What to Do With a Financial Windfall

What would you do if you won the lottery, or received a huge settlement or inheritance? It’s something most of us have happily dreamed about, but actually coming into a giant sum of money can be overwhelming and even a bit frightening. There’s the temptation to make big ticket purchases, pressure from family and friends to “share the wealth”, and fraudsters at the ready looking to scam you out of big bucks. So, what should you do with all that money? Here are some tips to consider when you find yourself faced with a financial windfall.tips-for-financial-windfall

Keep calm. Let’s face it – it’s extremely tempting to want quit your job, or trade up for a bigger house when you suddenly have big bucks in the bank. But you’d be surprised at how easily some people overestimate their newfound wealth. Many lottery winners are shocked when they find out the amount of taxes that will be taken out of their winnings. And moving into a giant house can come with super-sized utility bills, increased property taxes, and massive upkeep costs – things people can easily forget about when they’re in a rush to buy. When you receive an unexpected sum of money, it’s important to refrain from impulsive decisions you could later regret. Rather than take any immediate steps, it’s essential to start thinking through your financial options, and prioritize which ones are most important to you.

Think long-term. As you’re weighing the various things you can do with your newfound financial freedom, it’s crucial to think further down the road than just buying a new sports car or some fancy jewelry. The National Endowment for Financial Education reports that an estimated 70% of financial windfall recipients lose the money within just a few years of receiving it, and you don’t want to meet that same fate. In order to help make your money last, it’s a good idea to consider putting some of it aside for your future. That could mean setting up a retirement account, creating a college savings account for your children, or establishing an emergency fund, depending on where your savings currently stand.

Pay up. While it’s important to plan for your future financial needs, it’s equally important to assess your current financial situation and obligations. If you have a lot of credit cards to pay off, now’s the time to do it. Credit cards typically have some of the highest interest rates out there, so the longer you keep that debt, the more you’re going to end up paying in interest fees. Likewise, if you have any unpaid bills, you should pay them immediately in order to avoid additional late fees or judgements against you. You should also evaluate any loans you currently have. Depending on the terms of your loans, and your current interest rates, it may make financial sense to pay them off if you don’t have a pre-payment penalty. Doing so could end up saving you a lot of money in interest.

Get advice. It’s very important not to “go it alone”. A newfound wealth comes with a lot of considerations, including investment opportunities and tax obligations. In order to ensure that you make the wisest decisions with your new money, and understand any potential risks associated with those decisions, it’s critical to consult with financial professionals that you trust. Depending on what you’re looking to do with your money, and what questions you have, it could be a good idea to meet with a tax advisor, an accountant, an investment manager, or even a finance lawyer. Just make sure you do your homework to find advisors you can trust.

Protect your cash. Coming into significant wealth can put a target on your back, especially if your financial windfall was broadcast to the public – like in the case of a lottery winner. For this reason, it’s very important for you to be vigilant, and on high alert for any potential scammers. Stay up-to-speed on popular scams and fraud tactics, and protect your personal and financial information when you’re online or using a mobile device.

By refraining from impulsive decisions, and thoughtfully planning out your financial objectives with the help of trusted professionals, you will have the best chance of making the riches from your financial windfall last, and providing a secure financial future for yourself.

Need Help Establishing Credit?

Wouldn’t it be great if you could snap your fingers and you instantly had a solid credit history? The reality is that it takes time and effort to establish credit. But once you have good credit, it can open doors financially for you. Having good credit can mean the difference between getting approved or denied for a mortgage or car loan. And the stronger your credit, the greater your chances of getting favorable terms and interest rates on loans and credit cards.need-help-establishing-credit

But building credit can be a bit of a catch 22. A lot of credit card companies and lenders won’t grant you credit unless you have a proven track record of handling credit responsibly. This can make it a bit challenging for those who haven’t established a credit history yet.

Luckily, there are many ways to establish a foundation of credit to build upon. Here are some credit building tips you can use:

Take out a credit-builder loan. With this type of loan, the lender places the money being “borrowed” into a savings account on your behalf. You then pay off the loan through a series of monthly payments. Once the loan is paid in full, you gain access to the money in the savings account. Credit-builder loans are usually for relatively small amounts of money, making it easier to meet your monthly loan payments. The lender reports your payment history on the loan to the three national credit reporting agencies, so as long as you make your monthly payments on time, you’ll be building a positive track record on your credit report. These types of loans can be a bit hard to find, but a good place to look for one would be at a smaller financial institution, like a community bank or credit union.

Obtain a secured credit card. These types of credit cards are intended specifically for people with little or no credit. When you take out a secured credit card, you pay a deposit to the financial institution who then grants you a credit limit, which is usually equal to the amount of your deposit. Once the account is opened, the card works just like any other credit card. The only difference is that the financial institution has your deposit as a guarantee on the credit line. In other words, if you don’t make your payments, they will take the money out of your deposit. Like a credit-builder loan, the payments you make with a secured credit card are reported to the credit bureaus, helping you to build up a solid credit history if you make them on time. The point of a secured credit card is to build your credit to the point where you can qualify for an unsecured card — one that doesn’t require a cash deposit and has better benefits.

Look into opening a store credit card. Many popular retailers offer their own, private credit cards. While these cards can typically only be used to purchase items from the store issuing them, a plus side is that they usually have more flexible underwriting standards, meaning they are easier to get than a traditional credit card. These types of credit cards can be good “entry-level” cards, allowing you to build up a credit history before applying for a regular credit card. It’s worth noting however that they do typically have lower credit limits and higher interest rates than non-store credit cards.

Take out a student credit card. Like a store credit card, a student credit card is generally easier to get than a traditional credit card; that is, if you’re a college student. Credit card companies have been known to be pretty aggressive with targeting college students, due to their future earning potential. A college student can typically be approved for a student credit card even if they don’t have any credit, as long as they can show enough income or assets to cover the minimum monthly payments.

Become an authorized user on a credit card. If your parents or someone close to you is willing to do so, you could be made an authorized user on their credit card. An authorized user will typically receive their own card in their own name that they can use to make purchases, but financial responsibility for the account remains with the primary cardholder. So, as long as the primary cardholder makes all of the monthly payments on time, the authorized user will benefit by having the positive payment history reflected on their credit report as well. Just keep in mind that being an authorized user works both ways. In other words, if the primary cardholder is irresponsible with the card and fails to make payments on time, your credit could suffer as the authorized user. For this reason, it’s important to only be an authorized user if you completely trust the primary cardholder. You should review your credit report regularly to ensure payments on the account are being made, and if you find your credit is being damaged by the relationship, you should remove yourself as an authorized user.

Co-sign on a loan. It’s generally pretty difficult to obtain a traditional loan without a solid credit history, as lenders are hesitant to extend credit to individuals who haven’t demonstrated they can pay the loan back. However, if you co-sign for the loan with someone who already has a good credit history, your chances of being approved will be much higher. A co-signer is basically someone who agrees to share financial responsibility for the loan. In other words, if you default on the loan and stop making payments, the lender will go after the co-signer for the money. Both parties are equally responsible for the debt. Because both of your credit reports are on the line, it’s extremely important to only co-sign with someone you have complete confidence in.

Be responsible with student loan payments. No one likes having to pay back student loans, but if you’re fresh out of college with no credit history, you can at least work them to your advantage. Like other types of loans, student loan payments are reported to the credit bureaus, so paying them on time can help you establish a solid credit history. Just be sure not to miss payments, because then they’ll start to damage your credit history. If you find that your student loan payments are so high that you’re having trouble making them, you might want to consider refinancing them to help reduce the monthly payment amount.

No matter which approach you choose, once you have credit in your name the key is to be responsible with it. By making all of your monthly payments on time, every month, you can be well on your way to building a strong credit history for your future.

Tax Tips for a Safer Tax Season

Did you know that if you haven’t filed your tax return yet, a criminal could beat you to it? This type of crime is becoming more widespread every year. But luckily, there are some tax tips you can follow to help protect your return from these unscrupulous criminals.Tax form concept

Because the Internal Revenue Service only accepts one tax return per Social Security number, the sooner you file your return, the less likely you are to have a thief snatch up your rightful refund.

In additional to filing as early as possible, it’s important to do everything you can to shield your personal information from potential criminals. If they can’t get their hands on your Social Security number, they can’t file a return in your name. Here are some general recommendations to keep in mind:

  • Ensure that your computer and mobile devices have the latest web browsers, and security software installed. This is your best line of defense in protecting the contents of your device, and the information you share online.
  • Always use a secure internet connection when you submit or transfer sensitive information online. You can tell that a website is secure by checking for a URL that begins with “https://”, and a padlock symbol alongside the URL in the address bar of your internet browser.
  • Remember to shred paper documents that contain sensitive information, instead of just tossing them in the garbage. These types of documents could include drafts of your tax returns, copies of your W-2 forms, pay stubs, medical bills, or credit card and bank account statements.
  • Don’t give out your Social Security number unless absolutely necessary. And don’t carry your Social Security card in your wallet or store the number on your computer or cell phone.
  • Do your homework before hiring a tax preparer. Make sure you can trust them with your personal information. And ensure that they sign your return with their IRS Preparer Identification Number. The tax preparer identification system was developed as an added layer of protection against tax fraud.
  • Don’t use public wireless networks (such as those in coffee shops and restaurants) to work on your tax return or file it. Cyber crooks can intercept internet connections on these unsecure networks and gain access to your information.
  • Use strong, complex passwords for all of your online accounts, especially your online tax e-filing account, if you have one.
  • Consider using a USB memory stick or external hard drive to store sensitive tax data that you need to prepare your return. This will lessen the chance of cyber crooks stealing the information directly from your computer. The external drive or stick also serves as a backup should you encounter a crash or other problem with your computer.
  • Be aware that the IRS will never email or call you concerning tax issues or any back taxes you may owe. If the IRS needs to contact you regarding a tax matter, they will do so via regular postal mail. So, if you receive an email or phone call from someone who says they are from the IRS, odds are that they’re an imposter looking to steal your personal information. Never provide them with your bank account credentials, or your credit and debit card information, and never wire them money – you’ll never get it back.

It’s a shame that there are so many criminals out there looking to get their hands on your hard-earned tax refund, but armed with these tax tips, you should stand a much better chance of protecting yourself this tax season.

Deciding on a CD Term Length

If you’ve made up your mind that you’re going to invest some money this year, you might be considering a CD, or certificate of deposit. CDs are commonly viewed as a safer alternative to potentially higher-yielding investment vehicles such as stocks or mutual funds, because fixed-rate CDs have a set, guaranteed interest rate, and they’re protected by FDIC insurance. Bank5 Connect CD accounts are actually covered by both FDIC and DIF insurance. The DIF coverage at Bank5 Connect ensures that all deposits are 100% insured, even past traditional FDIC coverage limits.cd-term-length

Not surprisingly, the safety of CDs, coupled with the fact that they generally offer higher interest rates than traditional savings accounts, makes them popular choices for saving money. If you’ve chosen a CD as one of your investment tools, it’s just a matter of deciding how long you want to tie up your funds. With CDs, you have several fixed term lengths to choose from. They can range from as little as 3 months to up to 10 years. The term you select will depend on your unique financial circumstances and needs.

When considering CDs, it’s important to note that they’re intended to be held until maturity. When they mature, you have the option to withdraw the money, along with any accrued interest, but if you withdraw any money before the entire term length is up, you’ll usually be hit with an early withdrawal penalty fee. The policies regarding early withdrawals vary, so it’s always wise to check with your financial institution prior to opening an account to see what kinds of penalties you could incur.

To avoid early withdrawal penalties, it’s a good idea to choose a CD term based on how long you think you can go without needing access to the money. If you anticipate needing to tap into the funds within a few months, then a 3- or 6-month CD will probably be the way to go. Keep in mind however, that typically the shorter the term length, the lower the interest rate.

Generally, multiple year terms offer the highest CD rates. If you know you won’t need to tap into the funds for several years, a multi-year term could be a good fit, but it’s a good idea to consider current interest rate trends and predictions first. Think about it. How angry would you be if you locked in a 2.00% rate on a 5-year CD only to find that the rate on that exact CD increased to 2.50% a few weeks later? Once you’ve opened a fixed-rate CD, your rate won’t change, even if the bank starts to offer the same CD at a higher rate. To help avoid this kind of scenario, it’s a good idea to stay on top of interest rate news, so you have some kind of idea of when rates could fluctuate.

Another consideration with CDs is how often you’ll be looking to stash away more money. Generally, once you open a CD you can’t add money to it until it matures. Therefore, if you think you’ll want to add money every few months, a shorter term length might be best. Another option is to choose an add-on CD. Add-on CDs are special fixed-term CDs that allow you to deposit additional funds throughout the entire term length. These types of CDs can be hard to find, but Bank5 Connect does offer one. Bank5 Connect’s 24-Month Investment CD allows for additional deposits at any time, in any amount. Plus, there is only a $500 minimum deposit required to open an account, and no monthly maintenance fees.

If you have enough money to open several CDs, another way to allow for ongoing deposits is to invest in multiple CDs with various term lengths. This approach is known as CD laddering. With CD laddering, you end up with a collection of CDs that will mature at regular intervals. With a CD regularly reaching maturity, you’ll regularly have an opportunity to make additional deposits, or withdraw your funds.

No matter what CD term length best suits your needs, just remember to read all of the fine print associated with the account before opening one. This will help you to understand exactly what you’re getting into, and help you to avoid costly early withdrawal penalty fees. And, keep in mind that it’s always a good idea to consult with a tax adviser or financial professional before making any major investment decisions!

Establish an Emergency Fund for Life’s Unplanned Expenses

What happens if your car breaks down in the middle of the road? Or the boss tells you that the company is downsizing and you’ll be losing your job? What if your heating system decides to die in the middle of winter? Or you need to be hospitalized immediately? If any of these emergencies were to happen today, are you financially prepared for them? emergency-fund-for-lifes-unplanned-expenses

If your answer is “no,” then it’s a good time to think about setting up an emergency fund. Having enough money to cover unplanned expenses makes it easier to recover from life’s bumps and bruises, and can help alleviate stress in emergency situations and provide peace of mind.

But you may be wondering – doesn’t a credit card serve as a good backup for funds in case of emergencies? Of course it does, but you need to keep a few things in mind. For starters, credit cards provide borrowed money, which means you have to pay it back. And if you don’t pay it all back at once when your monthly statement comes due, you’ll be hit with interest. Interest charges can snowball pretty quickly, and for a lot of people they can lead to massive credit card debt.

Financial experts will tell you that an emergency fund should be part of every household budget. It should be as high of a priority as putting money aside for a down payment on a new house or car, or financing your child’s college education.

But how do you know what’s an adequate amount to have in an emergency fund? A good goal for your emergency savings account could be anywhere from three months’ worth of your salary to a year’s worth of your salary, depending on how much you make each year, and how prepared you’d like to be. When deciding the right amount of savings to aim for, think of what it would be like to unexpectedly lose your job. How much would be enough to pay for routine monthly household bills such as rent/mortgage payments, utility bills, and groceries? And how many months do you think it would take you to find a new job?

It may seem overwhelming to think about amassing that much money, but it’s okay to start small. By earmarking a certain amount of money to stash away in your emergency fund each month, you’ll be on your way to achieving your goal emergency balance. And one of the best ways to ensure you stick to your savings plan, is set up your paycheck to direct deposit a certain amount from each paycheck directly into your emergency savings account. If you don’t see the money, you likely won’t miss it! If your job offers direct deposit, your employer can likely help you set it up so your paycheck is split between your desired accounts.

Another way to reach your savings goals as quickly as possible is to stash your money in a high-interest savings account. Many online-only banks offer higher interest rates than traditional brick-and-mortar banks, because they have fewer overhead costs. Online banks save on costs associated with running physical locations, and they pass those cost-savings along to customers in the form of higher interest rates. The higher the interest rate, the more your money grows.

The key is to stick to your emergency savings plan, and make sure that you contribute to it on a regular basis until you reach your balance goal. You’ll be happy you did when an emergency arises and you have the money to pay for it without racking up debt.

Sweetheart Scams to Watch Out for This Valentine’s Day

Valentine’s Day is on the way. Love is in the air and it’s easy to be swept away in those feelings of affection. But it’s important to remember that not everyone is who they claim to be. Valentine’s Day is a preferred time for many cyber crooks attempting to lure in unsuspecting victims who are looking for love.Liebe und Dating mit dem Smartphone

With the ever rising popularity of social media, it’s no wonder that many people turn to online dating sites and social media networks on their quest for romance. But while these types of websites can facilitate loving relationships, they can also be prime hunting grounds for scammers armed with fake profiles. According to the FBI, over $220 million was lost to online dating scams in 2016. To avoid these types of scams, it’s important to be on the lookout for them. If your online love interest is displaying any of these common warning signs, it’s probably best to walk away:

  • They prefer to speak with you through email, text, or online messaging, rather than talk to you on the phone. Oftentimes, a phone conversation can give an online scammer away. You may notice they have a strange accent, or that the number they’re calling from doesn’t match with the area they claim to be from.
  • They tell you they’re currently overseas traveling, or out of the country on business.
  • Their feelings for you seem to be growing extremely fast. If they’re already telling you they love you after a few conversations, you should be highly suspicious.
  • They always have an excuse for not meeting you face-to-face.
  • They tell you they need money for some type of emergency.

Even if you don’t notice anything suspicious about the person you’re getting to know online, it’s still a good idea to go into any new online friendship or relationship with your guard up. If anything seems off about the photos they’ve shared with you, you can run them through a reverse image search on Google to see if they were taken from another person or website. It’s also a good idea to talk with your family and friends about your new love interest. Sometimes feelings of affection can blind us to warning signs that others can easily see. And perhaps the most important thing to remember with any new online acquaintance – never give them money. No matter what kind of story they give you regarding why they need money, it’s important to remember that you’ll likely never see your funds again if you wire money, mail cash, or give your bank account information to someone you’ve just met online.

And online dating scams aren’t the only “love scams” making the rounds this Valentine’s Day. There are flower delivery scams out there as well. One version involves an email claiming to be from a flower delivery company asking the victim to verify their credit card details before their flowers can be delivered. There’s even an in-person scam where victims receive a delivery of flowers or a package at their home, and the deliveryman tells them that there is a small delivery fee. They also tell the victim that the delivery fee can only be paid via credit card. In both of these scams, the crooks are looking to get their hands on your credit card information.

No matter what type of scam a criminal decides to use, the best way to prevent yourself from becoming a victim is to be on high alert. If you think you may have already been targeted by a scammer, there are some immediate steps you should take:

  • If you’ve sent money to a potential scammer, or have given them your bank account information, let your financial institution know immediately
  • Report the activity to the Federal Trade Commission at https://www.ftccomplaintassistant.gov/, and to the FBI’s Internet Crime Complaint Center at https://www.ic3.gov/
  • If the scam occurred on a dating site or social media network, report it to the website’s management

No matter what your relationship status, it’s important not to let your emotions cloud your judgement. Being watchful and vigilant can help protect your heart (and your wallet) this Valentine’s Day.


Shield Yourself from Debit Card Fraud

Chances are, you know someone who’s been a victim of fraud. Maybe you’ve even fallen victim yourself. With daily stories about credit card fraud and identity theft hitting the news, consumers need to be proactive about protecting themselves from fraudulent activity.shield-yourself-from-debit-card-fraud

One type of fraud to stay extra cautious about is debit card fraud. With debit cards, the stakes are higher than with a credit card. If a thief gets his hands on your card information as well as your PIN, your entire bank account could be drained in minutes. And Federal law doesn’t protect debit cards to the same degree as credit cards. If you notify the bank within two days of discovering a lost or stolen card, the most you will be liable for in terms of fraud is $50. After two days however, your liability can jump to as much as $500, and after 60 days you could be liable for all of the fraudulent activity, depending on your financial institution.

So what is a debit card user to do? Luckily there are steps you can take to protect yourself, and your bank account from fraudsters looking to steal your financial information.

Beware of card skimmers. You’ve probably heard about card skimmers in the news, and unfortunately they’re becoming more and more prevalent. These are devices that criminals install over the legitimate card readers at ATMs and point-of-sale terminals like gas pumps and self-service store checkout lanes. When you insert your card into the reader, the skimmer captures the card information so the crook can access it. Many skimmers look so much like the real thing that they’re difficult to spot, but there are some key things to look out for. A good habit to get into is to look around at the terminals next to you to see what their readers look like. If they look different than the card reader at your terminal, it’s very possible yours is affixed with a skimmer. You should also always check for any signs of tampering, or any aspect of the card reader or keypad that isn’t aligned correctly. And if the color of the reader is different from the color scheme used on the rest of the terminal, it could also be a sign that a skimmer has been installed.

Look who’s watching. It’s not uncommon for crooks to install miniature cameras near ATMs and payment terminals, so that they can watch people enter their PIN numbers. A more low-tech, but equally painful scam involves “shoulder surfing”, where a crook will literally look over your shoulder to obtain your card number and watch as you type in your PIN. One way to protect against this type of intrusion is to shield the front of your card, and cover the keypad with your other hand to block the view of a camera, or anyone nearby, from seeing what you’re typing in.

Don’t put yourself in a vulnerable position. Perhaps one of the easiest, and scariest, ways for a criminal to steal your debit card information is to ambush you at the ATM and demand your card and PIN number. To safeguard against this type of attack, try to conduct ATM transactions during daylight hours. If you do need to use an ATM at night, make sure you pick one that’s in a well-lit area. And if you see someone who looks suspicious lurking near an ATM, don’t use it.

Be wary of helpful strangers. In one type of unsophisticated debit card scam, the perpetrator will insert something into the card reader prior to the victim using it which will cause the card to get stuck in the machine. The crook will commonly offer help by telling the victim that entering their PIN again should get the card out, and they’ll watch closely while the PIN is re-entered. Of course, the card won’t come back out, and when the victim leaves, the criminal uses tools to get the card out of the machine, and walks away with the victim’s card and PIN number. Anytime your card gets stuck in an ATM, forego any offered help from a stranger, and instead immediately notify your financial institution and the owner of the ATM.

Keep close tabs on your account. Use online and mobile banking to check your account balance and card activity at least weekly, and sign up for account alerts if they’re available from your financial institution. These notifications will help keep you up-to-speed on any irregular activity in your account, so you can report it immediately to your financial institution.

Staying alert and being on the lookout for anything amiss is the best line of defense in protecting yourself from debit card fraud. Debit cards can be a convenient tool for helping you to manage and access your money, but it’s also important to know the risks associated with debit card use, and how to minimize them.