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

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.

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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?

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.

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Meet Grenata Vessel

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

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 #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? 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
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.