tax transcript doesn’t correspond to anything previously submitted – it may be a warning sign of identity theft. 

If a tax scam is suspected, report it to your state authorities and/or the Federal Trade Commission here.

Find out more about tax scams from the IRS website here.

Think First because There’s Harm In Not Knowing!

Article Source: CUInsight.com