National Financial Capability Month
Kick off National Financial Capability Month, April 2023, by committing to be in control of your own financial destiny.
Start by engaging in the Credit Union’s Financial Fitness for First Responders an ongoing series of free financial wellness programs specifically tailored for families in Law Enforcement. Financial Fitness for First Responders covers the topics most pressing to Law Enforcement Officers, including this month’s Retirement Readiness, Protecting Your Loved Ones with Life Insurance, Strategies for Investing, the ABCs of Homebuying, and more.
Following are Outtakes from recent Seminars:
RETIREMENT READINESS
- Deferred Compensation is only one piece of your retirement puzzle.
- Identify which “bucket” of money; Taxable, Tax-Deferred or Tax Free, best suits your retirement needs.
- Pension, Social Security and required minimum distributions (RMDs) can affect your Medicare premiums and taxes.
- Know your risk level, and make sure your investments match it.
- Never spending Deferred Compensation can have tremendous tax implications for your beneficiaries.
- There are numerous types of life insurance, and many advantages beyond a death benefit.
- Anyone with a pension will be required to self-fund Long Term Care.
- Consult a licensed financial advisor who can explain The SECURE Act and how will it affect your retirement accounts.
PROTECTING YOUR LOVED ONES WITH LIFE INSURANCE
- There are several types of life insurance:
- Term Life provides coverage for a specific period. If the insured passes away during the term of the policy, the beneficiaries receive a death benefit.
- Whole Life is a permanent life insurance that provides coverage for the lifetime of the policyholder. Whole life policies typically have a fixed premium and pay a death benefit. The policy also has a component that accumulates cash value over time.
- Universal Life provides permanent coverage and an investment component that offers the policyholder more flexibility.
- Determine how much life insurance you need, and which policy best accomplishes your goals.
- Life insurance can be used to generate tax-free income.
- Life insurance is one way to fund Long Term Care costs.
- You can convert taxable accounts into tax-free accounts with life insurance.
STRATEGIES FOR INVESTING
- Educate yourself about the basics of investing, the different options available and the associated risks.
- Define your investment goals and timeline and determine your risk tolerance.
- Diversify your portfolio by investing in different asset classes like stocks, bonds, or mutual funds.
- Dollar-cost averaging can help reduce the impact of market volatility on your investments.
- Focus on an investment strategy instead of attempting to predict market highs and lows. Avoid trying to time the market!
- Regularly monitor your investments and make portfolio adjustments as needed.
- Seek advice from a licensed financial advisor who can help you create a personalized investment plan.
ESTATE PLANNING ESSENTIALS
- If you do not complete an estate plan, the State of Illinois imposes a plan on your estate, probate proceedings are often unavoidable, probate bond costs cannot be avoided, and disharmony may ensue within your family because of disputes over who should administer the estate.
- By completing a will or trust, you direct who oversees your property after you pass and who should receive your assets.
- With proper planning, you can avoid probate proceedings, minimize the costs of administration, and plan for your inheritance to benefit your beneficiaries in a manner that best addresses your concerns about the beneficiaries’ circumstances.
- Completing a power of attorney for health care permits individuals you trust to make your health care decisions when you are not able to manage your care so that you can avoid guardianship proceedings.
- Completing a power of attorney for property permits individuals you trust to handle your financial matters to avoid guardianship during your incapacity.
BUILDING A BETTER BUDGET
- A simple budget can help you set financial goals and limit poor spending habits.
- Follow the 50/30/20 Rule and prioritize essential expenses like rent and groceries.
- Track expenses to understand where your money is going and identify areas where you can adjust.
- Don’t spend more than you earn and try not to overuse credit cards.
- Avoid impulse shopping and flash sales.
- Set aside 3-6 months of living expenses for an emergency fund, which can help cover unexpected costs or job loss.
- Manage and eliminate debt by utilizing the Avalanche or Snowball methods or investigate a consolidation loan.
UNDERSTANDING YOUR FICO CREDIT SCORE
- Your payment history is the most important factor in calculating your FICO score.
- Try to keep your credit card balances below 30% of your credit limit.
- Opening too many new credit accounts in a short period of time can negatively impact your FICO score.
- Try to keep old credit accounts open, even if you don’t use them often.
- Check your credit report regularly for errors or fraudulent activity. You can get a free copy of your credit report from www.annualcreditreport.com.
UNDERSTANDING CRYPTOCURRENCY
- Bitcoin and Ethereum are the most popular digital currencies, better known as cryptocurrency or “crypto.”
- Cryptocurrency relies on blockchain technology, an encrypted public ledger that records transactions across a network of computers.
- Cryptocurrency is decentralized, meaning it is not controlled by a central authority or government.
- Cryptocurrencies are extremely volatile, so don’t trade them with a “get rich quick” mentality.
- Do your research when selecting a crypto trading platform and focus on ease of use.
- Cryptocurrency adoption has grown in recent years, with major companies like Microsoft and AT&T accepting them as a form of payment.
