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• By Kevin Alvarez

Living in a Changing Rate Environment: How the Fed’s interest rates effect you

The Federal Reserve Systems (The Feds) job is to strategically change rates to accommodate the economic well-being of the nation. Their job is to keep the nation afloat by raising or lowering the cost of borrowing money.  When the economy starts to grow too fast, which is what’s happening in today’s environment, the Fed may decide to raise rates in hopes that consumers slow down on borrowing.

These higher interest rates make loans more expensive.  This strategy encourages consumers to postpone any projects that involve financing and simultaneously encourages people to save money so they can earn higher interest. While higher interest rates may be bad for borrowers, they are great for anyone with a savings account, as these rates tend to increase as well.

Here we’ll discuss a few ways the Fed’s changing rates directly impact you and your borrowing needs.  But, as with everything, with the bad there also comes the good.  We’ll also show you ways to take advantage of rising deposit rates.

The Borrowing Impact on You:

  1. Mortgages and HELOCs (Home Equity Line of Credit) — While fixed-rate mortgages are not directly impacted by the Fed, they may have some influence on their rates.  If you already have a fixed-rate mortgage, nothing to worry about here – you’re locked in.  However, variable rate mortgages and HELOCs are tied to the Prime rate, meaning those will rise along with the fed funds rate.
  2. Auto Loans — You might find that auto loan rates are on the rise too.  Auto loan rates are dictated by the time of year, the type of vehicle, the borrower’s credit score and more. But the Fed sets the benchmark rate on which auto loan lenders base their rates.
  3. Credit Cards – Most credit cards charge a variable rate, meaning the rate can “vary” based on the Prime rate.  So, when the Fed increases its rate, variable rates tied to Prime also increase.  This can mean significant increases in your minimum payments each month.  Unlike most credit cards, SafeAmerica’s Visa Platinum Rewards credit card has a fixed-rate, so your rate will not adjust.

Now Is The Time To Focus On Saving

There is some positive news in all of these rate changes.  Savers tend to benefit from Fed rate hikes. Financial institutions will typically adjust their APYs (Annual Percentage Yields) in hopes to encourage more money on deposit with them.  A win for you!  Now would be a great time to look around for higher-yielding savings accounts as well as share certificates so you can start to earn more.

We’ve recently increased some of our certificate rates.  To see our rates, click here.

What's SafeAmerica Doing With These Rate Adjustments?

“The recent rate increases from the Federal Reserve are an effort to alleviate the financial pressures brought forth from recent years. While it may seem worrisome, it is a sign of returning to “normal”. You can rest assured knowing that your credit union will begin to accommodate the rate increases in the form of leveraging higher-yield rates for our savings products.”

-Tom Graves, President & CEO of SafeAmerica Credit Union

Our team here at SafeAmerica Credit Union is closely monitoring and following the Feds rate adjustments as they come.  Our number one goal is to continue to provide you with the most competitive rates in our area.  As such, we look closely at our peers to assure we remain competitive, giving you the best rate we can.  We understand these borrowing rate hikes have tremendous impact on you.

If you are ever in need of financial assistance, we encourage you to reach out to our financial wellness program, GreenPath Financial Wellness.  They can help with anything from credit counseling, budgeting, or just financial education.  For more information click here

GreenPath Financial Wellness

Sources: Bankrate.com, Forbes.com

• By Kevin Alvarez

Practicing Healthy Habits Can Help Spark Your Financial Independence

A Path to Financial Independence

Making the transformation from being a carefree young person to a financially healthy adult can seem overwhelming and scary.  Most young adults starting out can attest to the challenges of managing an entry-level salary while still striving for financial stability. But there are ways to create a path to financial independence early in your career.

Though your salary may be minimal now, it’s vital to implement a realistic plan designed to save, budget, and maximize your cash flow.  If you find yourself in need of help reaching your financial independence, consider implementing these habits

Write Down What You Spend

Budgeting is the foundation of personal finances at any stage of your life, not just for those starting to “adult.”  If you’re new to budgeting, the first step is to write down all of what you spend. It could the coffee you get each morning, the sofa you purchased for your apartment or house, or the monthly charge for the streaming video service you use.

The idea behind a budget is not to limit what you do with your money, but more importantly to maximize the money you work hard for each and every day.   I remember when I began to dive into my finances and document my spending as a young adult, it was a huge eye-opener.  It became clear where I was wasting money and could cut back.  Cutting out even small things, such as that coffee or a pop purchase each day, could save you over $100 per month.

Best of all, technology has made it easier to connect you with your finances and spending habits. There are a variety of free budgeting apps available to you that will basically do all the tracking of your spending for you. It’s there each and every day to review as needed.

Create Clear Financial Boundaries

Ignoring the “Joneses” can be one of the biggest battles when making practical decisions regarding your finances.  After I graduated from college, I thought I deserved to buy the newest of everything. I soon realized however that spending outside of what my budget could handle would push me further away from saving money and much further into debt.  “Can I do without this?” is one of the questions you should be asking when making a sizable purchase such as a new automobile, or buying/renting in the new trendy neighborhood. For example, it was a difficult decision for me to stick with my used car that I had already paid off instead of buying a brand new vehicle after college. But it was a smart one.

One thing you could consider is the “50-20-30 rule.”  Experts state that we should spend 50% of our monthly income on necessities, which would include utilities, food, and rent.   The next 20% would be allotted to savings and debt, such as paying off any loans or student debt.  The last 30% of your income would be for personal purchases, things like your personal mobile phone plan, internet/cable/streaming services, etc.  Staying within these guidelines can set forth financial boundaries that will cultivate a healthy financial future.  Forget the noise of the Joneses and stay within your means.  Eventually, you’ll build up your finances and leave others in your financial dust.

Paying Yourself is Priority #1

When it comes to managing your finances and becoming more independent, you have permission to be a bit selfish.  Prioritizing paying yourself above and before you pay anything else is highly important when it comes to having a successful financial future.  No one can avoid unexpected expenses or financial emergencies, but you should be prepared.

I have come to think of my finances with this saying in mind: “Hope for the best, but plan for the worst.”  Having a savings plan will also keep you from accumulating debt with credit cards and loans.  It will help you learn to live and be content on a smaller budget.  One suggestion is to start putting a small amount into your savings each month.  Maybe you can’t do 10% of your paycheck, but even 5% is better than nothing. This provides you with the opportunity to make saving a financial habit.

Many employers have made it easier for their employees to streamline their savings by offering direct deposit options.  You can also schedule automatic transfers from a  bank account to a long-term savings or investment account.

Keep in mind that as you achieve your savings goals, you can increase the amount, as you can afford to.  It’s also smart to contribute as much as you can to your companies 403b or 401k employer-sponsored retirement savings plan.  This money can be taken out of your check even before you get paid so it’s likely that you won’t even miss it. You will likely experience long-term tax benefits as well.

This information is brought to you by GreenPath Financial Wellness

Youth Month

Save small. Dream big.

We're celebrating Youth Month all April long! Be sure to check out our blog each week or follow is on social media for a new youth financial literacy topic.

You can also check out our Youth Program to help get your child started on the path to smart money management.

Youth Month

• By Lisa

The Science of Saving

Saving your money isn’t always easy, especially when you don’t have a lot to spare. After paying all your usual expenses, there may be very little “fun” money at the end of the month. When we do find ourselves with some extra cash, like a tax refund, many of us rush out to buy those shoes or that electronic gadget we’ve been eying for months instead of putting it into our savings.

Why do we do that? Why do we spend the money we planned on using for our future?

We can blame it on our brains. Behavioral science has shown that humans are hard-wired to act on impulse and that it takes conscious thought to delay gratification. It’s also much easier to focus on the present than our future.

To help you save for your future, behavioral science suggests visualizing yourself as you might look when you’re older. For instance, if you want to save for retirement, imagine yourself at age 67, living comfortably, maybe travelling the country, or having the time and the means to do something you’ve always wanted to do. According to a study done in 2014, this technique works. The researchers took photos of 50 college students and digitally altered each person’s photo to make them look 70 years old. The participants were instructed to study the photos. Then they were told to imagine receiving $1,000 and were asked how they’d like to use the money: buy something now for a special person or for extravagant night out, or put that money into a retirement fund. After seeing a photo of themselves at 70 years old, the majority allocated more of the money to their retirement fund than to the other options.

Another way to help you save for your future is by making it a habit. Start with small goals. For instance, commit to putting a certain amount, say $10, into a savings account every week. If you have direct deposit, you might want to consider setting up an automatic transfer of $10 into your savings account every time your paycheck is deposited. Over time, you can gradually increase the amount by a dollar or two.

Teach Your Children How to Save

To help your children get into the savings habit, start by having them cut out pictures of something they’d like to have someday and post the images where they’ll see them often. Then help them open a savings or certificate account at SafeAmerica Credit Union. Encourage your child to make regular small deposits each week. Tell them their money will earn interest while it’s in their account. If they keep this routine going, they’ll quickly see their savings grows.