Virtue # 5 – April Showers, Bring May Flowers!

My family and I relocated to North Carolina from Texas almost a year and a half ago, so for the past two years, my friends and I have attended Women’s Empowerment which is held in April annually at PNC Arena in Raleigh. This event brings women from all walks of life to hear their favorite gospel artists perform, shop with local business owners and participate in seminars from topics concerning credit, skincare, and real estate investing. The full day of activities on the main stage include a fashion show, panel discussion and have hosted celebrity speakers Taraji P. Henson last year and Michael Strahan this year.

This year, I decided to bring my daughter with me and she talked about her experience for days after the event.

One of the seminars that I attended talked about credit repair, which is a pretty hot topic. It reminds me of my college days when the credit card companies would sit in the area that us students would congregate between classes and have us sign up to get a free t-shirt. A lot of us were unaware of the headaches we would be setting ourselves up for.

Photo credit Pexels.com

Credit is a good thing when used effectively, so I want to share a few high-level tips to help you avoid some of the mistakes that I have made and have seen others make.

1. Know your score. You can get a free credit report from creditkarma or annually request a free copy from the credit reporting agency websites: transunion, experian, equifax

2. If you have any inaccurate information on your credit report, it can be disputed on each of the reporting agency’s website. You can also mail a certified letter to each reporting agency to dispute the tradeline inaccuracy. Credit repair is a marathon and not a sprint, so you can avoid paying someone for this service by doing it yourself.

3. Don’t bite off more credit than you can chew. If at all possible pay off your entire credit card balance each month. If that is not possible, at a minimum send in your minimum payment. A trick to help avoid credit dings or late payments is to set up an automatic draft of your monthly payment through your credit card company.

4. Keep your account utilization low. An example of this principle is when having a $1000 credit limit only using $200 of that limit at a given time.

5. Do not close old accounts. This can negatively impact your score.

6. Minimize the amount of inquiries or credit pulls that you have on your credit.

Credit repair is usually a topic of discussion when people are looking to buy a car, get a credit card or purchase a home. It amazes me that the things credit affects that you would not suspect. For example, interest rates on vehicles, credit cards, mortgages, and premiums on your insurance to name a few.

Photo credit Pexels.com

Now that Spring is in full swing, many people are looking to purchase a new home or refinance their existing mortgage to get cash out to take care of home improvements that they do not want to spend their savings on, or to reduce their monthly payment. So, what do lenders look at when you want to get a new mortgage?

1. CREDIT
2. Loan to value. This the loan amount that you are requesting versus the home’s value. An estimate of your home’s value can be found either on the county assessor’s website for the county that the home is located in or on zillow.
3. Debt to income. This a calculation of the items on your credit report such as student loan, home, car and credit card payments versus your gross monthly income.

Please keep in mind that this information is for educational purposes only. For questions specific to your situation, please contact your loan officer. Schedule a time to ask me questions concerning how to get the best bang for your buck when it comes to financing.

One last thing, Happy Mother’s Day to all the mothers. If you are not a mother, you have a mother, so celebrate them!

About the Author: Grenata Vessel

Grenata is the owner of Virtuous Financial Group, LLC.

Website, LinkedIN, Facebook

Meet Grenata Vessel

Mom. Wife. Virtuous Woman. Founder of Virtuous Financial Group, LLC.

Are You Withholding Too Much?

Refund, Yes or No?

Tax time is nearing its end and of course many Americans will get a refund, but some will not. But is that what you should do? This year, taxpayers have until April 17th to file their 2017 taxes.

Starting a new job is a really exciting time! The joy of getting an income coupled with creating opportunities to make decisions that will ultimately have an effect on you at tax time the following year. One of those decisions are the allowances that you select on your W4. This decision determines how much of your hard-earned money will be used to pay your taxes. In my culture, whether you are married with three kids or single, the unspoken allowance truth is to withhold the least on your W4, collect a refund when you file, go on a shopping spree with money. And I personally did this when I first started working at McDonald’s as a teenager up until young adulthood.

So What is Really Going On?

The rule of thumb for allowances is the lower the allowance, more is set aside and the higher the allowance, less is set aside. Technically, a refund is an overpayment of taxes from the federal or state revenue services. Whenever allowances are set on W4s an amount is deposited and held in an “IRS account” without giving any interest for holding it. Is that a good way to let your money work for you? If you are not disciplined, the refund option may be the best option for you. The key to dealing with the discipline aspect is to automate your plan. But hear me out…

If you are wondering how much you should withhold, the IRS provides calculators for you to estimate your 2018 taxes and based on your 2017 tax liability along with some other key information will give you an estimate of how much you should set aside for taxes and what allowances to select to get more of your money throughout the year. Paycheck checkups can be done frequently throughout the year to account for any changes that may occur throughout the year such as job changes, additional income that you had not accounted for previously.

What To Do?

The extra income from the refund or the “monthly refund” can be used to:

1. Pay down debt
2. Save extra for retirement
3. Add to your emergency fund
4. Renovate a space in your home

Resist the urge to use all of your refund toward vacations or other stuff that will be of no value once they are used. The key is to start small, any amount helps to ultimately get you to your goals.

The Balance gives a full article about reducing your tax bill, here is my summary:

1. Income Reduction through pre-tax savings such as retirement plan contributions through work or traditional IRAs, health spending accounts, and health savings accounts
2. Tax Deduction Increases through mortgage interest, charitable giving, and car registration fees
3. Tax Credits through college expenses, adopting children, and saving for retirement.

Please keep in mind that this information is for educational purposes only. For questions specific to your situation, please contact your tax advisor or me for a referral to a tax advisor.

About the Author: Grenata Vessel
Grenata is the owner of Virtuous Financial Group, LLC, a financial advisory firm, which serves Texas and North Carolina.
Website, LinkedIN, Facebook

Meet Grenata Vessel
Mom. Wife. Virtuous Woman. Founder of Virtuous Financial Group, LLC.

Sources: IRS.gov, thebalance.com
Photo credit: Pixabay

Virtue #4 – I made a Mistake!

Have you ever been embarrassed and a little upset with a financial mistake that you’ve made? Well, today’s mishap has been a summation of all the car dealership experiences flashing before my face in one fatal swoop. So, with full disclosure here, I’d like to vent, but not regret this later. I really don’t care if I am breaking the “blogposting” rules.

I’ve been married for over 13 years and when it comes to dealing with car dealers, I am your girl. We’ve all heard horror stories of when the dealer sees a woman, we are overlooked and discounted, but not me. I am ready for the challenge. Here is how you can prepare for this experience:

1. Do your homework. Know what car you want and how much you want to spend before going to the dealership. Most dealerships have websites so look there first and look around the country as well.
2. Buy certified-used which usually has low mileage. Certified-used vehicles typically offer a manufacturer’s warranty up to a certain point i.e. no more than 100,000 miles. Certified-used cars, trucks and SUVs are often the returned leases and loaner cars. If you are buying a brand-new car, you lose value as soon as you drive your car off the lot, but to each its own. An even better option is to pay cash for your car, if the car is under $5000.
3. Have your financing with either your bank or credit union ready when you arrive at the dealership. For rate comparisons, look at Bankrate. In many cases, you will get a better rate this way, but if the dealer’s financing options are better, go with it. Remember to look for the best rate and term that fits your budget. The shorter your term the less you will pay in the long run.
4. Say n-o to the extended warranty and all the “extras” that the finance person offers you. With a little planning, you can create your own extended warranty fund. An extended warranty fund is saving the amount that you would have paid for the extra warranty automatically in an account that is not attached to your regular checking and savings accounts and nicknaming it “Extended Warranty Fund”.
5. Negotiate, negotiate, negotiate…Ask for the moon and the stars. For example, one time the dealers where so upset with the deal that I had negotiated that they practically escorted my husband and I from the dealership.

A few years ago, when I purchased my certified-used car, I was not very pleased that I was having to get “another car payment” because I had been car payment free for a few years and should have been saving for the rainy day when I would need to get another car. I thought my car would last forever, but after being rear-ended and my car totaled, I was back at square one.

My family convinced me that I had to get a car to get around, LOL, so I reluctantly went into the dealership with my financing paperwork and told the salesman that I wanted to see the car that I had found online, and after test driving that car and about two others I decided to go with my original option. A part of the research step above involves looking at the car’s Carfax to verify that the car had not had any major damage done to it. Carfax reports are offered by most dealerships at no charge on their website and a paper copy if requested at the dealership. So, I waited patiently for about an hour to meet with the finance manager and go through the spill of getting my information so that they can run my credit, so I respond “I already have financing, what are the rates that you can offer?” The finance person chuckles and gives me the rates and I say “no, thank you, my rate is better.”

Here is where I let my guard down, we discussed extended warranty and gap insurance. I declined. Then I was asked about the MAINTENANCE PACKAGE. I thought to myself “What is the maintenance package?” If you don’t know, so no! I had not heard of this before. He gave me some numbers of what I would spend in maintenance over the term and I was sold. But wait…my car already had close to 30,000 miles and the maintenance package only lasted for 48,000 miles and not to mention you only get oil and filter changes every 10,000 miles on your car.


Photo courtesy pexels

Fast forward to today, I now live in North Carolina and have been taking my car to the dealership for my scheduled maintenances because “it’s covered”, however, my maintenance plan was with a carrier in Texas so every time I scheduled maintenance, I had to remind the service person that I have my plan with another carrier in another state. Not to mention, the service people have attempted to sell me “their maintenance plan” although I already have one in place. Fool me once, shame on you, fool my twice, shame on me. This is good right? After my service is complete today, I get called in to complete my transaction. I remind the service person of our discussion before we started and I am met with “the maintenance package has ended”. I guess I did not read the fine print or remember my exact terms, but best believe I will be looking into this. I started looking at different articles about this situation and whether maintenance packages are worth it and here is what I found. J.D. Power, Edmunds, Wisebread


Photo courtesy pexels

So, if you have ever been in this situation, where you have made a financial mistake, you are not alone, Financial Advisors do it too, we are human, although we don’t want to admit it.

Virtue #3 – What is Stock?


What’s Happening?
Last month life was a little busy with the holidays, however, here is an update on Virtuous Financial Group. We are well on our way and I am excited about the growth that is happening thus far. The website, monthly newsletter and webinars are starting to pick up traction. If you have not subscribed to the newsletter, you may do so here. Last week’s webinar Naughty or Nice? Holiday Budgeting Behavior was a hit.


What is Stock?
Prospective client meetings have brought up the question many times “What is stock?”, so let’s address that question now. Stock is equity or ownership in a company. Stock can be purchased in a 100-share minimum through a brokerage account. Brokerage accounts are offered through companies such as Charles Schwab or TDAmeritrade. Imagine a pie that is cut into small slices. When buying stock, you are purchasing your share or slice of the whole pie. Stock is bought and sold on the stock exchanges. Investopedia explains it all here.


Death Preparedness Kit
A Facebook friend’s spouse died unexpectedly, at a young age, within the past couple of days. So, how do you prepare for the death of a loved one? Many companies train their employees on their emergency preparedness procedures, but many families forego preparing for an unexpected death in their households. When selecting coverage, many people choose a random number of coverage and forget to figure out if there is enough coverage to handle the expenses that are needed as soon as tomorrow. I truly empathize with my friend and her family, but this happens much too frequently. Death is always unexpected, so we must prepare and protect our families. Here are a few tips to get your death preparedness kit started.
• Update all beneficiary designations…no one wants an ex-spouse to get their money if that is not what they really intended to do.
• Set up a liquid emergency fund (in a checking or savings account and can easily be withdrawn) that holds 3-6 months income to handle expenses in case there is a delay in accessing burial funds.
• Have enough life insurance coverage either through work, outside insurance providers, or a combination of the two to cover at least 10 times the household income. An alternative to this method is to calculate the amount of coverage needed based upon the amount of household expenses to cover upon a family provider’s death.


Merry Christmas!
December is a very exciting time for me. I celebrate my birthday and Jesus’s birth. During this time of the year, remember the reason for the season, and give to those who are less fortunate.

Photos courtesy of www.pexels.com.

The information provided in this blogpost is for educational purposes only, and should not be considered advise. For individualized recommendations, consult your financial advisor.

Virtue #2 – Saving Coins at Annual Enrollment

The season is here when we are surrounded by festivals, pumpkins, leaves changing colors on the trees, and more candy than I wish to talk about. I usually don’t allow my kids to eat their candy that they collect, because I want to save the pieces I like for myself. Today, I will share some “financial” candy with you.

Fall is also the season for company open enrollment. Many families get a little anxious and overwhelmed when it comes to deciding which benefits to choose. Over the years, the analysis for me to help with choosing has become more involved and a little more detailed than I want to admit. Whether you have one option or multiples, avoid just ignoring this time and keeping your current elections without reviewing what you have or no longer have. The Balance gives a comprehensive list of typical employer benefit options that I will discuss further.

Health Insurance

According to Yahoo finance, 2018 open enrollment period for the federal government’s health insurance exchange will run for six weeks from November 1, 2017 to December 15, 2017 this year versus through January 31, 2017 for this year’s enrollment period. The federal government operates the Health Insurance Marketplace for most states, however, some states operate their own exchanges. Texas and North Carolina use the federal option.

1. When comparing health insurance plans, look at the plan types, deductibles, premiums, and percentage of coverage you will receive.
2. Compare the different variables that will allow you and your family to have the most coverage AND that is the most affordable.
3. When choosing the plan with the most economical monthly premium, consider the risk of the unexpected, i.e. hospital stays and plan to save through a Health Savings Account. Some employers will make an initial contribution for you.

Nerdwallet gives a full step-by-step guide on choosing a health insurance plan and provides a chart that gives a quick view of each plan type.

Short-Term and Long-Term Disability Insurance

Based on Fidelity’s findings from The Life and Health Insurance Foundation for Education, one in three women will have a short-term disability occurrence at some point during their working lifetime. Short-term disability and long-term disability insurance are distinct and complimentary programs that cover different types of disability. Short-term disability is typically used to cover 80% or more of your salary and may have a waiting period associated with the plan before coverage can begin. After your short-term disability, has been used and your illness continues, at that point the long-term disability coverage would take effect. Long-term disability usually covers only about 60% of your salary and typically employers will give you an option to pay for more coverage out of pocket.

For example, a UNC health center nurse automatically receives a disability benefit through the Disability Income Plan of North Carolina:

1. A permanent employee who works 30 hours or more per week, contributes to the retirement system, and has 1 year of service
2. Short-term disability coverage applies if above criteria is met and after satisfying a 60-day waiting period. Pays 50% of the salary prior to the first day out of work up to 12 months.
3. Long-term disability coverage applies if above criteria met and have at least 5 years of service. Pays 65% of gross monthly salary up to $3900 per month.
4. Liberty Mutual Supplemental Long-Term Disability is supplemental coverage for TSERS participants only. Pays 66 2/3% of monthly salary while on short-term or long-term disability after 90-day waiting period. Fills in the gaps of the State’s plan for the first year of employment, during the short-term period before and after five years of service, and if salary exceeds maximum.
5. Standard Supplemental Long-Term Disability is supplemental coverage for ORP participants only. Pays 66 2/3% of monthly salary while on short-term or long-term disability after a 90-day waiting period. Continues retirement contributions to a TIAA account at the full contribution rate for the disability duration. Fills in the gaps of the State’s plan for the first year of employment, during the short-term period before and after five years of service, and if salary exceeds maximum while continuing retirement contributions.

When determining the appropriate level of disability coverage, pick a plan either through work or an insurance provider, that will cover your monthly expenses.

Dental and Vision Insurance

According to the American Dental Association, the typical cost of an individual dental insurance policy is around $350 a year. For a family, the cost is around $550, annually. If you pay out of pocket for two checkups and cleanings and a set of X-rays, your cost, on average, will be around $375-$400. Delta Dental’s White Paper, concerning choosing dental insurance, gives a breakdown of the typical dental needs of different age groups. After understanding your needs, you should consider the following points: network, cost management, service, enhanced benefits and dental expertise.

WebMD shares that when it comes to vision care coverage, the average cost of frames and lenses alone is over $250, however, vision care coverage can make eye care more affordable. The Affordable Care Act considers vision care for children an essential benefit. The first step in determining which vision plan is right for you is to determine the type of vision plan you are being offered, whether it is a vision benefit plan or a discount vision plan. Then calculate how much you have spent on vision care the past few years. If you are generally in good eye health and don’t spend more on eye care each year, the discount vision plan will be the best option. However, if you are spending more than a couple of hundred dollars a year on eye care, a vision benefit’s plan could be your best option. Regular, comprehensive eye exams for everyone are also an important factor when selecting your plan.

Life Insurance
Nerdwallet’s blog post lists the pros and cons of choosing life insurance through work and clarifies the difference between basic and supplemental life insurance that is offered through your employer. Basic life insurance coverage is typically free and covers $25,000, $50,000 or an employee’s annual salary.

How do you decide?

1. Take advantage of the free basic life insurance offering.
2. Compare the costs of supplement life insurance offered at work versus what you can purchase on your own.
a. If you find a plan that is a slightly higher individual plan, it is probably a better bet because of the portability.
b. If you have many dependents, both an individual policy and a supplemental group policy through work, may both be beneficial.
c. If you believe you will not qualify for a good individual rate due to a medical condition, group life insurance is a good option.

401(k) or other Retirement Plans

Three types of retirement plans that are offered by employers are 401(k)s, 403(b)s, and 457(b)s. These plan names are based on the corresponding IRS codes. 401(k) are offered primarily by private employers, 403(b)s are offered by hospitals and schools and 457(b)s are offered by government entities.

Retirement plans allow you to contribute either a percentage or set dollar amount to your account through before-tax and/or after-tax contributions or deferrals. The amounts that are contributed accumulate in your account and are invested in a variety of investment options and most even allow the employee access to a broader array of investment options through a brokerage account. The 2017 maximum contribution limit is $18,000 and if you are over age 50 it is $24,000. The 457(b) has a double limit catch-up contribution that allows you in 2017 to contribution $36,000 if you are within 3 years of your normal retirement age.

When deciding whether to use your employer’s plan or an outside Individual Retirement account (IRA) I agree for the most part with Nerdwallet’s blog post.

1. Take advantage of your company match, then maximize your ROTH IRA contributions, any remaining amounts can be contributed to your employer-sponsored plan.
2. No company match, no problem. Maximize your ROTH IRA contributions and any remaining amounts can be contributed to your employer-sponsored plan.
3. Mandatory contribution, then maximize your ROTH IRA, any remaining amounts can be contributed to your employer-sponsored plan.

Health Care Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)
Flexible Spending Accounts are an employer-sponsored benefit that allows you to save pre-tax dollars for medical expenses for you and your dependents. The contribution limits for an FSA is $2600 for 2017. Flex spending account dollars are typically used to pay health insurance deductibles and qualified medical expenses. If you do not use the funds by April 15 of the following plan year, the funds will be forfeited. FSA contributions are non-transferable.

Health Savings Accounts (HSAs) are a tax-advantaged medical savings account that is available as a complement to a high-deductible health plan. Withdrawals for non-qualified medical expenses are taxed and penalized if withdrawn prior to age 65. 2017 Contribution limits vary: Employee only $3400, Family $6750, over age 55 catch-up $1000. You have the choice to keep the same account even in retirement.

1. If you have a chance of many medical expenses, Select FSA.
2. If you do not have a chance of many medical expenses, Select HSA

In conclusion, when making your benefit elections, comparison shop. You can make these small changes that will add up over time. Hope this information was sweet!

More Virtue #1

If you are following me on social media through LinkedIN or Facebook, have read my blog and are receiving my newsletter, you should have a pretty good idea about options to save for your child’s college, car, home, or whatever you want to gift your child or children with.

Savings Summary

Here are a few ideas that I have heard throughout the years that I felt may be of value to you to help you reach your savings goals.

1. Start saving at birth (in other words early). Even if you start small, the key is to start.

2. Make the contributions automatic. This can usually be setup through your banking center or the entity that your account is setup with.

3. For Birthdays and Christmas have family members contribute to the savings versus buying the latest toy that ends up “not” getting played with.

4. Make a “catchup” contribution at Christmas. We are all busy and may not have set up the automatic contribution in Step 2.

5. Use investment property income to build your nest egg and then gift the child with their first investment property

6. Know what your goal is, so you can know if you are on track.

 

I have noticed that I have asked for comments and I have not received any, however, there is no space for you to leave them, so that will be fixed. I’m human!

Virtue #1 What’s the 411 on 529s?

I was asked about moving 529s the other day and I wanted to address that here.

What is the 529?
Savingforcollege.com has a wealth of information on this topic, but specifically describes it as

an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.

• Nationwide college-saving vehicle offered through states but maintained by outside investment companies
• Contributions –
o no federal tax deduction
o may offer full or partial state tax deduction or credit
o Automatic contribution option through linked bank account or payroll deduction plan
• Earnings growth – tax free
• Withdrawals –
o Qualified – tax free when for college expenses – room, board, tuition, books
o Non-qualified – incurs income tax and 10% penalty tax
• Donor control
• Max contribution $14000 per individual per year (annual gift tax exclusion)
• Investment choice changes twice per calendar year
• Rollover into another 529 one time within a 12-month period
• No income limits, age limits or annual contribution limits
• Lifetime contribution limits vary by plan range from $235,000 – $500,000

Types of 529s
There are two types of 529 plans: prepaid and savings plans. Prepaid plans allow you to prepay for private colleges and savings plans are plans with contributions that are invested in mutual funds or exchange traded funds.

Rollover options
You are allowed to rollover any or all of your 529 account from your current plan to a different plan only once in a 12-month period, therefore avoiding the transaction being treated as a non-qualified distribution, and paying federal tax and a 10% penalty on earnings. Keep in mind that if your child does not choose to go to college you may change the beneficiary of the plan to another one of your children or you may use the funds for your own college expenses.

To Begin the Process
1. Do YOUR research
2. Open a new 529 plan
3. Complete the rollover contribution form available from the plan you wish to move your money into and the plan administrator of your new plan will coordinate the transfer of funds directly from your old 529 plan
OR
4. Request a distribution from your old 529 plan, and within 60 days redeposit the amount into the new 529 plan, notify the new plan that the contribution is a rollover, and provide a breakdown between principal and earnings to the administrator
Most 529 plan participants stay with their plan, so rollovers do not occur often; and in addition to the paperwork the administrator may charge a fee to process the rollover. Recapture tax is another disadvantage that you may occur if your originally took a deduction and reside in a state that requires recapture of that benefit upon the rollover of funds to another state’s plan.

When to Switch?
• Lower cost plan with higher net returns
• In-state tax deduction on contributions if rollover treated as a contribution
• Manager, investment option change or termination of plan
• Continued poor performance
• Better service expectations
• Plan too restrictive – owner change difficulty
Switching can be done either with a financial advisor’s help or online.

529s are one of many ways that moms and extended family can support their loved little ones if college is an option that they want to pursue. We will address part 2 of 529s, other college funding resources, and gifting options in the weeks to come.