(BPT) - If you had to grade your financial literacy, what would it be? Are you an A+ saver, investor and planner, or do you think you could do better? If you grade yourself average at best, you’re not alone.
When asked to grade their own financial literacy, more than half of Americans say they’d earn a “C” or lower, according to new data from Prudential Financial. This isn’t surprising, considering data from Prudential’s Financial Wellness Census shows less than half of Americans are on track to meet their financial goals, including planning for retirement.
“Regardless of where you are on your family’s financial wellness journey, the best way forward is through financial literacy,” says Prudential Advisors President Brad Hearn. “Researching, educating yourself and getting advice from a financial professional can help you make the best decisions based on your life stage, risk tolerance and goals.”
Hearn says each family’s situation and goals are unique, and things like life stage and personal preference will impact how they choose to prepare for their financial future. To get started, here are five financial wellness basics every family should master:
Set up an emergency fund
Life is a series of experiences, and sometimes the unexpected can hit your finances hard. Whether it’s a car breaking down, your AC unit on the fritz or even losing a job, it’s important to be prepared for emergencies. If you don’t already have an emergency fund, start saving a little each month until you reach your goal. A good rule of thumb is to have three months’ worth of expenses saved in an emergency fund. So, if your monthly expenses are $2,500, you should have $7,500 saved.
Create a budget
Saving for college? A new car? How about starting that emergency fund? Whatever your family’s financial goals are, it’s important to have a plan in place that helps you achieve those goals. Budget to manage day-to-day expenses, and include in that budget a commitment to save for bigger milestones. For tips on getting started, do some research. There’s no shortage of advice, whether you decide to go it alone or consider using the help of a professional financial advisor.
Plan for the unimaginable
If you have people who count on you for financial support or caregiving, you should have life insurance. A life insurance policy can help give your family financial peace of mind should the worst happen. There is no rule as to how much life insurance you need, but important things to consider are your annual income, mortgage debt, potential college costs for kids and other future financial obligations.
Save for retirement
According to Prudential data, of Americans who have retirement savings and debt, nearly one-quarter have more in total debt than in retirement savings (23%), while 15% of Americans say that they have no debt, but also have nothing saved for retirement. Planning for retirement is something that should start as soon as possible. If your work offers any type of matching program, make sure to take advantage. If you don’t, you’re essentially leaving free money on the table.
Seek professional advice
Retirement, life insurance and savings can be confusing. Information overload is partly to blame. According to Prudential data, two-thirds of Americans agree that the list of things they need to learn to successfully manage their finances keeps growing, not shrinking. That’s where financial literacy programs and professional financial advice can play a key role. Nearly two-thirds of Americans don’t have a financial advisor. They say they cannot afford one (42%) or don’t believe their financial situation warrants needing an advisor’s help (26%). The reality is that advice is more within reach than ever before — and it’s not just for the wealthy. A financial professional can help at various stages in life and work with you to create a strategy based on your timeline, risk tolerance and goals.
“Financial wellness isn’t always a matter of having more money,” says Hearn. “Instead, it’s a journey that takes a combination of proactive effort, dedication and professional guidance.”
Prudential Advisors is a brand name of The Prudential Insurance Company of America and its subsidiaries. Life insurance is issued by The Prudential Insurance Company of America, Newark, NJ and its affiliates.
From heading off to college to marrying the love of your life to taking those dream vacations, life’s biggest moments are often tied to being financially responsible. A credit card is one tool that can help you achieve your financial goals while offsetting some costs along the way. These tips from financial experts can help you maximize financial tools like credit cards throughout life’s milestones.
A Financial Planning Tool for Every Stage of Life
(Family Features) From heading off to college to marrying the love of your life to taking those dream vacations, life’s biggest moments are often tied to being financially responsible.
While memories of your first dance as newlyweds don’t often include the cost of the band, money is frequently front and center when planning for some of life’s larger events. From early adulthood through retirement, a credit card is one tool that can help you achieve your financial goals while offsetting some costs along the way.
“No matter your stage in life, it’s important to plan ahead and have the right tools to meet your financial needs,” said Jason Gaughan, credit cards executive at Bank of America. “A credit card offers flexibility, convenience and an increasing amount of rewards that can make your budget go even further.”
These tips from financial experts can help you maximize financial tools like credit cards throughout life’s milestones.
“Though credit can be a somewhat foreign topic for beginners, online resources such as Bank of America’s Better Money Habits offers tips to help young adults learn about things like how your credit score is calculated, the difference between a credit report and credit score and explains why it’s important to understand before signing up for a credit card,” said Lysandra Perez, a relationship manager for Bank of America who is responsible for educating clients on establishing strong financial habits including managing and building credit.”
According to BetterMoneyHabits.com, an important rule for building strong credit is to spend no more than 30 percent of your available credit line. The online resource also recommends that students look for credit cards that offer low interest rates and no annual fee to help minimize finance charges if they aren’t able to pay their bills in full each month.
“Establishing strong financial habits early on can help set you up for future credit opportunities later in life,” Perez said.
Using a credit card that offers rewards tied to interests is a strategy some young adults utilize. According to a Bank of America survey, 91 percent of Millennials ages 23-29 plan to use a rewards card to help pay for upcoming travel.
“It’s common for people in their mid-to-late 20s to prioritize maximizing credit card rewards,” Gaughan said. “They understand using a card for smaller, everyday purchases like coffee and groceries can be an easy way to earn points to pay for fun events like a trip abroad or home for a college reunion.”
Saving and tracking rewards is key during this period, too. Digital tools like My Rewards provide new visibility into the rewards you earn and how to maximize their value. Also look to explore banking rewards options like Preferred Rewards, which can offer special perks and benefits like credit card rewards bonuses, discounts on home and auto loans, interest rate boosters and no-fee ATM transactions.
Marriage and Parenthood
These years typically require more financial savviness to make every dollar count as large expenses requiring loans, such as houses and cars, are more prevalent during this stage.
Along with larger purchases, these years also often come with grocery store trips, filling up the gas tank for carpool duty and buying new clothes as your kids grow. Look for a cash back card that lets you earn rewards on your everyday purchases and offers redemption for cash back to cover expenses or invest in a savings account.
“There are many ways to continue saving and investing once in retirement,” said David Poole, head of Merrill Edge Advisory, Client Services and Digital Capabilities at Bank of America. “Credit cards that allow you to invest rewards back into your retirement fund is an easy way to continue contributing to your 401(k).”
Credit cards can also help retirees fulfill long-standing travel goals. Some like the Bank of America Premium Rewards card offer lucrative travel benefits such as earning two points for every dollar spent on travel and dining purchases. Look for points that are flexible and can be used toward future travel purchases or as cash back.
“With so many credit card options available, it’s important to understand what your current needs are,” Gaughan said. “Do your research, develop a strategy and work with your financial institution to determine the best card for your lifestyle.”
Find more information and credit card options at bankofamerica.com/creditcards.
Photos courtesy of Getty ImagesSOURCE:
Bank of America
Here are four steps to take today to spruce up your money management process and get yourself on the path to financial health.
(BPT) - Are you feeling good about your finances? Or do phrases like “account balance,” “credit score” and “retirement savings” give you a twinge of anxiety?
Don’t worry, you’re in good company. Only 24 percent of millennials have basic financial literacy, according to the National Endowment for Financial Education. When it comes to getting their financial house in order, most millennials would prefer not to set foot in that proverbial house in the first place. Getting yourself out of debt and building enough savings to cover your expenses in an emergency is a marathon, not a sprint. Small, incremental changes in your financial habits today can make a big difference in your financial health months or even years from now.
Take these steps today to spruce up your money management process and get yourself on the path to financial health.
* Check your credit score. Before you start the work of realigning your finances, you should check your credit score and review your credit report. It helps to know where you stand financially, and the good news is, even if your credit score is not as high as you’d like it to be, you can take steps to improve it. Establishing a history of on-time payments and maintaining a healthy credit utilization ratio are two things that could improve your credit score quickly. One way to access your credit score without any cost is to find out if your bank or lender offers your VantageScore through their website.
* Knock down your debt. Track down all your accounts — checking, savings, investment, credit cards and other loans — and do the math to find out your net worth. That’s your benchmark to help you track your progress. In the beginning, the truth can hurt, however, knowing how much you have in savings and knowing how much you owe gives you a valuable blueprint for where you need to direct your energy. From there, put together a household budget, and figure out where you can trim expenses, so you can pay ahead on your debts, one account at a time.
* Automate your savings. You’re much more likely to accumulate savings when you make the decision once and let the rest happen automatically. Log onto your bank account and set up an automatic transfer from checking to savings, starting with a small amount, preferably timed with your regular pay day. If you can manage to set aside $85 a month, in a year’s time, you’ll have set aside a full $1,000. That’s a decent emergency fund for things like car repairs and doctor bills.
* Open a retirement account. Here’s another way to automate savings. If you haven’t done so already, start contributing to a retirement plan. Even better, if your employer makes a plan and a match available to employees, sign up as soon as you can. If you can’t afford to contribute the full amount to get the full match, start with a small percentage, and slowly add on.
Taking the first steps to gain control of your finances isn’t easy. Setting up good financial habits today can leave you in a better place tomorrow. Test your credit score knowledge at CreditScoreQuiz.org, and be sure to visit VantageScore Solutions to learn what things influence your score, and what you can do to improve it.
(BPT) - Your most valuable asset is around you all the time. It’s above you, it’s below you and in many cases you don’t realize how much it can do for you.
According to the Urban Institute in Washington, D.C., “Americans have a staggering amount of untapped equity in their homes.” How much? Altogether, $11,030,000,000,000. That’s 11 trillion, 30 billion dollars.
Yet despite this huge wealth possessed by homeowners, using it isn’t as simple as writing a check. You have to capitalize on your home’s equity.
What Is Home Equity?
Your home’s equity represents the difference between its current market value and the money that you owe on it.
Let’s say, for example, your home has a market value of $200,000, you made a down payment of $40,000 and you took out a $160,000 mortgage. At that point your equity is $40,000. You can always calculate this number by taking your home’s initial price and subtracting the amount you still owe.
Now, let’s say 10 years later you have paid off $60,000 of your $160,000 mortgage. At this point you still owe $100,000 on your home’s initial price of $200,000 so your equity is $100,000, assuming the home's value has remained the same.
A little at a time
Each month when you make a mortgage payment, some of your money goes toward interest, some goes toward real estate taxes and homeowner’s insurance (if the lender is collecting for these and making the payments on your behalf), and some goes toward paying off the mortgage itself. This last portion grows your equity because it subtracts from the amount you still owe.
Your home equity can also grow if your home increases in value because the amount you still owe has not changed. A rise in value may be due to increased home prices in your area and/or improvements you make to the home.
Market home prices may rise and fall from one year to the next but given enough time, most real estate tends to increase in value. For example, current economic forecasts from CoreLogic project a 4.8 percent increase in home prices year over year in 2017.
Gaining access to your equity
Now that you understand what equity is and how much equity you have, your next question may be “How do I use it?”
Your first step is to contact a knowledgeable mortgage professional. They will be able to answer your questions as well as show you loans that use your home as collateral. You’ll want to do your research to determine which type of loan is best for you. You should also take the time to compare interest rates, offers and loan features.
And if you are age 62 or older, you are also eligible for additional home equity options such as a Home Equity Conversion Mortgage (HECM), which is an FHA-insured Reverse Mortgage loan. This loan may be taken as a lump sum, a line of credit, through fixed monthly payments or a combination and the loan can never be frozen or reduced.
The equity in your home empowers you with several financing options and the specifics of each loan may vary from lender to lender, so ask questions and do your own research. Once you understand all your options you’ll be able to determine which loan offering allows you to make the most of your most valuable asset.
To learn about HECM Reverse Mortgage loans and other special home-equity options available to homeowners 62 and older, visit www.reversemortgage.org/HomeEquity.
(BPT) - More than any other demographic group, African-Americans perceive homeownership as an integral component of the American Dream, and a way to build security and wealth for their families, according to a recent survey.
The poll by Ipsos Public Affairs, conducted on behalf of Wells Fargo, found that 90 percent of African-Americans said homeownership would be a dream come true, and more than half were considering buying a home within the next two years.
However, African-Americans currently have the lowest rate of homeownership among ethnic minorities - just 42 percent, or 20 points short of the national rate, according to U.S. Census Bureau data. African-Americans are expected to represent the third largest segment among new households (renters and owners) in the U.S. by 2024.
"Americans of every demographic aspire to homeownership, but this survey indicates African-Americans place high value on the emotional and financial benefits of owning a home," says Brad Blackwell, executive vice president and head of housing policy and homeownership growth strategies for Wells Fargo. "Unfortunately, myths about down payments and credit often deter people from inquiring about loan options."
Barriers, real and imagined
Like many Americans, African-Americans want to own homes, but are often challenged by factual and perceived barriers. Real barriers include tight credit markets, lack of affordable inventory in many areas and underemployment or unemployment.
Perceived barriers are directly related to a lack of experience with the homebuying process. For example, in the Wells Fargo survey, nearly half of African-Americans believed a 20 percent down payment is necessary to buy a home. However, many home loans permit down payments of less than 20 percent. Some are as low as 3 percent.
Mortgage approval is not contingent on full-time employment, either. Homebuyers need only be able to demonstrate their ability to repay their mortgage loan, regardless of whether their income comes from a full-time or part-time job. However, 54 percent of African-Americans believed homebuyers must have full-time jobs in order to qualify for a mortgage. In some loan programs, income from others who will live in the home, such as family members or renters, can also be considered.
The survey also highlighted the possibility that some credit education could help aspiring African-American homebuyers. Eighteen percent weren't sure what constitutes a good credit score, 35 percent didn't know what minimum score they would need to qualify for a mortgage, and 20 percent didn't know their own credit score range. While lenders do consider credit scores in making mortgage decisions, credit scores are only one factor, and minimum credit scores vary based on the type of mortgage and loan amount. Homebuyer education and credit counseling could provide key information about the elements of a good credit score or how to develop a good credit profile.
Improving African-American homeownership
"Just 5 percent of homeowners are African-American, according to the National Association of Realtors," Blackwell says. "African-Americans and other minority groups should have equal access to the wealth- and stability-building benefits of homeownership. In an effort to positively impact the homeownership rate among African-Americans, Wells Fargo has committed to providing education, counseling, a more diverse sales team, and mortgages to African-Americans."
Wells Fargo recently announced plans to lend a projected $60 billion to qualified African-American consumers with the goal of increasing the number of African-American homeowners by at least 250,000 by 2027. They'll also hire more African-American mortgage consultants in an effort to make their mortgage workforce more closely aligned with the populations they serve. Finally, Wells Fargo will provide $15 million to support educational initiatives and counseling for African-American homebuyers.
Meanwhile, if you want to purchase a home, you can maximize your chances of getting approved for a mortgage with several important steps, including:
* Monitor your credit - Your credit report and score can affect your ability to qualify for a mortgage, how much you can borrow, and the interest rate and terms you'll be offered. Review your credit report and score at least once a year. You can get an annual free credit report from all three national credit bureaus at www.annualcreditreport.com.
* Control other debt - Debt-to-income (DTI) ratio is an important factor lenders consider in mortgage applications. This ratio compares your total monthly debt to your monthly income. Keep your DTI below 36 percent by paying down credit cards, auto loans and student debt.
* Save - Even though you don't always need 20 percent down in order to qualify for a mortgage, having savings can still positively affect the mortgage process. Some financing programs allow qualified homebuyers to secure a mortgage with as little as 3 percent. Or, you may qualify for programs that benefit veterans if you've served in the military.
* Be able to prove income - Although you don't need a high income to qualify for a mortgage, you will need to be able to document your income with W2s, tax returns and other paperwork.
* Build up an emergency fund - Unexpected expenses are a reality of homeownership. An emergency fund can help you cover costs such as repairing a leaky roof or replacing a broken-down appliance. Lenders are also likely to view you as more financially responsible if you have six months' worth of expenses saved up.
To learn more about homebuying and to find a mortgage professional near you, visit www.wellsfargo.com.
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