Category: FINANCIAL LITERACY,

Wants are things someone would like to have but can live without. Needs are things someone must have to survive, such as food, water, or shelter. When learning the differences between the two, people are often told the key to budgeting is simply spending money on needs instead of wants. While needs are more important and should be prioritized, it’s okay to spend money on wants––as long as one’s necessities, savings, and debt repayment plans aren’t impacted. By following the popular 50/30/20 model, people can budget for both wants and needs!

First, what is a budget? It’s a plan that outlines where each dollar someone has will go. However, if a budget is too complicated or overwhelming to follow, people may decide to stop referencing it. The 50/30/20 budget model is a simplified budgeting method that is easy to follow and stay committed to. In addition to being easy to follow, it’s an effective financial strategy. People following the 50/30/20 model divide their take-home income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment.

People should begin by determining what their take-home income is each month. This is what they earn for income after the deductions of taxes, benefits, or contributions from a paycheck. Next, they should write a list of all the things they pay for each month. That means everything from hand soap to health insurance. After all the expenses have been listed, people must decide whether each expense is a want or a need. Most expenditures may be obvious and easy to categorize, but others may be more difficult. For example, water is a need. However, seltzer water is a want. As another example, someone commuting from outside the city would categorize a vehicle as a need. For someone living in the city with access to public transportation, a vehicle may be a want. After the expenses have been categorized, the 50/30/20 model can be used to budget upcoming expenditures.

Needs: 50%

These are expenses that are essential for people to be able to live and work. Some common expenses may include:

Rent or Mortgage
Transportation (personal vehicle or transit pass)
Groceries
Basic utilities
Insurance
Loan payments
Childcare

Wants: 30%

These are expenses that aren’t essential to living and working. They’re luxury items, not necessities. Some examples of wants include:

Video game consoles
Coffeehouse drinks
The latest iPhone
Designer clothing
Cable or streaming subscriptions
Gym memberships

Savings and Debt Repayment: 20%

The final 20% in the 50/30/20 model is reserved for savings and paying down extra on any debt. Examples could include:

Starting an emergency fund (people should aim to save away at least 3 months’ worth of expenses)
Investments
Saving for retirement
Paying off debt (loan payments are categorized as needs, but extra payments should be factored in here)

Using the 50/30/20 model, someone taking home $3,000 a month would budget for spending $1,500 (50%) on needs, $900 (30%) on wants, and $600 (20%) on savings and debt repayment.

While calculating the 50/30/20 rule can be done on paper, an online 50/30/20 budget calculator provides people with access to an easy, streamlined budgeting strategy that can help them stay on top of their finances. Find it at https://moneyfit.org/50-30-20-budget-calculator.

Getting Started with Estate Planning

July 16, 2024July 9, 2024

A home is often considered a person’s most valuable asset. But what happens to your home after you die? Estate planning is an important and often overlooked process that can greatly benefit you and your loved ones once you’ve passed away. Here is a checklist to help:

Itemize your inventory
Follow with non-physical assets
Assemble a list of debts
Make a list of memberships
Make copies of your lists
Review your retirement accounts
Update your insurance
Assign transfer on death designations
Select a responsible estate administrator
Draft a will
Regularly review your documents
Visit an estate attorney and/or financial planner
Simplify your finances
Complete other important documents
- Power of attorney
- Healthcare proxy
- Living will/Trust
Take advantage of college funding accounts for your grandchildren

Estate planning is never easy and often overwhelming. However, it’s best not to put this off. Set time aside to tackle this so you will have the peace of mind knowing you are prepared.

Watch out for Charity Fraud

March 15, 2024

According to the Giving USA Foundation’s annual report on U.S. philanthropy, Americans contributed nearly $485 billion to charity in 2021. Unfortunately, this willingness to donate money opens a door for scammers, who capitalize on donor’s goodwill to steal money. Charity fraud scammers succeed by mimicking the real thing.

This fraud is an example of Relationship and Trust Fraud under the Fed’s FraudClassifer model.

HOW TO IDENTIFY THREAT: Scammers solicit “donations” by contacting victims using the same channels as legitimate charities, such as telemarketing, direct mail, email, door-to-door solicitations, social media, crowdfunding platforms, and cold calls. Scammers may also use natural disasters or other emergencies to commit fraud. For instance, scammers may commit insurance fraud against natural disaster victims, re-victimizing people whose homes or businesses were damaged by the disaster.

HOW TO PROTECT AGAINST THIS THREAT: Real charities will accept donations using any method available to the donor, such as ACH debit, check, or credit/debit card. Scammers will request payments immediately using payment methods that are difficult to trace and provide the scammer guaranteed funds such as cash, gift card, virtual currency, Instant Payment, or wire transfer. Donors should verify the charity’s names and web addresses before donating. Consumers should also keep records of their donations and view their bank accounts regularly to ensure they weren’t charged the incorrect amount or unknowingly signed up for a reoccurring donation. Consumers who find incorrect or unauthorized entries on their accounts can dispute entries with their financial institution.

The Internal Revenue Service maintains an online database where consumers can check whether an organization is a registered charity and whether their donation is tax-deductible. Click here.

A victim of charity fraud can report it to the FTC and the government agency in their state that regulates charities. The consumer can further report a charity fraud to the FBI at 1-800-CALL-FBI or visit www.fbi.gov for more information.

Preventing Identity Theft

September 14, 2023September 12, 2023

If a fraudster steals your personal information, they can run up charges on credit cards, withdraw money from your accounts, open new accounts in your name, and more. Here are some ways you can prevent identity theft:

Safeguard Your Physical Records

While fraudsters are becoming increasingly sophisticated in their ways of stealing personal information, the tried-and-true method of physical theft is easy to rely on. Identity thieves can do a lot of financial harm with a lost or stolen wallet, mail, or documents you throw away. To limit the chances of identity theft, safeguard important documents at home, such as your Social Security card, birth certificate, passport, recent credit union statements, and tax documents. Put these documents in a locked safe. If you throw away any documents with your personal information on them, tear them up or shred them beforehand. Sensitive materials such as credit union statements, credit applications or offers, insurance forms, medical statements, checks, and utility bills can be a goldmine for thieves if they search through your trash. Opting into Compass e-Statements is an easy, secure way to protect your account information.

Additionally, you should consider collecting your mail daily. If an identity thief is willing to steal sensitive data out of your garbage, it’s likely they’re willing to steal sensitive data out of your mailbox. Consider signing up for Informed Delivery, which will notify you with a digital preview of the items being delivered—that way you’ll know if something is missing. If you know you’re going to be away from home for a while, sign up for Hold Mail service. By opting to use this tool, the USPS will safely hold your mail at your local Post Office until your return home, for up to 30 days.

Enable Two-Factor Authentication

Consider enabling two-factor authentication on all of your accounts. By adding two-factor authentication, accounts can only be accessed after entering the username and password, then by completing another prompt—such as entering a code you receive via text or email or scanning a fingerprint. Without having access to the latter, a fraudster can’t access your accounts.

Don’t Overshare on Social Media

Social media platforms are treasure troves for identity thieves. Not only is it common for someone to share their full name and date of birth on social media, but people are often sharing updates on their whereabouts and interacting with family members. For example, let’s say John Smith makes the following status update, accompanied by a photo: “Hey, everyone! Check out my new car! I’m going to take it for a spin and meet my mom at the dog park. Spike always loves playing fetch!” Under the photo, John’s mother, Jane (Doe) Smith comments, “I can’t wait to see you!” Without John realizing it, answers to common security questions were revealed:

What is the make and model of your first car?

What is your childhood pet’s name?

What is your mother’s maiden name?

Be wary of oversharing online.

If you have questions or if you’re looking for a way to increase security on your financial accounts, contact us at 707-443-8662. As an additional resource, visit IdentityTheft.gov to report identity theft and create a recovery plan.

How you can protect yourself from scams

June 15, 2023June 15, 2023

Every year, scammers inundate senior Americans with all kinds of fraudulent schemes. Here are just a few:

Phony investment schemes
Bogus charity fundraisers
Medicare fraud
Fraudster posing as a family member in need
Predatory reverse mortgages
Sweepstake scams
Fictitious surveys

Be wary of emails requesting personal information. Scammers send bogus emails that look like they come from a company you recognize. They include the company’s branding and logo so you think it’s legitimate. These scams are designed to trick you into providing your username and password. Do not click on any links in the email. Contact the company directly through their website by typing the web address yourself. You can also call the phone number that you have on file or the number listed on their website.

Crooks like to create fake websites that look genuine. They can be very impressive to deceive you into thinking it’s real. Then, they try and trick you into providing your debit/credit card number or your username and password. The best thing to do is go directly to the website by typing the web address yourself rather than from the link. Look at the website address and make sure it matches the site you’re trying to access.

Tip: Scammers usually misspell or add an extra letter to the website address. An example is Amazon becoming “Amazone” or “Amazne.”

Fraudsters con people every year. It can be difficult for some to admit they may have been victimized. According to AARP, there are several telltale signs to watch for:

Money and valuables are disappearing for no good reason.
Bills aren’t paid, and a parent seems confused about finances.
They are being secretive about money and asking for more. There may be strange credit card charges.
A family member won’t answer questions about your parent’s money.
Someone new befriends your parent and manages to take joint title to accounts and property.

To help keep our seniors safe, the Consumer Financial Protection Bureau has created some free materials at www.consumerfinance.gov.

For additional tips, visit https://compassccu.org/securitytips/

Four Ways to Stretch Your Food Dollars

May 24, 2023May 24, 2023

According to the United States Department of Agriculture, Americans spend an average of 9.9% of their disposable incomes on food. If you factor in expired and wasted groceries, and poor money management, you could be spending even more. If you’re looking to stretch your food dollars, here are four ways that can help you save at the grocery store:

Stick to Your List

Before heading to the grocery store, put together a shopping list. It’s easy to end up impulse buying when shopping without a list, and even more so when you’re hungry. With strategically placed displays, samples, and all the sweets near the checkout lane, it can be difficult to ignore those temptations. Every grocery store is laid out differently, but you become familiar with it after a few trips. If you know the layout, try to write your list in the order that you will find the product in the store. This will prevent you from any backtracking and reduce your temptation to grab other items not on your list. You can also avoid grabbing items not on your list by ordering online for pick up. While there may be a small fee, it can be cheaper than impulsively buying a bunch of food you don’t really need. Sticking to your list will give you a better estimate of your cost at checkout and can help prevent you from leaving the grocery store with too much food and too little money.

BYOB

Bringing your own reusable shopping bags to the grocery store is not only better for the environment, but it’s better for your wallet as well. Some grocery stores offer a discount on your grocery bill if you bring your own reusable bags from home to pack your food in. While a $.10 discount or being charged an additional $.05 here and there doesn’t sound like a lot of money, it certainly adds up.

Keep an Inventory

According to CNBC, the average American family loses around $1,500 a year on wasted food. You wouldn’t throw $1,500 in cash into a garbage bin, would you? However, it’s not uncommon to find something in the back of the fridge or pantry, but have no idea how long it’s been there, or worse, what it even is. To cut back on waste and extra food spending, consider creating and maintaining an inventory of all the items in your kitchen. You can plan cost-effective meals around what’s in the pantry and save money by identifying when you’re running low on something. If you see you’re starting to run low on something, you can plan ahead and replace that item while it’s on sale instead of when you’ve completely run out.

Shop for Seasonal Items

Fresh produce is delicious, but your favorite fruits and vegetables aren’t always in season. And when they aren’t in season, the prices are considerably more expensive. The cost of travel and shipping increases, and the stores pass the cost on to customers to balance out their return on investment. When you do buy fresh produce, make sure you stick to what’s in season. Strawberries and grapefruits are at peak season in the spring, while apples and pears are at their peak in the fall. Also, don’t be afraid to substitute fresh produce with frozen. If you find that your produce spoils because you can’t eat it in time, choosing frozen fruits and veggies can prevent that.

Scams are on the rise. Protect yourself, don’t become a victim (part 2).

October 13, 2022August 30, 2022

Last month, we provided some tips on how to identify recent scams. This is part 2 of our series on how to identify them and what to watch for.

E-mail Fraud/Phishing – What is Phishing?

Phishing is a general term for e-mails, text messages and websites fabricated and sent by criminals and designed to look like they come from well-known and trusted businesses, financial institutions and government agencies in an attempt to collect personal, financial and sensitive information. It’s also known as brand spoofing.

Characteristics:

• The content of a phishing e-mail or text message is intended to trigger a quick reaction from you. It can be unsettling, might contain exciting information or demand an urgent response. Phishing messages are normally not personalized.

• Typically, phishing messages will ask you to “update,” “validate,” or “confirm” your account information or face dire consequences. They might even ask you to make a phone call.

• Often, the message or website includes official-looking logos and other identifying information taken directly from legitimate websites. Government, financial institutions and online payment services are common targets of brand spoofing.

Catch phrases:

• E-mail Money Transfer Alert: Please verify this payment information below…

• It has come to our attention that your online banking profile needs to be updated as part of our continuous efforts to protect your account and reduce instances of fraud…

• Dear Online Account Holder, Access To Your Account Is Currently Unavailable…, Important Service Announcement from…, You have 1 unread Security Message!

• We regret to inform you that we had to lock your bank account access. Call (telephone number) to restore your bank account.

In some cases, the offending site can modify your browser address bar to make it look legitimate, including the web address of the real site and a secure “https://” prefix.

Information sought: Social Security numbers, full name, date of birth, full address, mother’s maiden name, username and password of online services, driver’s license number, personal identification numbers (PIN), credit card information (numbers, expiry dates and the last three digits printed on the signature panel) and bank account numbers.

Foreign Government Fraud

Watch out for emails from senders posing as government or business officials offering to share large sums of money. If you have received an unsolicited letter containing any of the characteristics listed below, you should consider this a scam and delete the email. Most letters are variations of the following:

• You receive an “urgent” business proposal “in strictest confidence” from a foreign civil servant or businessman.

• The sender, often a member of the “contract review panel”, obtained your name and profile through the Chamber of Commerce or the International Trade Commission.

• The sender recently intercepted or has been named beneficiary of the proceeds from real estate, oil products, over-invoiced contracts, cargo shipments, or other commodities, and needs a foreign partner to assist with laundering the money.

• Since their government/business position prohibits them from opening foreign bank accounts, senders ask you to deposit the sum, usually somewhere between $25-50 million, into your personal account.

• For your assistance, you will receive between 15-30% of the total, which sits in the “Central Bank of ______” awaiting transfer.

• To complete the transaction, they ask you to provide your bank name and address, your telephone and fax numbers, the name of your beneficiary, and, of course, your bank account number.

• The sender promises to forward your share within 10-14 working days!

Money Mule – What is it?

The Money Mule (victim) is recruited – often unknowingly – by scammers to move money made from illegal activity. Money is moved from one bank account to another. By using a money mule, it makes it harder for authorities to track down.

How do people become Money Mules?

Fraudsters approach their money mule victims in a variety of ways including social media, email, mail or phone. Many scams are typically disguised as online job opportunities that promise a fast and easy way to earn money. All they need is your account information to let money be transferred into your account. Then you move the money out of your account for a commission.

These scams look attractive, especially when a little extra income wouldn’t hurt, which is why so many people fall for them. But they are actually helping criminals commit crimes.

Tips:

1. Be cautious of unsolicited emails and social posts.

2. Verify company information online or give them a call.

3. Thoroughly check offers from overseas companies.

4. Never give out your bank account information.

Remember, do not give out your personal or account information unless you are absolutely sure you know who you are dealing with. If you have any questions or concerns, please call us at 707-443-8662.

Why You Should Monitor Your Automatic Payments

July 21, 2022July 21, 2022

Between working, spending time with your friends and family, and pursuing your hobbies, there never seems to be enough time in the day. As a result, we are all looking for ways to cut the amount of time spent on mundane chores. Setting up automatic payments for recurring bills is a modern convenience that saves a significant amount of time. As long as you have the funds in your account, you’ll simply be able to set it and forget it, right? Yes—you could, but here are a few reasons why you should monitor your automatic payments:

Overdraft Fees

When making manual bill payments, you can always check to ensure you have sufficient funds in your account before you pay. When you enroll in auto-pay, there’s a greater risk of an overdraft to your account. While truly being able to set it and forget it would be great, it’s a good idea to continue checking in on your accounts before your automatic payments clear each month. This is especially crucial if you’ve automated any variable expenses, such as a utility bill. Try to get in the habit of checking your account balance before your auto-pay clears. While it’s not exactly a “set it and forget it” approach, it’s still more convenient that manually paying your bills each month.

Unnoticed Errors

There are a number of benefits to enrolling in auto-pay. It’s convenient and you’re less likely to miss a payment. A major downside, however, is actually something out of your control. Payees do occasionally make mistakes. While rare, these mistakes could be costly. If you aren’t monitoring your automatic payments, a significant mistake could go unnoticed.

Cancelled Services

If you’ve enrolled in auto pay and had only positive experiences, you might simply let your automatic ACH or Bill Pay services take care of everything. However, your auto-pay service doesn’t know when you’ve stopped going to the gym or canceled a service. If you’re letting your auto-pay take care of everything, you may find yourself wasting money on subscriptions you’re not using. Instead, simply check in on your account statements each month to ensure that you aren’t throwing your hard-earned money away.

If you decide to sign up for auto pay, set up eAlerts using the Compass app. You will receive a notification when your balance is low or when a transaction has occurred. It’s a great way to stay on top of your payments without having to manually make them yourself. Auto pay is incredibly convenient and is a payment process that is certainly worth looking into, but it’s important to have good financial habits rooted in an awareness of what you’re paying and when.

The Hidden Costs of Buying a Home

December 14, 2021December 14, 2021

Buying a home is often one of the biggest financial decisions you can make. The process of becoming a homeowner can take a great deal of patience and fiscal commitment, but in the end, it’s an incredibly rewarding milestone to achieve. However, it’s important to remember the total cost of buying a home encompasses more than just your down payment and monthly mortgage. Below are some often overlooked and unexpected costs of buying a home.

Utilities

Typical utilities include electricity, water, internet, heating, cooling, and waste management. Be sure to factor in utility costs when determining whether you can or can’t afford to purchase a home. If you want a better idea of what the costs will be for a home you’re interested in, request a copy of previous bills from the real estate agent.

Homeowners Insurance

Your home is far more than a roof to sleep under. In many cases, a home is one’s most valuable asset—an asset that most can’t afford to replace out-of-pocket in the event of disaster-related damage or total loss. Homeowners insurance helps protect your asset. Additionally, most lenders require that you have insurance on your home, as it safeguards them (as well as you) against financial loss. Make sure you add in the cost of protecting your home when putting together your monthly budget.

Property Taxes

Beyond your mortgage, down payment, and insurance, it’s important that you also remember to factor in property taxes. The cost of your taxes will vary depending upon where you live and the value of your home. The taxes will either be billed directly by your local taxation office or paid through your mortgage lender. If paying directly, you’ll usually make two payments each year. If paying through your lender, the cost will be added to your monthly mortgage payment. Make sure to budget for this ongoing, recurring cost, as you will always need to pay property taxes.

Maintenance and Repair

As a renter, your landlord was likely responsible for regular maintenance and repairs. If your furnace stopped working, you could call your landlord and they would coordinate making the repair at no extra cost to you. As a homeowner, though, it’s up to you to fund maintenance and repairs. According to the one percent rule, you should set aside one percent of your home’s value each year for home maintenance. If your home is valued at $200,000, you should be setting aside $2,000 to cover any repair costs.

When you’re ready to take that next step to buy your home, Compass is here to help you with the financing. If you have any questions, feel free to reach out to us at 707-443-8662 x5.