Life Guidance

3 Things to Know Before Buying a Home

Buying a home is a big decision so you want to be prepared before you even apply. Work through these three questions before you fill out your application.

What’s Your Debt to Income Ratio?

Your debt to income (DTI) ratio is an important number to your lender. It compares your total monthly debt payments (including your potential new mortgage payment) to your total monthly pre-tax income. You can also look at your DTI of just your mortgage payment to monthly pre-tax income (commonly called the front-end or housing DTI ratio).

DTI shows the impact your mortgage payment could potentially have on your finances. Studies have shown that borrowers with a higher DTI have a harder time making their mortgage payments.

Calculate your DTI using our DTI Worksheet.

What’s Your Credit History?

Credit history is a critical part of applying for a mortgage. Underwriters look at both your credit report and credit score when making a lending decision.

Credit Report

Think of your credit report as your financial report card. It is a record of your credit history, bad and good. When did you last pull your credit report? If you’re like most Americans, you haven’t done so in over a year. Mortgage decisions are based heavily on your credit history.

Through the Fair Credit Reporting Act, you are legally allowed to pull your credit report for free once a year from each of the three credit reporting bureaus (TransUnion, Equifax, and Experian).

To get your free credit report, go to the government sponsored site at annualcreditreport.com and go through the steps to pull your report. You can pull all three at the same time, or space them out.

Credit Score

If your credit report is your financial report card, your credit score is like your financial grade point average. Using the data from your credit report, a number is calculated that lenders use as an indicator of risk and to determine your interest rate.

Your credit score is based on five major factors: payment history, amount you owe, length of credit, types of credit, and new credit. Each is weighted differently when calculating your score with payment history (35%) and amount owed (30%) having the two largest weights.

How Much Can You Afford?

You don’t want to buy a home that you can’t afford. Before you buy, know how much you can afford. Use the Monthly Payment Worksheet from the Consumer Financial Protection Bureau to:

• Assess current income, spending, and savings
• Estimate your financial responsibilities after buying a home
• Determine how much of a monthly payment you can afford

Ideally, you want your total monthly housing obligations to be no more than 28% of your pre-tax monthly income.

Your Home Loan Toolkit

The Consumer Financial Protection Bureau’s entire reason for existing is to protect the finances of consumers, so yeah, we trust them.

They’ve put together a home loan toolkit that goes into great detail to help you understand the ins and outs of loans, how closing works and how you can choose the best loan for your situation and goals. All in clear, understandable language.

Understanding Mortgage Documents

Mortgages and paperwork go hand-in-hand. But it’s important to know what you’re getting and what you’re signing.

Loan Estimate

The Loan Estimate must be sent within three business days after the loan application date. Included in the Loan Estimate:

• Interest rate
• Fees for both lender and third-party services
• Estimated closing costs
• Terms and costs for the life of the loan
• Lists prepayment penalties or future expected changes in interest rates

Closing Disclosure

The Closing Disclosure must be delivered three business days prior to closing. Included in the Closing Disclosure:

• Final figures for closing costs, prepaid taxes and insurance, payments, fees, and mortgage terms
• Costs paid by buyer and seller
• What is paid to each real estate company involved

Both the Loan Estimate and the Closing Disclosure are standardized forms that every lender must use. This makes it easier to compare loan offers between lenders.

Closing Documents

In addition to the Loan Estimate and the Closing Disclosure, there are important documents you will sign at your closing.

Promissory Note

The Promissory Note is the document you will sign indicating your promise to repay your mortgage. Included in the Promissory Note:

• Details of your loan including amount you owe, the interest rate, payment due date, length of time for repayment, and the place to send payments
• Consequences of being late on your payment

Mortgage/Security Instrument

The Mortgage/Security Instrument restates the information of the Promissory Note and explains your responsibilities and rights as a borrower. Upon signing this document, you give the lender the right to take your property by foreclosure if you fail to repay your mortgage as agreed.

Initial Escrow Disclosure

The Initial Escrow Disclosure indicates how much you will pay into escrow each month as part of the mortgage agreement. It also shows how your escrow payments will be used to pay taxes and insurance.

Documentation Checklist

Buying a home is a big step and with A+, you don’t have to do it alone. Whether you’re ready to buy now or just interested in seeing how much home you can afford, submit the loan application and an A+ Mortgage Loan expert will reach out to answer questions and discuss options.

The following documents are typically requested to fully process your application. Your Mortgage Loan expert will let you know exactly what you’ll need.

Items required for all borrowers:

• Driver’s license(s)
• Social Security card(s)
• Most recent pay stub(s) covering last 30 days
• Two months statements for all checking, saving, and investment accounts outside of A+FCU – all pages required
• Last two statements on all retirement accounts (or last quarterly statement) – all pages required
• W-2 and/or 1099 for the last two years
• Last two years of tax returns – all pages required
• Proof of Homeowner’s Insurance policy – must include insurance agent’s full contact information and dwelling coverage detail

Items required if applicable:

Your Mortgage Loan expert will let you know what is required.

• Proof of Student Loan Repayment Statement – regardless of deferment status
• Divorce decree
• 24 months child support payment history is used as income or debt
• Copy of Green Card (front and back) – required for Resident Alien
• Copy of HUD I or Settlement Statement from previous closing
• Copy of Note
• Copy of Deed of Trust
• Survey
• Copy of most recent mortgage statement
• Signed copies of complete tax returns for last two years including all schedules
• Signed copies of business tax returns for last two years
• P&L/Balance Sheet for year-to-date

9 Things to Avoid When Going Through the Mortgage Process

When you're going through the mortgage process, follow this advice to limit any bumps in the road.

Find Out More >

Your Home Loan Toolkit

The Consumer Financial Protection Bureau’s entire reason for existing is to protect the finances of consumers, so yeah, we trust them.

They’ve put together a home loan toolkit that goes into great detail to help you understand the ins and outs of loans, how closing works and how you can choose the best loan for your situation and goals. All in clear, understandable language.

HomeAdvantage

There’s a lot more involved in buying a home than just securing a loan, we want to help make it easy. We highly recommend HomeAdvantage, which will help you find a realtor, buy your house, and save you money.

1. Enroll in HomeAdvantage

Free and easy to use HomeAdvantage gives you access to property listings, neighborhood information, a referral to a trustworthy, experienced real estate agent, and a rebate at closing.*

ENROLL

2. Search & Research

Start looking for a home you’ll love. With HomeAdvantage you can quickly search by price range, home size, ZIP code and many other features. Plus, you can view data on specific neighborhoods including schools, crime rates, and more.

3. Find an Agent

For an investment this large, you want to find a real estate professional you can trust. HomeAdvantage and A+FCU have done the legwork for you by choosing a number of knowledgeable, local real estate agents. You just make your selection and request referrals using HomeAdvantage.

4. Get a Mortgage

Depending on your wants, needs, and financial situation, we’ll make sure you get exactly the right loan.

• Personal assistance throughout the loan process
• Financing up to 30 years
• Low rates

HOME LOANS

5. Earn a Rebate

Work with a real estate agent in the HomeAdvantage network and get a 20% rebate on the agent’s commission. The average member saves more than $1,500 at closing.*

Step One: Identify Income

A budget is a simple equation: Income minus Savings minus Expenses equals Zero. Basically, every dollar you earn is either put into savings or is spent. The trouble comes when figuring out your expenses and trying to make sure they aren’t more than your income.

Budget is a Four Letter Word

Most people dislike budgeting. The main complaints:

• “Budgets are complicated and take too much time.”
• “Budgets are restraining and limit freedom to spend and do what I want.”
• “I can’t solve my money problems unless I make more money.”

The truth of the matter is that, when done right, a budget…

• May take some time to set up, but maintaining can be relatively painless.
• Should be a reflection of how you want to spend your money.
• Can help you find extra money on your current income.

This guide walks you through the four main steps to building a budget that will work for you and can be used with the Budget Worksheet.

Step One: Identify Income

Look through pay stubs or online statements to determine your income. Sources of income to consider include wages, child support, pension benefits, social security, rental income etc.

Tips:

• Look at your net income. Net income is what you get paid after taxes and deductions are taken out, it’s the amount that’s deposited into your checking account.
• Ignore inconsistent income. While it’s nice to consider tax refunds and bonuses as income, if they don’t occur regularly, don’t include them in your budget calculations. It’s better to set a rule for any irregular income. For example, “for any irregular income I earn, 50% will go into savings and 50% will go towards my goal of paying off my student loans.”

Step Two: Identify and Organize Expenses

Identify Your Expenses

The best way to figure out where you are spending your money is to track your spending for one month.

If you only use your debit card/credit card to make purchases, you’ll just need to gather your most recent month’s statements. If you use cash, you’ll want to carry a notebook or open a note in your phone to write down every time you spend money, no matter how much.

You can also use a personal finance management app, like myFinance, to track your spending. It takes some time to set up, but can make the budget building step even easier.

Organize Expenses

Once you’ve tracked your expenses, it’s time to organize. Your goal is to evaluate where you are currently spending money.

There are a lot of recommendations out there on how to categorize and build your budget. We like to keep it simple so we recommend breaking expenses into three categories:

Essential Expenses

• Housing payment (rent, mortgage)
• Transportation (loan, gas, insurance)
• Groceries
• Utilities

Financial Priorities

• Debt payments
• Retirement savings (after-tax contributions)
• Emergency Savings
• Other savings/goals

Lifestyle Choices

• Anything fun, personal, or voluntary
• Cable, internet, phone
• Charitable giving
• Entertainment
• Pets
• Personal care
• Shopping
• Anything that doesn’t fit in the Essential or Financial Priority categories

Go through your list of expenses from the past month. Next to each item, write an E for Essential, F for Financial Priority and L for Lifestyle Choice.

In the next step, we’re going to build your plan.

Step Three: Build Your Plan

Now that you have your income and your expenses, it’s time to build your plan. Remember, one of the main goals of a budget is to tell your money where you want it to go.

Evaluate

There are a lot of different ways to divide expenses. In Step Two, we broke your expenses into three categories: Essential, Financial Priority, and Lifestyle Choices. This is called the 50/20/30 method:

• 50% (or less) of spending should be on Essential Expenses
• 20% (or more) should be on Financial Priorities
• 30% (or less) should be on Lifestyle Choices

Before you can build your plan, you need to see where you are currently. Use the Evaluating My Expenses Worksheet to total up your expenses into these three categories and see how they compare to the 50/20/30.

If you’re just starting to budget, your expenses may not fit or the 50/20/30 method may not be the one that fits you best. You need to determine what works best for you and for your situation.

Build

The next part, building your plan, may seem overwhelming, but you’ve done most of the legwork already.

When you follow the 50/20/30 plan, you have a guide for where you want your money to go. Use the Budget Worksheet to divide up your income to these three categories. For example, if you make $3,000 a month (after-tax), you would budget $1,500 for Essential Expenses, $600 for Financial Priorities, and $900 for Lifestyle Choices. Remember, this is just a starting point. You may find you need to make adjustments.

Now, using your past month’s expenses, start to fill in the Budget Worksheet.

1. Start with the Essential Expenses – your housing payment, transportation costs, utilities, groceries.
2. Now, add in your Financial Priorities – after-tax retirement savings, emergency savings, debt payments, and any other savings goals. For now, just enter the minimum payments for your debt payments.
3. Finally, add in your Lifestyle Choices. Since this category covers a wide variety of expenses, start with your needs. You should use the past month’s numbers as a starting point, but also think back to past spending to make sure it’s accurate.

Fixed vs. Variable Expenses

When budgeting, it’s important to know whether an expense is fixed – costs the same each month – or variable – the cost changes each month. With fixed expenses, budgeting is much easier since the cost won’t change. But with variable expenses, it can be more difficult to predict the cost each month.

For variable expenses, take a look at the past couple months to figure out your average spending in that category. Use that as a starting point when building your budget. This number may change depending on the month or the season. For example, in the summer, electricity bills might be significantly higher than in the fall or winter.

Needs vs. Wants

When it comes to evaluating expenses, you should ask yourself if it’s a need or a want. In an ideal world, a need is something you must have to survive and everything else is a want. But in reality, to determine if something is a need, ask yourself: am I willing to sacrifice other things in order to pay for this item? If the answer is yes, it’s likely a need.

But remember – not everything can be a need!

Adjustments

As you build your spending plan, you may find that your expenses are nowhere near the 50/20/30 recommendations. How you adjust your budget will depend on your goals and priorities.

Step Four: Implement

Now that you have your plan, it’s time to put it into action. To hold yourself accountable, you’ll want to choose a system to keep track of your spending to make sure you’re sticking to your goals. You’ll want to choose the method that works best for you:

Paper and Pen

Traditional and simple, yet effective. Use paper and pen to write down your expenses and build your budget.

Envelope System

With this method, you have different envelopes for different categories of your budget. When you get paid, you withdraw cash and divide it into envelopes according to how much you have budgeted to spend for that time period.

For example, you’ve budgeted $200 for groceries for the month. When you get paid, you count out $200 cash and put it into the Grocery envelope. Throughout the month, you use the cash in the specific envelope for any grocery purchase. Once the money in the envelope is gone, you can no longer spend money on groceries.

While this is typically done with cash and envelopes, there are ways to set up an envelope type system in personal financial management apps and websites.

Spreadsheet

Another method to build a budget and keep track of expenses is using a spreadsheet. While it might require more time to set up and maintain, you have more flexibility and control in how you build your budget and track your expenses.

Personal Financial Management App/Website

Using an online Personal Financial Management (PFM) app or website, such as myFinance, is a convenient way to build and follow a budget. With a PFM, you allow the app/website to have access to your financial accounts. They will then aggregate your spending data and account information into one location.

You can set up specific budgets, sort and categorize expenses from across checking and credit card accounts, and set up notifications for when you’re reaching your budget limits.

Credit Reports and Credit Scores

When it comes to building or rebuilding credit, understanding what’s on your credit report and what’s included in your credit score is important.

What’s a Credit Report?

You can think of your credit report like a financial report card. It displays your financial history, specifically focusing on your borrowing history. It includes:

• Basic information about you, such as current and former addresses
• Current loans/accounts and history
• Credit inquiries (when you apply for new credit or when others request your information)
• Any public records or collections.

What’s a Credit Score?

If your credit report is like your financial report card, your credit score is like your financial GPA. It takes information from your credit report and calculates a score that lenders then use to determine whether they want to lend you money, and if so, the interest rate and terms.

Different Reports and Scores

Many people assume they only have one credit report and one credit score. In reality, you have multiple credit reports and multiple credit scores.

Fair Isaacs Corporation developed the most popular and well-known credit scoring model, the FICO score. Your FICO score is based on the data on your credit report.

There are three credit reporting bureaus – Transunion, Equifax, and Experian – and each of them have a credit report for you. The data on each of these credit reports could be different for a variety of reasons including when a lender submits information or to which bureau they send it.

Each of the credit reporting bureaus have their own credit scoring models that are similar to FICO, but use their own formulas.

Despite the number of reports and scores and the differences between them, in general, you want to remember that higher scores are better. Each lender determines which score correlates with which rate, but higher scores correlate with lower rates for borrowing.

Five Main Factors

While there are a number of different credit scoring models out there that each use their own formula, there are five main factors that are considered when calculating credit scores.

The percentages and information used here are based on the FICO scoring model, but are similar for other credit scoring models.

Payment History

Payment history is the largest factor in calculating a credit score.

• How late was your payment?
• How recently did it occur?
• How many late payments do you have?
• How much did you owe?

When evaluating payment history, the more severe, recent, and frequent the late payment, the greater the impact will be on your score.

An easy thing to remember: always make your payments on time and one-third of your score will be perfect.

Amount Owed

Amount owed looks at a few things:

• How much money you owe to lenders across all accounts
• Amount owed on specific types of accounts
• Number of accounts with a balance
• Credit utilization ratio on revolving accounts
• Remaining amount owed on installment loans

Your credit utilization ratio looks at how much you have borrowed on revolving debt (such as credit cards) compared to the amount available to you.

For example, if you have a $10,000 limit on your credit cards and you have borrowed $9,999, your credit utilization ratio would be 99.9%.

Ideally you want to keep your credit utilization ratio as low as possible – below 30% is usually the recommendation.

Length of Credit History

Lenders and credit scoring models look at past behavior as an indicator of future behavior. When evaluating credit history, they are looking at three main things:

• Age of oldest account
• Average account age
• Age of specific types of accounts

If you are new to credit, you will need at least six months of reported account activity and history before you will have a FICO score.

New Credit

New credit looks at how often you are going out and applying for credit. It looks at:

• Number of new accounts
• Date you last opened a new account
• Recent requests for credit

If you are applying for multiple loans to get the best rate (rate shopping), FICO and other credit scoring models will consider that one inquiry if these applications/requests for credit fall within a certain window – typically 14 days.

Types of Credit

The last factor, types of credit, looks at the different types of loans and accounts you have. Ideally, you’d have an installment loan or two (say for a vehicle), maybe one or two revolving accounts (such as a credit card), and maybe a mortgage.

Remember, not all credit is created equal. When looking at types of credit, a mortgage loan is typically “better” than a retail card from your favorite store or a payday loan.

This factor is more important when you don’t have a long credit history.

Credit Errors and How to Fix Them

Errors on your credit report are more common than you might think. According to a 2012 Federal Trade Commission study, about 1 in 5 Americans have an error on their credit report.

Credit report errors can negatively impact your credit score and, depending on the type and severity of the error, can prevent you from getting credit.

Three Main Types of Errors

Account related error

Examples:

• Late payment listed that’s more than seven years old
• Credit card or loan account listed doesn’t belong to you
  Account closed by you, but shown as closed by the provider

Account related errors could keep you from getting credit and could be a sign of fraud.

Derogatory mark error

Examples:

• Paid-off collection item showing as unpaid
• Paid tax lien more than seven years past date of payment still listed
• Account discharged in bankruptcy still showing as active with a balance

Derogatory mark errors could keep you from getting credit and could be a sign of fraud.

Personal information error

Examples:

• Wrong name listed or misspelled
• Address listed that you’ve never lived at
• Inaccurate employer information

Personal information errors could be a sign of fraud.

Fixing Errors

According to the Fair Credit Reporting Act, you have the right to know what is in your credit file, dispute incomplete or inaccurate information, and limit “prescreened” offers of credit and insurance.

Consumer reporting agencies have to correct or delete inaccurate, incomplete, or unverifiable information and may not report outdated negative information.

Get your credit report.

To fix errors on your credit reports, you first need to get your credit report. You have the right to access your credit report for free annually from each of the three reporting bureaus. The government sponsored site to do so is annualcreditreport.com.

Go over it carefully.

When you get your report, review it carefully for any possible errors. If you find any errors or information you don’t recognize, highlight or circle it.

File disputes for each claim.

If you find errors on your report, you need to file a dispute for each claim. You can do so online or via mail. If you decide to do it online, you can visit the Credit Reporting Bureaus website and should easily be able to locate how to file a dispute. If you decide to mail your dispute, you can also find example letters online. Either way, you’ll want to detail the issue and provide supporting documents.

Four Things to Know About Credit

In addition to knowing more about credit reports and credit scores, these four tips can help you better understand and know how to build and improve your credit.

Your credit helps determine if you get a loan and how much you will pay in interest.

Lenders use credit reports and scores to determine the cost of borrowing, also known as your interest rate.

With a higher credit score, you’re more likely to pay back what you borrow on time, so your cost of borrowing is lower.

With a lower credit score, you are a higher risk of not paying back what you borrow on time, so your cost of borrowing is higher.

Your credit report and score aren’t the only things that matter when a lending decision is made. Other things considered include:

• Stability: how long have you worked where you are? How long have you lived where you live?
• Comparable debt: have you borrowed this much before? Can you handle this debt?
• Escalating debt: would you be taking on too much debt too soon?
• Relationship: how long have you been a member? What history do you have with us?
• Capacity ratios: debt-to-income, payment-to-income, revolving debt, disposable income
• Collateral: can the property or asset be used to secure the loan?

You need to use credit to build credit.

To build or rebuild credit, you need to use credit. You need to show that you can responsibly handle credit that is given to you.

Things to remember:

• Don’t borrow just to borrow. Have a reason for borrowing money.
• Make your payments on time. This will help build your credit history.
• If using revolving credit such as a credit card, pay off your balance in full every month. Just because you have to use credit doesn’t mean you have to carry a balance.
• Limit the number of open accounts. Try to keep it to 1-2 credit cards from your financial institution (not retail stores), an auto loan, and maybe a mortgage.

This does not mean…

• You have to carry a balance on your credit cards.
• You have to be in debt.
• You are rewarded for having debt.

The better your score, the harder you fall.

When making lending decisions, typically those borrowers with a higher credit score are considered a low risk and will have a lower interest rate. These borrowers have shown a pattern of positive credit behavior – they’ve consistently made on time payments, keep their balances low, have a longer credit history, don’t open new credit often, and have a good mix of credit.

So if someone with this type of behavior suddenly makes a late payment, it’s highly unusual. As a result, their credit score will take a bigger hit.

For example, Bert has a 780 credit score and no late payments. Ernie has a 680 credit score and a 90-day delinquency from two years ago and a 30-day delinquency from one year ago. They each make a 30-day late payment that is reported to the credit bureaus. While Bert’s score could drop 90-110 points, Ernie’s may only drop 60-80 points.

Negative information eventually “ages” off.

There are time limits on how long negative information can be reported and remain on your credit reports.

If you have any negative information on your account, remember the older the negative item, the less impact it will have on your score.

Five Steps to Get Out of Debt

Step #1: Get your budget in order.

To get out of debt, you first need to have your budget in order.

There are two main reasons you need a budget first and foremost before putting together a plan to get out of debt:

• Provides a plan to spend money to avoid using credit
• Helps you find extra money to put towards your debt

Use the Building a Budget guide to get started. Your goal is make sure your needs are met and find ways to reduce expenses to increase how much you can put towards your debt.

Step #2: Stop creating more debt.

Easier said than done, but that’s why building your budget is the first step. Once you have a budget, you need to stick to it to avoid using credit for purchases. You also need to understand your triggers and barriers to success.

Triggers

If you know you’ll still be tempted, you need to know your triggers. Ask yourself:

• When do you feel tempted to buy something you can’t afford (and put it on credit)?
• What do you tell yourself when you’re feeling tempted?
• Are you feeling sad, mad, disappointed, frustrated, etc.?

Everyone has different triggers to spend money. Common ones include retail therapy, boredom, leisure, and justification. While it can be difficult, it’s important to recognize what leads you to spend money you don’t have.

Barriers

Barriers are things that keep us from doing what we want and know we need to do. They get in the way of changing behaviors and being successful. Barriers can be difficult to identify and depending on the barrier, difficult or easy to fix.

For example, if you’re trying to reduce your eating out spending, you’d probably make a goal to cook more at home. However, the physical act of preparing a meal can be enough to keep you from doing so and instead you find yourself in the drive-thru.

To figure out your barriers, think of an action you want to do. For example, I only want to go to the grocery store once a week. Then ask yourself “why” you don’t do this to get down to the barrier that is stopping you from accomplishing this action.

Step #3: Make your list.

To develop your get out of debt plan, you need to know where you stand with your debt. This requires gathering the information and putting together your list of what you owe.

Use the Know What You Owe worksheet to put together your list. You’ll record the Company/Creditor, the Current Balance, the Interest Rate, the Minimum Monthly Payment, and the Payment Due Date.

Step #4: Make your plan and set goals.

When you make your plan, you need to first determine how much extra money you can afford to put towards your debt each month (above the minimum payments). This is done by looking at your budget. Ideally, you’d have found ways to trim your budget so that you have extra money left to put towards your debt.

Next, you need to develop your plan. Some of the plans can work in conjunction with another. For example, you may want to refinance your loans or consolidate your revolving debt before moving forward with the stack or snowball methods. Evaluate each of the options and pick the ones that work best for you.

Refinance

Refinancing involves replacing a loan with a new loan with ideally a lower interest rate and/or a lower monthly payment. While not technically a “payment plan”, refinancing debt is a great option if you have debt with a really high interest rate.

Consolidate

Consolidation means taking out one larger loan and using that loan to pay off your other loans. You’re replacing multiple loans with one “super” loan. The goal is to reduce your monthly payments and possibly the interest rate and time to pay off your loans.

Stack Method

The stack method is the one that typically costs the least over time. To help with your interest rates, you may want to refinance or negotiate for a lower rate.

• Consider refinancing or negotiating for lower rates on your debts with the highest rates
• Order your debts by interest rate (highest to lowest)
• Pay the minimums on all your debts
• Apply the extra money from your budget to the debt with the highest rate of interest
• Continue until you pay off the debt
• Once the debt is paid off, apply that payment to the debt with the next highest interest rate
• Continue until all debts are paid off

Snowball Method

The snowball method involves paying off your debt in order of balance (lowest to highest). Many people prefer this method as you ideally see a quick win as you pay off your first debt quicker.

• Consider consolidating revolving debt, refinancing, or negotiating for lower rates
• Order your debts by balance owed (lowest to highest)
• Pay the minimums on all your debts
• Apply the extra money from your budget to the debt with the lowest balance
• Continue until you pay off the debt
• Once the debt is paid off, apply that payment to the debt with the next lowest balance
• Continue until all debts are paid off

Set Goals

Once you’ve picked the method to pay off debt, set goals for yourself. When do you want to have your first debt paid off? When do you want to pay down your debt by 50%? Think about the goals that mean the most and write them down on your plan.

Step #5: Put in the work.

You have your budget; you have your list; you have your plan. Now it’s time to put in the work to reach your goal of paying down your debt.

Keys to reaching your goal:

• Know and recognize triggers and try to find alternative ways to cope that don’t involve spending money or using credit
• Display your plan where you will see it every day – maybe on your phone, your refrigerator, your desk, etc.
• Review your budget regularly and make changes as needed
• Continually look for ways to reduce expenses or increase income
• Dedicate any “bonus” money (tax refunds, bonuses, etc.) to paying down the debt you are currently focused on
• Find someone to hold you accountable to your goals
• Celebrate milestones

Know What You Owe

To better understand where you stand with regards to debt, you need to know what you owe. Gather your current debt statements and input the information in the Know What You Owe worksheet.

For more information, read the Five Steps to Getting Out of Debt guide.

Stack Method

Use the Stack Method Worksheet to develop a plan to pay off debt. The stack method is the one that typically costs the least over time.

• Consider refinancing or negotiating for lower rates on your debts with the highest rates
• Order your debts by interest rate (highest to lowest)
• Pay the minimums on all your debts
• Apply the extra money from your budget to the debt with the highest rate of interest
• Continue until you pay off the debt
• Once the debt is paid off, apply that payment to the debt with the next highest interest rate
• Continue until all debts are paid off

For more information, read the Five Steps to Getting Out of Debt guide.

Snowball Method

Use the Snowball Method Worksheet to develop a plan to pay off debt. The snowball method involves paying off your debt in order of balance (lowest to highest). Many people prefer this method as you ideally see a quick win as you pay off your first debt quicker.

• Consider consolidating revolving debt, refinancing, or negotiating for lower rates
• Order your debts by balance owed (lowest to highest)
• Pay the minimums on all your debts
• Apply the extra money from your budget to the debt with the lowest balance
• Continue until you pay off the debt
• Once the debt is paid off, apply that payment to the debt with the next lowest balance
• Continue until all debts are paid off

For more information, read the Five Steps to Getting Out of Debt guide.

Guide to Buying a Car

If you’re buying your first vehicle, the process may seem overwhelming. Maybe you know what you want, but you’re not sure it will fit in your budget. And how do you know you’re getting the best deal? This guide is designed to help you successfully maneuver down the road to your new vehicle.

Decisions

When buying a car, you have a lot of decisions to make. You also need to carefully weigh your needs and wants with how much you can afford. While you may think you need a convertible, your actual needs (and budget) may suggest otherwise.

Ask yourself the questions below to get a better idea what kind of vehicle you need. Even if you already have a make or model in mind, go through the questions and answer honestly. You want to make sure the vehicle you end up with is the one that best fits your needs.

• What will be the primary use of the vehicle?
• How many passengers will you need to transport regularly?
• Do you want manual or automatic transmission?
• What safety features are most important to you?
• What style vehicle do you want? Coupe? Sedan? SUV? Truck?
• How many miles do you plan to drive yearly?
• How long do you want to keep the vehicle?
• Do you want an environmentally friendly vehicle? Are you willing to pay more?
• Do you need all wheel drive?
• Do you need cargo space?
• What features are most important?
• Do you want to lease or buy?

Budget

Before you start looking at vehicles, you need to know how much vehicle you can afford.

Total Cost of Ownership

What you can afford each month isn’t just the monthly payment – you need to consider the entire cost of ownership.

The cost of ownership includes:

• Monthly payment
• Insurance
• Registration fee, license, taxes
• Gas/fuel
• Oil changes
• Tires
• Maintenance and repairs
• Parking and tolls

The total cost of ownership will be different depending on the type of vehicle you get. A new car may not have as many repairs but the monthly payment may be higher. Kelly Blue Book has a Five-Year Total Cost of Ownership calculator to help you compare costs between vehicles.

Monthly Budget

To determine how much you can afford, you need to take a look at your monthly budget. Use the Guide to Building a Budget to get started.

How much of a payment can you afford? This isn’t necessarily how much of a loan can you get approved for – it’s how much can you afford each month with your budget. Just because you’re approved for a $50,000 auto loan doesn’t mean you can afford the monthly payment.

Beyond the monthly payment, how much can you afford to pay for insurance, gas, maintenance, etc. each month? Your monthly insurance premium is going to depend on a variety of factors including your zip code, credit history, type of car, year of car, miles driven, and more. Gas costs will depend on how much you drive and what kind of vehicle you get. Maintenance and other costs will depend on whether your car is new or used, your driving style, weather, and more.

Do you have money saved for a down payment? A down payment or even a trade-in can reduce the amount you need to borrow and potentially your monthly payment.

How quickly do you want to pay off the loan? A longer loan term may mean a lower monthly payment, but that also means more interest paid.

Financing

Figuring out your budget and financing go hand in hand. If you’ve decided to purchase your vehicle and don’t have cash for the entire purchase price, you’re going to need a loan. Getting pre-approved before you begin shopping will help you narrow down your options and give you more power when negotiating.

Applying for a Loan

When you apply for an auto loan, the lender is going to use the information you provide in addition to the information from your credit report to evaluate how much you can afford and the likelihood of you paying back your loan. Factors lenders take into consideration:

• Monthly income and expenses
• Length at current address
• Length at current employer
• Car information/value
• Down payment and amount financing
• Credit score and credit report

Lenders use all of this information to determine if you’re approved and the terms of the loan.

Terms of the Loan

When you receive your loan approval, you’ll receive the terms of the loan. These include the payment amount, length of the loan, and interest rate.

In general: if you want a lower payment, it will likely take you longer to pay off the loan and you’ll pay more in total interest. If you have a higher payment, you will likely pay off your loan faster and pay less in total interest.

Additional Items

In addition to financing, you may want to consider adding additional protection to your vehicle.

• Mechanical Breakdown Protection (MBP) may also be called an extended warranty, this protects your vehicle beyond the manufacturer’s factory warranty.
• Guaranteed Asset Protection (GAP) pays the unpaid balance of your loan if your vehicle is stolen or damaged beyond repair

Both MBP and GAP can be added to your monthly payment.

Research

Once you know how much car you can afford, it’s time to begin your research. With the internet, there’s no shortage of search engines to help you find the car for you. Keep your list of needs and wants in mind as you begin researching vehicles.

If you’re also searching private sellers, always be careful. Take someone with you to test drive, don’t give any private and confidential information to the seller, and schedule to meet in a public location.

Once you’ve found a couple vehicles, call up the dealership/seller to schedule a time to come by to look at the vehicle and take a test drive.

Test drive

The test drive is an important step in the car buying process. A vehicle may have all the features you need, but it may not drive how you would like. Ideally, your test drive should be as close as possible to how and where you plan to drive on a regular basis. For example, if you have a lot of traffic on your commute, try driving with frequent stops and slow speeds.

If you’re buying a used vehicle, the Used Vehicle Checklist will give you an idea of what to look for before and during the test drive.

Negotiate

Once you’ve narrowed down your choices, it’s time to see if the dealer/seller is willing to negotiate price. Some dealerships have moved away from this practice and have a “this is lowest price we will offer” policy. Others expect you to negotiate price and their sticker prices are reflective of that.

Whenever you are negotiating, make sure you have done your research.

• Know the car’s worth. Look up prices of the specific make and model so you know when a price is good or too high.
• Know the value of add-ons. This will give you an idea of what each feature will add to the total cost. A sunroof may sound nice, but is it worth an extra $1,000?
• Know what else is out there. You’re not limited to one dealership. When you do your research, look for options on dealership, make/model, features, etc. This means being flexible on the type of vehicle or the different features. If you fall in love with a particular vehicle, your negotiation skills may suffer as you won’t want to lose the vehicle.
• Know your limits. How much are you willing to pay? Even if you have a pre-approval, you may not feel comfortable spending the maximum. Set your max and stick with it.
• Know you can walk away. If you make an offer and the dealer counters with something you’re not comfortable with and won’t budge, don’t be afraid to walk away. Again, you have options.

After the purchase

After you’ve signed the paper, don’t forget to get these other items in order:

Registration

If you purchased from a dealer, they should get you set up with your temporary registration, but you’re responsible if you purchased from a private seller. You can look at the Texas DMV website to find out what’s required for Texas.

Insurance

You may be required to get your insurance set up before you get your registration, so it’s important to update your insurance for your new vehicle as soon as possible. Make sure you know your VIN, make, model, etc. so you’re ready to go when you get to this step.

Questions to Ask When Buying a Used Car

You’ve made the decision to buy a used car. Whether you’re buying from a dealership or a private seller, you want to make sure the car you’re buying isn’t going to fall apart the minute you drive away. Here are some important questions to ask before you buy:

How long of a test drive is possible?

If you’re buying from a dealer, ask them if you can take the vehicle for a test drive overnight. They may ask for proof of insurance, keeping it under a certain mileage, and a signature guaranteeing you’ll come back. If it’s a private seller, it may be more complicated to get an overnight test drive, but you should still see how long they’re willing to give you with the vehicle.

How many miles are on the vehicle?

If you’ve done your research ahead of time, you may already know this answer. But this number should give you an idea of how many miles were driven per year on average. Depending on this average, you may want to ask the dealer or private seller what kind of miles they are.

Do you have the service records?

Make sure the vehicle has been well cared for by asking for service records and proof of any maintenance or new parts. If they are hesitant to give you any information, it’s probably best to walk away from the purchase.

How many previous owners?

By knowing how many owners a vehicle has had, you can better understand the history and possible issues. For example, if the car has had many owners over a short period of time that might be an indication that something is wrong with it.

Has it been in any accidents?

Ideally, you’d be able to find this information out with the Vehicle Identification Number (VIN) and a search of records. However, not all accidents are reported. If the vehicle has been in an accident, ask for the extent of the damage, if there were any repairs, and proof of the repairs and parts that were needed/purchased.

Do you have a clear title?

A clear title means the seller owns the vehicle free and clear without any lien or possible question of ownership. Be careful with out-of-state titles. If the seller still has a loan for the vehicle they are selling, the financial institution likely has the title and will not release it until the loan is paid off. The seller may be planning to use the funds they receive from the sale to pay off the loan. If this is the case, you may want to see if you can pay the financial institution directly for the remainder of the loan and then pay the seller the rest. Just make sure you get the title from the financial institution and not the seller.

Why are you selling?

Pay attention to their reasoning as elaborate stories may be indicators of issues with the vehicle.

Can I have this vehicle examined by a licensed mechanic?

While you may be able to see exterior issues, not everyone is comfortable evaluating the inner workings of a vehicle. Find a licensed mechanic who will do a thorough examination of the vehicle. A dealership should have already examined the vehicle closely and prepared it for resale and they should provide records. If a private seller is hesitant to let you get it looked at professionally, it’s probably best to walk away.

Does the car have a warranty? If so, is it transferable to the new owner?

In most situations, a factory warranty stays with the VIN and not the owner, so if you purchase a vehicle that still has a factory warranty, it will still be eligible upon purchase. There are some exceptions to this rule, so you want to ask. You also want to make sure the warranty is still available. Most warranties start the date of purchase, not the model year. You can always call a dealership and have them check the VIN to determine how much of the warranty is left. Some sellers may have purchased an extended warranty. Be sure to ask them if the extended warranty is transferable or not. If it is, make sure you get the information about what is all included and what needs to be done to transfer the extended warranty.

Used Vehicle Checklist

When purchasing a used vehicle, you want to make sure you’re still getting a good quality vehicle. This checklist is not meant to replace a proper inspection from a licensed mechanic. This checklist should be used to make sure there aren’t any glaring issues before taking it for an in-depth inspection.

Before driving…

• Is the windshield free of cracks?
• Does the paint color match all over vehicle?
• Are the tires the same brand and size?
• Does the tread and wear look even on the tires?
• Are there any scratches or dents in the body?
• Do the windshield wipers work? Windshield wiper fluid?
• Do the headlights work? Brake lights? Turn signals?
• Do you see any fluid leaking under the vehicle? Look when the car is both on and off.
• Does the trunk open and close smoothly?
• Do the doors lock and the windows work?
• Are the seats in good condition?
• Does the car smell like smoke or pets? Or is there a strong smell of air freshener that may be covering up smells?
• Does the air conditioning work? How long does it take to cool down? Any smell?
• Does the heater work? How long does it take to heat up? Any smell?
• Does the stereo and all the stereo controls work?
• Do all the seatbelts work?

During the test drive…

• Does the front end shake or vibrate at higher speeds?
• Does the steering wheel vibrate at any point?
• Are there any weird noises when the car is at a standstill? When you accelerate?
• If you let go of the steering wheel, does the vehicle pull to one side?
• Any noise when you brake?

If you feel good about the vehicle after the walk around and the test drive, ask to take it to a licensed mechanic for a complete inspection. If a seller hesitates to let you take it to a mechanic, it’s probably best to walk away from the sale.

CarQuotes

We’ve partnered with CarQuotes  to offer our members CarQuotes exclusive Know Before You Go pricing on new and used vehicles. In just moments, get low, upfront price for the car you are interested in – before heading to the dealer.

Car Finder

CarQuotes vehicle search tool allows you to search for new and used vehicles, by make or model, and by location.

• CarQuotes searches their dealer network and provides you with a low, up-front price
• Use this competitive price quote to give you an advantage before you set foot on the lot
• Get a FREE Pricing Report with a complete pricing breakdown

Estimate Your Trade

Use CarQuotes Estimate Your Trade tool to get a better idea of what your vehicle is worth before visiting the dealership. This information can help you negotiate a deal for your new vehicle.

1. Enter basic information about your current vehicle
2. Enter your contact information
3. Choose a replacement vehicle
4. Get a FREE CarQuotes Valuation Report emailed to you with both retail and trade-in valuations

Purchase Your Leased Vehicle

Our partnership with Innovative Funding Services (IFS) offers you the easiest way to purchase your leased vehicle. Whether you bought from a dealership, or leased from a smaller leasing company, A+FCU and IFS offer the easiest way to own it. There is no need to go back to the dealership. Apply, sign, and finance from the comfort of your home.

Get Started:

• Follow the link to apply
• IFS will obtain your payoff, and work to get you approved with A+FCU
• The paperwork to buy will be sent to you via email or FedEx
• All DMV work (where applicable) will be completed for you
• Your loan will be assigned back to A+FCU for servicing

In just moments you can get our low, up-front price for the car that you are interested in.

A+FCU Auto Dealers

We work closely with a number of dealerships in the area to provide our members with the best prices and service. Before you head to the dealership, get pre-approved for an auto loan.

Preferred Auto Dealers

These dealers are the most supportive of A+FCU and its members. Stop by and let them know you’re an A+FCU member and see what they can do for you.

• Allen Samuels Alfa Romeo Fia (Waco)
• Covert Cadillac/Buick
• Don Hewlett Chevrolet Buick
• Indian Motorcycle of Fort Hood
• Jim Turner Chevrolet (McGregor)
• Leif Johnson

Authorized Dealers

We recommend using any of the following dealers for your next purchase.

• Apple Sport Chevrolet
• Apple Sport Imports
• Audi South Austin
• Austin Infiniti
• Austin Subaru
• Autonation Chevrolet
• Autonation Toyota
• Bates Nissan (Killeen)
• Benny Boyd (Georgetown)
• Benny Boyd (Gonzales)
• BMW of Austin
• Capitol Chevrolet
• Cecil Atkinson (Burnet)
• Cecil Atkinson Ford (Hondo)
• Charles Maund Imports
• Charles Maund Toyota
• Charles Maund Volkswagen
• Chevrolet of West
• Chuck Nash
• Chuck Nash Pre-Owned (Seguin)
• Chuck Nash Pre-Owned (Lockhart)
• Clay Cooley Nissan
• Cleo Bay Honda (Killeen)
• Cleo Bay Subaru (Killeen)
• Covert Chevrolet Bastrop
• Covert Chevrolet Hutto
• Covert Chrysler/Dodge/Jeep
• Covert Ford
• Covert Ford (Taylor)
• Dodge Country (Killeen)
• Don Hewlett Chevrolet Buick
• Douglass Nissan of Waco
• Freedom Chrysler Dodge Jeep (Killeen)
• Fiat of Austin
• First Texas Honda
• Garlyn Shelton Cadillac Buick GMC (Temple)
• Garlyn Shelton Imports (Temple)
• Garlyn Shelton Nissan (Temple)
• Garlyn Shelton Volkswagen (Temple)
• Henna Chevrolet
• Hewlett Volkswagen
• Honda of San Marcos
• Howdy Honda
• Jim Hoffpauir (Lampasas)
• Johnson Sewell Ford/Lincoln
• Leif Johnson Superstore
• Leif Johnson Truck City
• Lexus of Austin
• Lexus of Lakeway
• Lockhart Motors
• Lost Pines Toyota
• Luling Chevrolet GMC
• Mac Haik Dodge/Chrysler/Jeep
• Mac Haik Dodge (Temple)
• Mac Haik Ford
• Mac Haik Pre-Owned (Hutto)
• Maserati of Austin
• McDavid Acura
• Mcleod Auto Sales (Killeen)
• Mercedes-Benz of Austin
• Miller Mazda Kia (Waco)
• Miller-Starnes Chevrolet/Buick (Rockdale)
• Nyle Maxwell GMC
• Nyle Maxwell Chrysler/Jeep/Dodge/RAM (Supercenter)
• Nyle Maxwell of Taylor
• Onion Creek Volkswagen
• Oviedo Chevrolet GMC
• Oviedo Motors (La Grange)
• Patriot Buick GMC (Killeen)
• Ratliff Chevrolet
• Riata Ford
• Roger Beasley Hyundai (Kyle)
• Roger Beasley Hyundai (New Braunfels)
• Roger Beasley Mazda Central
• Roger Beasley Mazda/Mitsubishi South
• Roger Beasley Mazda (Georgetown)
• Roger Beasley Porsche
• Roger Beasley Volvo
• Round Rock Honda
• Round Rock Hyundai
• Round Rock Toyota
• Rush Chevrolet
• Sames Chrysler Dodge Jeep (Bastrop)
• Sames Ford (Bastrop)
• Sames Red Barn Motors
• San Antonio Chrysler Dodge Jeep
• San Marcos Toyota
• Stanley Chrysler Dodge/Jeep (Gatesville)
• Stanley Chevrolet/Buick/GMC
• Stanley Ford (McGregor)
• Sterling Acura of Austin
• Subaru of Georgetown
• Toyota of Cedar Park
• Yaklin Chrysler Dodge Jeep RAM (Seguin)

Creating a Wedding Budget

When you’re planning a wedding, you want everything to be perfect, but you don’t want to be faced with a huge debt after the honeymoon.

The average wedding in the United States costs $26,645 (not including the honeymoon). In the Austin metropolitan area, the average wedding cost in 2015 was $29,879 with the majority of the funds going to the venue, catering and rentals.

The first step to planning your wedding is to create a wedding budget that will help you determine how much you are comfortable spending and help you allocate your money according to your preferences for the event.

Paying for the Wedding

As with any budget, the first step is to determine your “income” or how much you have to spend. Traditionally, the bride’s parents pay for the wedding. However, this isn’t always the case anymore. Now, both sets of parents contribute and more and more couples are actually footing the bill.

Family

If your families plan to contribute to the wedding, it’s important to talk with them about how much they can afford to pay and to get a specific dollar amount.

Savings

If you and your partner decide to dip into your savings for your wedding, make sure you pick a dollar amount and stick to it. It can be tempting to continually go back to your savings for an extra dollar amount for something you have to have.

You should also be cautious about dipping into any retirement savings for your wedding. Withdrawing funds from your retirement funds can be costly with fees and tax penalties, but they can also cost you in the long run as you lose out on potential interest/investment gains.

Borrowing

If your parents and family cannot cover the entire wedding and you don’t have enough in savings, another option is to borrow money to pay for your wedding. If you plan to finance your wedding, set a budget and make sure you stick to it.

If you plan to use a credit card or other revolving debt, use the card with the lowest interest rate and pay it off as quickly as possible.

Remember – even if you’re borrowing money, that doesn’t mean you can/should spend up to your limit. Pick a budget that works for you and that you can pay off quickly.

Before Anything Else

No matter what your budget, you and your fiancé need to answer this question: what things are the most important/must haves for your wedding?

Write out your must-have list first, then build your budget and determine how you want to spend your money.

Things to Consider

As you develop your budget and start to break down how you want to spend your money, keep your answers to the following questions in mind:

• What style wedding do you want? Formal? In-formal? Semi-formal?
• Where do you want to have your wedding and reception?
• Do you want it in-state, in a different state, or out of the country?
• Does it need to be in a particular city?
• Will you need to rent a space?
• Will you need to pay for both a place for the ceremony and for the reception?
• Do you want a place that provides everything – tables, linens, catering, etc.?
• How many people do you want to invite?
• What time of year do you want to get married?
• What time of day do you want to get married?

Average Costs

There’s no right way to spend your wedding budget. Here are some averages on how expenses breakdown:

If you and your fiancé plan to pay for your own honeymoon, you’ll want to include that in your budget as well.

Stay on Budget

Once you have your budget and figured out how you want to spend your money, it’s time to start booking venues, vendors, and making decisions.

While it’s easy to get caught up in the moment when you’re making wedding decisions, keep your budget in mind and remember that if you spend over in one area, you’ll need to cut back in another.

Here are other tips to help:

• Record every expense. One of the easiest ways to track expenses is with a spreadsheet on your computer. You can set up your budget, break it down by category, and set up formulas to quickly total all your expenses in each category. Use this tool to keep on track with your spending and ensure you’re not going over in a particular area.
• Don’t forget the little expenses. Make sure you include tips, service fees, and overtime fees when working with vendors and venues. If they’re not explicitly included in the contract, you still need to include them in the budget.
• Prepare for the unexpected. Make sure you’ve included a little wiggle room in your budget for unexpected costs such as weather related expenses (like umbrellas, fans, heaters, etc.) or small accidents like gown adjustments or lost items.

Working with Vendors

Whether it’s the reception venue, the florist, or the caterer, when you work with a third-party vendor, you want to make sure you get what you agreed upon and that the contract you sign reflects that.

Before you sign, review each contract carefully. Make sure it reflects what you want and what was discussed. Check for the following details:

• Dates and times of all services – includes arrival and completion time
• Date of the wedding
• Name of all parties
• Deposit and final payment amounts
• Contingency plans – this will detail what will happen if something goes wrong or if the vendor cannot get a particular item
• Detailed description of the services the vendor will provide
• Cancellation and refund policies
• Contact information for main contact and day of contact

Ways to Save

There are any number of ways to save money on a wedding. How you save will depend on the type of wedding you have and your budget.

Here are some common ways to cut expenses:

• Cut the guest list. Depending on the cost per head for the venue and catering, you may be able to easily cut costs by reducing your guest list by 5-10 people (or more).
• Save money on invites by limiting the number of ink colors and keeping the information to one page. You can even use an app or website to record RSVPs instead of a separate card.
• Flower costs can quickly add up; to save, choose flowers that are in-season or limit the types of flowers used to 1-2. You can also use the bridal party bouquets as centerpieces for the reception.
• Keep the menu simple by limiting the number of options and number of courses. You may even consider doing a buffet or just serving appetizers and drinks.
• Order a smaller cake for display and larger sheet cakes for serving. Keep the cake flavor and design elements simple.

Wedding Budget Worksheet

Use this budget worksheet along with the Creating Your Wedding Budget guide to build your wedding budget. Track and categorize expenses every time you spend.

Before and After Wedding Paperwork

As you plan for your big day, don’t forget about the important before and after paperwork.

Before the Wedding

Marriage License in Texas

If you’re planning to marry in Texas, you and your fiancé will need to go to the County Clerk’s office together to apply for your license. This license will be good in any Texas county, but may not be legal in other states (you’ll want to check the requirements in the state in which you plan to marry).

Texas requires a 3-day (72 hours) waiting period between the time the application is filed and the ceremony. Once the waiting period is over, the marriage ceremony must occur within 90 days.

There is a fee to receive your marriage license and the fee will vary from county to county.

When you go to the County Clerk’s office, both you and your fiancé want to make sure you bring:

• Proof of identity and age with a valid, government-issued picture identification such as copy of a birth certificate, a driver’s license or state-issued ID, passport, visa, or military ID
• Social Security Number for each applicant
• If applicable, a certified copy of the Divorce Decree must be presented if planning to waive the 30-day required waiting period

Following the ceremony, confirm that the officiate files the marriage license with the County Clerk who issued the license no later than the 30^th day after the wedding.

Be sure to order additional copies of the certified marriage license at the County Clerk’s office to assist with the post-wedding paperwork.

Destination Wedding

If you are planning a destination wedding outside the United States, research the country’s license requirements well in advance of the date. This information should be easily found on their tourism website.

You may need to get documents translated and countries require blood tests in addition to proof of identification. These types of tests and translations can be expensive and require a lot of advance notice.

Another option to avoid these issues with a destination wedding, is to get legally married in the United States and have a symbolic ceremony in the destination of choice. It could possibly save money and headaches getting the paperwork in order.

After the Wedding

The majority of wedding paperwork happens after the wedding. Much of the paperwork will require your marriage license, so make sure you have it handy.

Changing Last Name

While not required, many spouses take their new spouse’s last name. If that’s the case, you’ll want to make sure the following items get changed as well:

• Social Security Administration – visit the Social Security Administration website to get the Application for a Social Security Card. While it’s free to apply, you will need to provide proof of the name change, such as a marriage certificate. You can either mail in the form along with the supporting documents, or you can visit your local Social Security office.
• Texas Department of Motor Vehicles – once you have your new Social Security card and within 30 days of the name change, you’ll want to bring that along with your current driver’s license, marriage license, and original vehicle title to the DMV (this must be done in-person) to get your new license and vehicle registration. You can also update your voter registration while at the DMV.
• Texas Office of Secretary of State – if you do not change your voter registration when you change your name at the DMV, you’ll also need to update that information. This can be done online or in-person.

The following items also need to be changed, but the process is much easier once you have your Marriage License, updated Social Security Card and updated Driver’s License.

• Employer/payroll
• Financial institutions including your credit card companies
• Insurance companies
• Post office
• Doctors and other health companies
• Investment accounts

Legal Documents and Beneficiaries

Once you’re married, you’ll want to make sure you and your spouse update any legal documents and your beneficiary designations on any necessary accounts, if you haven’t done so already.

• Wills (note: if you don’t have a will yet, now is the perfect time to get one developed)
• Any power of attorney or advanced health care directive/living wills
• Life insurance
• Financial accounts
• Investment accounts such as your 401(k) or other retirement accounts

Additional Items to Consider

Health Insurance

You may find it more cost effective to join your spouse’s health insurance or have them join yours. If that’s the case, ask your employer what time frame you have to decide to make sure you don’t have to wait for the next open enrollment period.

Taxes

You and your spouse need to determine if you plan to file jointly or separately. In the eyes of the IRS, no matter when you get married in the year, you are married for the entire year.

There can be some significant advantages to filing jointly including a possibly lower tax bracket and increased deductions, credits, and exemptions.

However, there can potentially be some negative consequences to filing jointly. It will all depend on your combined income and potential exemptions/deductions. Always consult a tax advisor before making any tax decisions.

Steps to Take Before Having a Baby

Planning for a baby can be an exciting and busy time for families. Follow these steps to get prepared before baby arrives.

Review Your Benefits

Thinking about having a baby? Before you get pregnant, review your health care options to ensure you are adequately covered. Talk to your human resources department and take advantage of open enrollments at work to sign up for the right coverage.

Health Care

To better understand what costs you’ll have to pay for your health care during and after pregnancy, review your health care benefits to find out what tests, appointments, screenings, etc. are covered and what isn’t. You may also ask your human resources department if they can help you better understand your costs.

Questions to research:

• What does your health care plan cover? Is there a co-pay or a deductible?
• Is your doctor in or out of network?
• Do you have to pay by appointment or a flat fee? If you have a high-deductible plan, what’s your deductible? What’s covered once you meet your deductible?

Maternity/Paternity Leave

Talk with your human resources department about your company’s family leave policy. Some may offer paid time, others may not. Under the Family and Medical Leave Act, most employees are eligible for up to 12 weeks of unpaid time for birth or adoption.

You will also want to ask about using sick time and/or vacation days. Additionally, you may be able to use Short Term Disability coverage for your time off after birth or adoption.

Life Insurance

Now that you’re going to have a dependent, you’ll want to make sure your child and partner are taken care of if something should happen to you. Life insurance can act as an income replacement for your partner and your child.

First, check with your employer to see if they offer life insurance, the cost, and if it’s enough to meet your needs. You may need to look into additional sources of life insurance.

Income

Talk with your spouse/partner to determine your income situation after the baby arrives. Will you have income from a job coming in during the maternity/paternity leave? Will someone stay home full time? Reduce hours? Work from home? How will these changes impact your household’s income?

If one parent decides to stay home, it can helps save on day care costs, but it will also reduce your household income. It could also impact Social Security and other retirement benefits in the long run. It’s a decision you and your partner need to discuss and make together.

Day Care

In Texas, a two-parent household can expect to pay about 10-12% of their income on center-based child care. Single parents pay a much higher percentage of their income on day care.

Begin researching day care options and costs if you and your partner are both planning to work after the baby is born. Start asking for recommendations, reading up on different facilities, and calling for prices.

Options to research:

• Relative
• Home daycare
• Day care center
• Live in nanny/part time nanny

You and your partner need to select the option that works for you. You may find that a combination of the above options works best.

Finances

Budget

When did you last review your budget? Do you even have one?

Before the baby arrives, track and review your expenses to build a budget using our Build Your Budget guide and the Baby Budget worksheet. Follow this budget as close as possible.

Know that your spending (and possibly, your income) is going to change once the baby is born. You and your partner need to adjust your budget to cover these new, on-going expenses. Costs will depend heavily on where you live and the choices you make. On average, it costs new parents $12,000 the first year (this includes furniture, housing, supplies, etc.).

These costs are all estimates and will depend on what you and your partner decide. For example, you may decide to use cloth diapers or to breastfeed instead of using formula.

You also need to take into consideration how your income will change after the baby is born. If one parent plans to stay home, you’ll need to reduce your income when building your budget.

If one partner is planning to stay home after the baby is born, try living on one income during the pregnancy to see what works and what doesn’t. Use the second income to pay down debts and save for the baby.

Debt

One of the benefits of following a budget is finding extra money to either pay down debt or save. Once you have your budget, look for ways to pay down your high interest debt as quick as possible.

By paying down debt, you can use the money you were making in payments to pay for the added costs of having a baby.

Save

Another benefit of a budget is making a plan to set aside money for savings. Ideally, you should have an emergency savings that covers 3-6 months of expenses.

But with a new baby, your goal should be to have at least 6 months of expenses set aside in an emergency fund. This will help keep you from using debt if a financial emergency occurs.

Steps to Take After Having a Baby

Bringing your new baby home can be an exciting and busy time for families. Follow these financial steps after the baby is born.

Get a Social Security Number

Once you’ve picked the baby’s name, apply for a Social Security number. This number allows you to claim your new baby as a dependent on your taxes and qualify for various tax benefits.

Having a Social Security number also allows you to open savings accounts for your child.

Add Your Baby to Your Health Insurance

Be sure to check with your health insurance provider to find out the rules and details you need to follow to add your new baby to your health insurance. If you wait too long and miss the deadline, you may have to wait until open enrollment to add your baby.

Set Up a Will or Update Your Will

If you don’t have a will, now is the time to get one set up. You can use an online program, follow a book, or consult an expert. You may also want to check with your employer to see if they offer discounts or have a partnership with a company (possibly through an employee assistance program) that can assist you in writing a will.

In the will, you’ll want to designate a guardian for your child. This protects your child in case something happens to both parents. If you don’t designate a guardian, the state will make the decision for you. Each state has its own guardianship rules and priority lists (the order in which guardianship is granted).

A will goes beyond just appointing a guardian for your children. It is also a tool to designate who will inherit certain assets and property if something happens. There are other assets that have separate beneficiary designations that you’ll want to update as well.

Update any Beneficiary Documents

In addition to your will, review all of your beneficiary designations to ensure they match up with how you want your assets divided. These include your life insurance, retirement accounts, and others.

While you may have your spouse or partner designated as the primary beneficiary, you may want to add your new baby as a secondary beneficiary on these documents.

Consider Saving for your Child’s Future

While it may be tempting to begin saving for your child’s education, you need to make sure you are contributing and maxing out on your retirement savings first. You also want to make sure you have a healthy emergency fund of at least six months of expenses.

If you have both of those started and you have room in your budget, begin setting aside money for your child’s education or future. Consider meeting with a financial advisor to discuss special education savings accounts.

Baby Budget Worksheet

Use this monthly budget worksheet and the Guide to Building a Budget to compare income and expenses before and after baby.

This worksheet can also help you and your partner examine the costs and benefits of one partner staying home with the baby long-term after birth.

Can You Afford to Stay Home?

Is one parent planning to stay home after the baby arrives? This is a discussion you and your partner need to have way before the baby arrives.

Planning to live off one income isn’t something that you can adjust to overnight. It requires thought and planning. Parents need to take a good, hard look at the numbers to evaluate and justify the pros and cons.

Obviously this isn’t a decision that will solely be based on financial considerations. There are many factors that go into the decision. We’ll focus on the financial ones.

Income

When a parent decides to stay home that most likely means leaving a job and the income that comes with it. Sometimes, a stay-at-home parent may decide to work part time from home or take on freelance work to bring in some income.

When looking at the numbers, it’s best to first determine how much the total income loss will be. In the next section, where we look at expenses, you need to make sure your monthly expenses do not exceed the monthly income.

Expenses, Part 1

Your first step is to get an accurate picture of everything you are currently spending money on. This includes your mortgage/rent, groceries, clothing, transportation, etc. Make a list of everything you spend money on and then track your expenses for 1-2 months to verify your numbers.

Once you have all your expenses, identify the ones that will remain the same no matter if a parent stays home or continues working. For example, your mortgage or rent payment is likely to stay the same.

Once you know where you are currently spending money and what expenses you need to consider, it’s now time to examine how your expenses are going to change when you have a baby.

Expenses, Part 2

When it comes to making the decision to stay home, you need to take into consideration how your expenses will change. While certain expenses will decrease, some will go up. You also have to look at the long-term costs of not working.

Expenses that could decrease/disappear:

• Child Care: with one parent staying home, the need to pay for regular child care disappears. This isn’t to say that you’ll never need a babysitter, but rather that you won’t have to worry about paying as much as $1,000 every month.
• Transportation: one less person commuting to work could equal savings in gas, repairs, and insurance. If the car is no longer being used to commute, call your insurance company to see if your rate will go down. Another possibility is going down to one vehicle to save even more.
• Work Related: with one parent staying home, there may no longer be the same work-related expenses that existed before. Things like going out to lunch regularly, buying work clothes, picking up food on the way home, etc. You may still have these expenses, but they will likely decrease.
• Taxes: one less income may push you into a lower tax bracket which could reduce your overall tax burden.

Expenses that could increase:

• Utilities: staying at home during the day means the air conditioner/heat needs to run regularly throughout the day. You’ll also use water and electricity more frequently.
• Groceries: eating and cooking at home more means paying extra for groceries, but this will likely lead to lower eating out expenses.
• Child related: you now have an additional person in your household that requires very different food, clothing, and items to survive. Things like diapers, formula, clothing, toys, and more are all new expenses that you need to make sure to add into your new budget.

Long-Term Costs and Considerations:

• Retirement: not working for a long period of time can have a significant impact on your ability to save money for retirement. Without a job, you no longer get employer contributions or 401(k) or other tax-deferred employer-sponsored accounts. You also need to be aware of how many credits you have earned in order to remain qualified for Social Security benefits.
• Employability: if the parent staying home does eventually plan to go back to work, you also need to consider the potential loss in employability when they return to the job market. Many parents re-entering the work force have to start at a lower paying job or even in a different industry than where they were before.
• Divorce: while no one wants to think that they will get divorced, it does happen. If the partners decide to divorce, it can be much harder financially on the one who stayed home with the kids.

Putting it Together

Once you’ve looked at how your incomes and expenses will change, you need to see if the numbers match up on paper and in real life. On paper, can you make it work? Can you and your partner pay all your bills, expenses, savings, debt, etc. on one income?

If it looks alright on paper, put it into action. Try to live on one income for as many months as possible before your baby arrives.

Instead of spending both paychecks, save the entire paycheck of the partner that is considering staying home in your emergency savings account or use it to reduce debt. Then use the remaining paycheck to live. See what works and what doesn’t. Look at the areas that you know you’ll need to work on – maybe going out to dinner or buying a daily coffee.

Even if you find that you are able to live off one income, make sure you have enough cushion in your budget to handle the increased expenses that come with having a baby.

Living on one income isn’t impossible, but it does require a lot of planning and a lot of discipline.

Saving for Retirement for Beginners

Have you ever said one of these to yourself (or your parents, maybe your grandparents) regarding saving for retirement?

• “I’ll start saving when I make more money.”
• “I don’t even know where to begin.”
• “I have money in my savings account, that’s fine for now.”
• “I can barely pay my bills, how can I set anything aside for retirement?”

When retirement is 30-40 years away, the thought of setting aside money now might seem pointless. It’s one of those things you know you should be doing, but it’s easy to ignore and push off until later.

Time

There’s one big thing you’re ignoring: time. When you have 30-40 years to save, you have 30-40 years for your money to grow and compound. The more time = the more compounding.

To put it simply, compound interest is amazing. Your interest earns interest. This gives you additional earning power and the more time you have, the greater your compound earning potential.

Example:

Greg starts saving for retirement at age 18. He puts $2,000 in an account earning 7% APR. He stops saving when he turns 28. Over the course of ten years, he saved $20,000. But with compound interest, when he retires at age 65, he has $386,718.

Marcia starts saving for retirement at age 31. She puts $2,000 in an account also earning 7% APR. She stops saving when she turns 65 and retires. Over the course of 35 years, she saved $70,000. With compound interest, she has $295,827.

In the example, Greg saves less that Marcia and saves for less time, but ends up with more money (over $90,000 more). That’s compound interest at work. The more time you have, the more compound interest can boost your savings.

Recommendations for Retirement Saving Beginners

Just Start Saving

Maybe you can only afford $20 a month right now. That’s fine. Save $20 a month and work hard to cut other expenses to increase how much you are setting aside for retirement. Another option is to determine a specific dollar amount you want to set aside for retirement and build the rest of your budget around it. For example, you decide to save $200 for retirement each month and that is the first item that is subtracted from your budget. Whatever you decide, just start saving.

Take Advantage of your Workplace Retirement Savings Program

If your workplace offers any kind of retirement saving match, take full advantage of that. For example, if your company offers to match dollar for dollar up to 5%, contribute at least 5% and get the full match. This is an easy way to get more money for your retirement.

Don’t be Afraid of Some Risk

When it comes to investing, you’re going to have to be ok with some risk. While putting money into a savings account is safe, if you’re only getting 0.18% in interest, you’re not maximizing your investment potential. This doesn’t mean you have to go all in and invest like crazy on super risky investments. It means looking at all your options and determining what sort of investments offer a higher possible reward without making you uncomfortable.

Talk with an Expert

Sitting down with an investment advisor may seem like only something people with a lot of money do, but it’s a smart idea no matter how much you have. The goal of your initial meeting should be to come up with a plan for saving for retirement. Be prepared by writing down the questions you have and the topics you want to discuss. If you’re an A+ member, take advantage of a free consultation with one of our A+ Investment Advisors.

Save More

Once you’ve started saving, make it a goal to increase the amount you are saving regularly. By evaluating your budget regularly, you can hopefully find ways to increase your retirement saving. The more you can save, the better off you’ll be when it comes time to retire.

Tools to Save for Retirement

When you’re beginning to save for retirement, it can be confusing to remember all the acronyms and names for the different ways to save.

401(k)

Offered through your employer, a 401(k) is a special account to set aside money for retirement. Your employer should provide information to you when you begin working or become eligible to contribute to the 401(k).

Types of 401(k)s

There are two main types of 401(k)s – a Traditional 401(k) and a Roth 401(k). The primary difference between them is how and when the money you save is taxed.

Money put into a Traditional 401(k) is contributed on a pre-tax basis. This means the contributions can be deducted from your current-year taxes and that you do not pay any taxes on that money in the year you earn it. However, when you take the money out in retirement, the withdrawals are taxed as income.

Money put into a Roth 401(k) is taxed as income in the year you earn it. Then, when you take money out in retirement, the withdrawals are not taxed as income.

Qualifying

To qualify to contribute to a 401(k), you must work for a company that offers a 401(k) plan to employees.

Contributions

You will be asked to designate an amount of money you want to be withheld from your income and set aside into your 401(k). This is typically a percentage of your income. Be sure to ask if your employer matches any portion of your contributions. If they do, it’s recommended to contribute enough to get the full match.

For example, if your company matches dollar for dollar up to 6%, you should contribute 6% to ensure you are getting the full match from your employer.

There are annual contribution maximums you will need to be aware of – and the number will depend on your age.

The IRS determines contribution limits and the most up to date information can be found here.

Investment Options

The money in the 401(k) is typically put in investments selected or offered by the employer and the 401(k) company. From those pre-selected options, you decide how you want to invest. Some employers offer target date investments, others break their investments up by risk, and some do a combination of both.

Review the investment choices and pick the one(s) you feel most comfortable with.

Key Recommendations

• If your employer offers any type of contribution match, contribute enough to your 401(k) to get the full match.
• Choose investments that reflect how long you have until retirement and your comfort level with risk. The longer you have until retirement, the more risk you should be able to tolerate with regards to your investments.
• Avoid taking money from your 401(k) prior to retirement to avoid penalties, fees, and taxes.
• If you change jobs, make sure you roll over your 401(k) funds from your previous job into an IRA or other retirement account.

403(b)

A 403(b) is almost identical in structure, contribution limits, rules, and restrictions as a 401(k). The main difference is that a 403(b) can only be offered by certain employers – typically non-profits and school districts.

IRAs

Individual Retirement Accounts (IRAs) are another way to save for retirement, but are not offered by employers. You have more freedom in where you open it and how you invest your money. The type of IRA you are eligible to use will depend on your financial situation.

Types of IRAs

The four main types of IRAs are:

Traditional IRA

• Tax-deferred retirement account
• Contributions go in pre-tax and earnings grow tax-deferred
• Pay taxes when money is withdrawn in retirement
• You may be able to deduct contributions from your taxes (if you qualify)

Roth IRA

• Money goes in after tax
• Earnings grow tax-free
• Do not pay taxes when money is withdrawn in retirement

Simplified Employee Pension (SEP) IRA

• Designed for self-employed individuals or small business owners
• Structure is similar to a Traditional IRA
• Contributions are tax deductible for business owner
• Employees cannot make contributions
• Pay taxes when money is withdrawn in retirement

Savings Incentive Match Plan for Employees (SIMPLE) IRA

• Designed for self-employed individuals or small business owners
• Structure is similar to a Traditional IRA
• Contributions are tax deductible
• Pay taxes when money is withdrawn in retirement
• Employees can make contributions
• Employers required to make contributions – regardless if employee chooses to make contribution

Qualifying, Limits, Taxes and Withdrawal rules will depend on the type of IRA you have. We recommend reviewing the IRS website for SEP IRAs and SIMPLE IRAs.

Investment Options

One of the main advantages of IRAs is the ability to control how the money is invested. You can keep it simple by putting it into a fixed or variable rate investment (like a certificate or savings), or you can choose to invest the funds in mutual funds, stocks, or bonds. The types of investments available will depend on where you open the IRA.

Key Recommendations

• If your employer offers a 401(k) and a contribution match, contribute enough to your 401(k) to get the full match.
• Whether you choose a Traditional or Roth IRA or both, will depend on your individual circumstances. There are advantages to both. We recommend discussing with an investment advisor to determine the best choice for your individual circumstance.
• If you choose to invest in both a Traditional and Roth IRA, make sure you do not go over the max contribution limits as defined by the IRS.
• Choose investments that reflect how long you have until retirement and your comfort level with risk. The longer you have until retirement, the more risk you should be able to tolerate with regards to your investments.
• Avoid taking money from your IRAs prior to retirement to avoid penalties, fees, and taxes.

Investment Options

Once you have a retirement account established, you need to decide how you want to invest your money. There are a variety of options that each come with their own risk and reward. How you choose to invest will depend heavily on the time frame you have and your risk tolerance.

Long Run

When you’re starting out investing for retirement, keep in mind that you are doing this for the long-run. This means that while there might be fluctuations in prices of stocks or mutual funds day-to-day, you’re thinking about longer time periods – like years and years.

Risk vs. Reward

When investing, there is always some element of risk involved. However, in general, the riskier the investment, the higher the potential reward and the lower the risk, the lower the potential reward.

Risk tolerance is different for every individual. Some people can handle more risk when it comes to their investments. Your risk tolerance will depend on your personality, but should also depend on your time frame. In general, the closer you are to retirement, the less risky you should be with your investments.

Diversification

“Don’t put all your eggs in one basket” is a very simplified definition of diversification. When investing your money, you want to make sure it’s spread out to spread out the risk. For example, if you invested all of your money in ABC Company and the next day, they go bankrupt, you’ve lost all your money.

Diversifying helps ensure that one bad day or year in a particular industry or for a particular company doesn’t cause you to lose all your money.

Income Investments

Income investments are designed to give you income. They tend to be lower risk than growth investments, but have their place in any retirement plan.

Bonds

Bonds include saving, government, corporate, and municipal bonds. With a bond, you are essentially lending your money to the government, a corporation, a city/state, and in return, they are going to pay you back, plus interest.

In general, bonds tend to be a lower risk investment, but it depends on the type of bond and where it’s invested. For example, if you’re buying a bond from a company, that might be more risky than buying one from the Federal Government.

Savings Accounts

A savings account is a very safe place to put money but generally pays very little interest. However, it does provide quick and easy access to cash, if needed.

When picking a savings account, make sure the financial is federally insured in case of loss. For credit unions, they should be insured by the National Credit Union Administration (NCUA). For banks, it’s the Federal Deposit Insurance Corporation (FDIC).

Share Certificates

Share Certificates are similar to savings accounts in that they are very safe, but because of their structure, they typically pay a higher interest rate than a savings account. With a certificate, you are agreeing not to withdraw your money for a set period of time. Because of this, you are paid a higher rate of interest.

As with savings accounts, make sure the financial institution is federally insured in case of loss. For credit unions, they should be insured by the National Credit Union Administration (NCUA). For banks, it’s the Federal Deposit Insurance Corporation (FDIC).

Growth Investments

When you invest in growth investments such as stocks or mutual funds, you are purchasing them in hopes that their value goes up over time. Over longer periods of time, growth investments tend to earn higher returns than income investments. However, they also tend to come with higher levels of risk.

Stocks

Stocks are one of the most common types of growth investments. When you purchase a share of stock, you are purchasing a piece of ownership in a company. The more pieces of ownership you have, the more control you have of that company.

With stocks, you can make money one of two ways: dividends or appreciation.

Dividends are typically paid by more established companies and the amount you receive depends on the number of shares you own. For example, if you own 10 shares of ABC Company and they pay a $0.50 dividend, you will receive $5.

Appreciation is when the price per share rises above what you paid for it. For example, one year ago, you bought 10 shares of ABC Company for $10 each. Now, each share is going for $50. The value of your shares has increased by $40 each. However, you do not actually make any money or receive any benefit of this increase until you sell your shares.

Investing in stocks typically provides a higher return, but they have a higher risk. If the company goes broke or has a bad day, you could see your stock values decrease significantly. There’s no guarantee of return and the prices will fluctuate for a variety of reasons.

If you decide to invest in stocks, make sure you do your research into the company. Look at their historical stock data – how much has the price fluctuated over the past year? The past five years? What are investors and experts saying about the company? Make sure you know what you’re investing in and be prepared for fluctuations and price changes.

Mutual Funds

Mutual funds are a collection of stocks and other investments put into a fund. Investors are then able to purchase shares of the mutual fund rather than buying individual shares of each of those companies. They are typically ran by a fund manager who makes the decisions on what to buy and sell, and how much of each investment to purchase.

Mutual funds are a great way to invest as they are typically more affordable than buying individual shares of each company. They also tend to be less risky because they’re more diversified than just buying shares in one company. There’s a wide variety of mutual funds to invest in and many have a much lower initial cost to invest.

Ages 3-5

Most kids have their first consumer/retail experience within a couple weeks of being born. As kids grow and get older, they start to adopt money habits just by watching how their parents and others in their life use it.

With children this age, it’s important to keep it simple and work on the basics.

You Need Money to Buy Things

• Help them understand the differences between the different coins and their values. Grab some loose coins and work on sorting them. Talk with your child about the differences between the coins – not just in size, but in value.
• Talk with your kids about how you use money to buy things. While you are out shopping, have them point out things that cost money. Depending on their age, ask them to identify the cost of the item they have picked.

You Earn Money by Working

• Discuss your job with your child. Talk about how when you go to work, you are getting paid for the hours you are there and the work you do.
• Talk about other people in their lives that work to earn money – like a babysitter or someone at a store. Ask them to point out other people they think are working to earn money.
• Explain how some people choose to start their own business to make money.
• Ask your child to think of ways they can earn money.

You May Have to Wait to Buy Something You Want

• Work with your child to set a short term financial goal. Keep the time frame short – within a couple weeks. Ask them what they’d like to accomplish and how they plan to do so. Draw a picture of the goal together and put it somewhere they can see it every day. Work with them to accomplish the goal.

There’s a Difference Between Things You Need and Things You Want

• Begin talking about needs and wants. Talk about needs as the very basic items you must have to survive, like your house or food and water. Ask them to identify other needs.
• Have your child help you with the grocery list. Work on the needs first and then put down the wants. Explain to them that the needs are the food items you have to have. Then, explain to them that there is limited money to purchase the wants and that sometimes, you can’t have everything you want.

Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.

Ages 6-10

At this age, kids are more aware of money and the role it plays in their lives. It’s important to help them build a saving habit and learn about smart spending.

Another teaching tool to possibly use at this age is an allowance. Giving a child an allowance is a personal family issue. Read more about the pros, cons, and types of allowances here.

Again, it’s important to keep it simple and continue to work on the basics.

You Need to Make Choices about How to Spend Your Money

• When out shopping, include your child in small money decisions like which kind of cereal to buy or what kind of fruit to buy. Explain to them the differences in cost and quality and how you make your decisions.
• Give your child a small amount of money ($2-$3) and give them the freedom to purchase something (you can narrow it down to a certain type of item). Explain that they can choose what to buy, but cannot go over the amount you gave them.
• When shopping with your child, talk about how you make decisions. Ask yourself questions aloud like, “Do I need this?” or “Would it cost less somewhere else?” Explain your answers.

It’s Good to Shop Around and Compare Prices

• Comparison shop for a particular toy your child wants. Together, look at prices online and in-store. Don’t forget to talk about other costs like shipping and taxes. Ask them which is the best deal and why.
• Have your child help you find coupons – either in the newspaper or online. When you use the coupons in stores, explain how they help you save money. Use the receipt to show them how much you saved.
  • Bonus: if they help you find coupons, allow them to keep part of the savings.

It Can Be Costly and Dangerous to Share Information Online

• Always know the websites your child visits and block those you don’t want them on.
• Talk about the dangers of giving out personal information like their birthdate, address, phone number, email, or school when online. Explain that there are people out there who will use this information to do bad things.
• Don’t allow them to buy anything online without your permission. Be careful with apps on phones as many of them have in-app purchases that make it easy for kids to buy.

Putting Your Money in a Savings Account will Protect it and Pay You Interest

• Visit A+ together to open a youth savings account. Have your child go through the account opening process and encourage them to ask questions. Ask the Member Service Officer explain how the savings account works and how interest works.
• Once you have the savings account, take them to make deposits to their account regularly. Help them track their balance and show them the interest that they earn.

Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.

Ages 11-13

As tweens and teens, money represents a lot. It’s the ability to go shopping, go to the movies, grab a bite to eat, and more. Continue to reinforce smart money habits like saving, spending smart, and making good choices.

Save at Least a Dime for Every Dollar Earned

• Encourage your child to save at least 10% of everything they earn. Ideally, they’d save more, but 10% is a good habit to start with. Have them write out their savings rule and have it displayed where they can see it regularly.
• Visit the credit union to make deposits. After their savings accumulates, bring it in to deposit. Show them how their money has grown over time.
• Have them set a goal for something they want to purchase. Work on a plan together on how they are going to reach their goal. Make sure the goal is SMART: Specific, Measurable, Attainable, Realistic, and Time-Bound.

Entering Personal Information Online can be Risky

• Reinforce previous lessons on the dangers of entering personal information online. User a personal story about someone who had their information stolen or had a fraudulent purchase made with their information.
• Talk about the dangers in free offers from the internet and how thieves and fraudsters use these kinds of ploys to get information and scam people into spending money.

Compound Interest Helps Your Money Grow

• Talk about compound interest and how it helps your money grow. Use examples and calculators to show how it works. Here’s an example:

Using a Credit Card is Taking Out a Loan

• Talk about credit cards and the dangers of buying something you cannot afford. Go back to compound interest and explain that while it’s great for saving, it’s not so great when it comes to debt.
• Use a calculator to show how long it would take to pay a $1,000 credit card balance by only making the minimum payments.
• Talk about the differences between smart borrowing and dangerous borrowing. Examples of smart borrowing could include getting a mortgage to buy a home or even borrowing money to buy a sensible and affordable car. Examples of dangerous borrowing include store credit cards or maxing out a credit card if you cannot afford to pay it off in full.
• Discuss the advantages of a credit card, especially for making purchases online, and how when it’s used smartly, a credit card can be a good way to build credit.

Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.

Ages 14-18

In high school, teens understand the importance of money not just in the moment, but in the future. Reinforce smart money habits, but begin to talk about money habits beyond high school.

Compare Colleges and Costs

• Discuss the financial benefits of continuing education after high school. Explain that while college or school might cost money up front, long term earning potential for those with a degree is typically higher than those with a high school diploma.
• As they begin to research schools to attend, encourage them to look at tuition, fees, room and board, and more in addition to what the school offers. Use tools like the Net Price Calculator to research prices and compare schools.
• Go through the FAFSA process before your teen is a senior with the FAFSA4Caster. Together, go through the steps and see an estimate of your teen’s financial aid. Use this information and the net price information to get a better idea of what college/school will cost.
• Research types of financial aid – including loans, grants, work study, and scholarships at studentaid.ed.gov.

Budgeting Can Help Prevent Overspending on Credit

• Work with your teen to develop a budget. Have them list their income and then their expenses. Have them track their spending for a month. Encourage them to set goals to buy things. Explain how having a budget and setting goals for expenses can keep them from overspending or needing to use a credit card to buy something they cannot afford.
• Reinforce this rule: Only use credit to buy things you can purchase with cash. Never buy more than you can afford to pay off right away.

Money is Taken out of Your Paycheck for Taxes

• Use your teen’s first job as an opportunity to discuss the difference between gross income and net income. Go through their first paystub and show them the money that was taken out for Federal income taxes, Social Security, Medicare, and more.
• Discuss what taxes are used for – things like national defense/security, schools, roads, medical help for the elderly, etc.
• When it comes time to do taxes, show them their W-2 and go over what each of the numbers mean.

Begin Thinking about Long Term Financial Goals

• Talk about long term financial goals such as buying a home and retirement. Encourage them to begin saving money for a long term goal.
• Discuss savings options like a Roth IRA and how it can help them save for long term goals through compounding and investments.
• Explain that companies sometimes offer other types of retirement accounts like a 401(k) to help employees save for retirement. These tools can help them set money aside in a special account that should only be used for retirement.

Based on recommendations from the President’s Advisory Council on Financial Capability. Learn more here.

The Allowance Question

Raising money smart kids means giving them the tools and knowledge to make solid financial decisions on their own. One of the best ways to do this is to give them money and have them make their own choices on how to spend and save it.

There is a lot of debate about whether or not you should give a child an allowance. You first need to determine if you can afford to give your child an allowance. If you can, an allowance can be a great way to foster wise spending decisions.

Pros and Cons of an Allowance

Pros:

• Children learn to be responsible for their own money and have to deal with the consequences of a bad decision.
• Children learn the value of money and appreciate it more.
• Money is coming from their pockets – not yours. They learn that when the pocket’s empty, they can no longer spend.

Cons:

• Kids may not spend the money how you would like them to.
• They may complain about not getting enough of an allowance.
• They may lose their money.

When Should You Start?

Research shows that children start to recognize the differences between needs and wants and understand that money is used to buy things around preschool. This can be a great time to start, especially if they start asking questions about money. If you don’t feel your child is responsible enough or they show signs that they don’t care or understand money, wait a little to begin.

What Kind of Allowance Should I Offer?

There are three main types of allowances:

Chore/Grade-Based

With this type of allowance, you are paying your child to do their chores or get certain grades. It teaches a child to work for their money, not just expect it. However some experts argue that children should do their chores because they are contributing to the family and get good grades to be a better student, not just to get paid.

Needs-Based

A needs-based allowance has nothing to do with chores or grades, but rather, it is based on what your child reasonably needs for a week. For example, if you are regularly buying things for your child (such as candy or toys, etc.), give them the money as an allowance instead. This gives them the responsibility of deciding how to spend or save their money.

Combination

With this type, you provide them an allowance based on their needs for the week (you can even make this payment contingent upon completing their assigned chores). Then, you allow them to earn additional money by doing chores that go above and beyond their assigned chores.

The combination allowance provides the best of the other two types. It teaches the child that they can work to earn more money and still gives them enough to buy some of their needs for the week.

You’re In. Now What?

Once you’ve decided to give your child an allowance, the next step is to figure out how often and how much.

Some parents decide to do a weekly allowance while others go with biweekly or monthly. If your child is younger, a weekly allowance may be better as the time span is shorter. As they get older, consider moving to biweekly as that better represents an actual paycheck cycle.

A great way to determine how much to give your child is to tie the total amount to the child’s age. Some recommend giving them an amount equal to half their age, for example if the child is 6, give them $3 a week. Others argue giving them one dollar per year.

One of the benefits of tying it to their age is you do not have to worry about when to increase their allowances. They know that on their birthday they’ll get a “raise”.

Payday

Set up a day to act as a payday for your child. On that day, give them their allowance in all singles. The first couple times you pay them, talk with them about what they plan to do with the money. Discuss the three main ways to use money: Save, Spend, Share. Encourage them to set aside money for saving, sharing, and spending.

We encourage children to set Savings Rules for their money. This means they set aside a certain percentage of any money they receive. For example, we typically recommend starting with 50%. This makes figuring out how much to save, spend, and share easier. As the child gets older and takes on more responsibilities with their finances, this number may need to be adjusted. But always make sure they are saving some of their money!

Let Them Make Mistakes

When you begin giving an allowance, one of the most challenging things can be to let them make their own decisions and to be ok with them making mistakes. Think of it this way: it’s better if they make a mistake at age 6 with $5 than at age 26 with $35,000.

The best way for children to learn is to make a mistake. If they spend their allowance in one day and have nothing later when they want to do something, use it as a teachable moment to talk about the importance of budgeting.

An allowance is a great tool to teach children about money and smart money skills. It encourages conversations about needs, wants, financial decisions, budgeting, saving, and so much more.

Questions to Answer before Starting Your Business

Starting your own business is a big decision. Before you take the leap, make sure you’re committed to your idea and the work required by going over and answering the following questions.

• What is my idea?
• Am I providing a product or service?
• Who is my customer?
• Is there a need for my idea?
• What does the market look like for similar products/services?
• Who else offers something similar to my idea?
• How is my idea different than the competition?
• Do I have the financial resources to start my business?
• Do I have a financial plan to make a profit?
• Do I need a location for my business?
• Will I need to hire anyone?
• What business structure is best?
• Do I need to register my business?
• Do I need any certain licenses or permits?

Once you have a good idea as to the answer to these questions, you can go into more detail by writing out your business plan.

Writing a Business Plan

A business plan is one of the first steps in starting your business. Not only does it lay out specifics and details about what your business is, how it’ll be structured, and your goals, but it is a critical piece when/if you need financing or investors.

If you’re a well-established business, your business plan may look a little different as you have more of a history to include. The information below is geared towards those who are in the early stages of building their business.

Whether you’re a sole proprietor or an LLC, take the time at the beginning to develop your written business plan. If you find yourself in need of assistance, check out a business mentorship program such as Texas State Small Business Development Center or BiGAustin.

Section One: Executive Summary

Often written last, the executive summary is the most important piece of your written business plan. Once you’ve completed the other sections, you’ll pull important highlights from each to add to the executive summary. The goal is to give the reader a brief overview of your business, where you are now, and where you want to go.

This section usually includes:

• Basic business information such as location
• Mission statement
• Management information

Section Two: Company Description

In this section, you’ll go into greater detail about your business. You’ll want to include information about the structure of your company, what the company offers, details about the current industry/market, how your product/service will meet the needs of the marketplace, and information about your ideal customer base. Think of this section as your elevator pitch.

Section Three: Market Analysis

For the market analysis, you will provide a detailed look at the market in which you plan to sell your product or service. The goal is to show your understanding of the market and how your business plans to compete.

Areas to cover:

• Describe the current industry. What has growth looked like over the past couple years? What predictions are there for the future?
• Narrow down to your target market. The industry might be large, but your target market should be specific. Avoid being too broad about who you hope to reach. Think about what you offer and who would benefit most from your business.
• Research your target market. Gather as much information and data about your target market as possible. How big is the target market? What’s the potential? Can you find consumer data on your target market?
• Research your competitors. Who else is out there? What are their strengths and weaknesses? Where does your product/service fit into this industry/market? Why would a consumer choose you over the others?
• Determine your pricing. Use the information you gather here to determine your pricing model.
• Research regulations. Make sure you know what city, state, and federal regulations you need to follow.

Section Four: Organization and Management Description

Think of this section as a combined resume for all your owners. In addition to detailed information about each of the owners (if multiple), this is also the section where you’ll detail your organizational structure.

As you lay out your organizational structure, make sure to include a chart with detailed responsibilities and tasks for each owner/employee/area.

After the organizational chart, you’ll want to list out all the business owners, their role in the business, and information about their history and experience. The goal is to show who is doing what and that the people running the business have experience and know what they are doing.

Section Five: Product/Service Details

In this section, you will provide as much detail about your product or service as possible. Include information about how you plan to make/develop your product/service, how consumers will use it, and where you are in the development process. Be sure to research any existing patents/trademarks, etc. for your product/service to ensure you haven’t crossed any legal boundaries.

Section Six: Marketing and Sales

You will need to include a promotion plan for your business in your business plan. This will detail how you plan to market your product to your target market and how you will handle sales.

Use the market research you have already done to determine different methods for reaching your target market.

• How much money can you afford to spend on advertising?
• What types of advertising do you plan to use?
• How will you track results of your promotions?
• What’s your sales message?
• How do you plan to handle sales?

Section Seven: Financial Projections

The final section is used to show financial projections for your business for the future. If you’re presenting to investors and looking for financing, you need to show your plan for income, expenses, cash-flow, and more. Even if you’re not looking for additional funding, this section helps you determine your sales goals to help you cover expenses and, hopefully, make a profit.

As you put together the documents here, include projections for 3-5 years:

• Income statement
• Balance sheet
• Cash-flow statement

Anything else?

There may be other sections you want to include in your business plan. If there are, you can include them as separate sections or as an appendix. These could be additional charts or data, letters of recommendation, etc.

The important thing to remember is to write it down so you have your plan to guide you as you start your business.

Again, if you find yourself in need of assistance, check out a business mentorship/counseling program such as Texas State Small Business Development Center or BiGAustin.