Tradewinds eNewsletter

This day of celebration recognizes the positive global impact of credit unions, namely, providing financial services in local communities that serve people, not stockholders. This year’s theme, “A Steady Signal in a Noisy World,” reminds credit union members that in a world of uncertainty, credit unions remain rooted in trust, people, and community.

 

Check our page below to learn more about the unique benefits of banking with credit unions versus for-profit, commercial banks. 

What’s coming in? Add up your monthly sources of income: employment (include your spouse’s/partner’s if you share expenses), retirement, Social Security, child support, etc. Don’t include what’s deducted for taxes so you know your take-home pay.

 

What’s going out? List your monthly expenses covering needs (housing, utilities, groceries, loan payments, medical, childcare, transportation, etc.), wants (travel, entertainment, dining out, etc.), and donations. Don’t get too caught up in 100% accuracy but be as honest as you can to get a realistic look at what you’re spending.

 

Do the math. Subtract your monthly expenses from your monthly take-home pay. If you’re seeing a number that’s near or less than zero, sticking to a monthly budget would be beneficial. Ideally, after all monthly expenses are paid, you should have a “buffer” to build an emergency fund for unexpected expenses and future goals (purchase a home/vehicle, retirement, tuition, travel, etc.).

 

For a more detailed calculation, check out our free Home Budget Calculator. 

 

Choose a method that’s right for you. From 50/30/20, Envelope, Zero-Based, and more, there are several ways to keep yourself financially on-track each month. Experian has an overview explaining each. 

It’s not always interest-free. Some providers allow users to spread payments in months or years and may charge an annual percentage rate of up to 36%! In contrast, the average credit card interest rate is 19.35%.

 

Fees may apply. Late fees can cost up to 25% of the purchase value, not to mention possible overdraft fees with the associated bank account(s). Nearly half of BNPL users have made a late payment this year. Fees can also be charged for failed payments, payment rescheduling, service, and origination.

 

Your credit score can be affected. Some BNPL services report to credit bureaus and if you don’t make payments on time, it could negatively impact your score.

 

Overspending can happen. Because BNPL payments “seem” more manageable, it can tempt some to buy and spend more than they intended.

 

Before deciding on BNPL, weigh the drawbacks, compare it to options already available to you (cash, credit, debit), and ask yourself if the purchase is really a necessity or a want. 

As you surf the web and use apps, data brokers are quietly collecting information on your activity. They sell this information to a variety of parties--advertisers, debt collectors, landlords, etc. Among other things, sold data can include email addresses, Social Security numbers, and search histories.

 

To take advantage of DROP, the California Privacy Protection Agency will ask you to provide basic information to confirm your eligibility.

 

You can learn more and start the process by clicking the link below.

 

Never provide sensitive data. Do not share private information such as your passwords, social security number, account numbers, tax information, etc. Gen AI services are not regulated like financial institutions. 

 

Consider it a “starting point.” Think of Gen AI as a more detailed search engine and more for general education. It should not be considered a replacement for professional human financial advisors.

 

It isn’t bound to fiduciary considerations. Unlike human financial advisors, Gen AI isn’t legally obligated to provide advice that’s in your best interest.

 

Be specific. The more information you give, the more tailored the response will be. For example, if you ask how best to invest $1,000, you will be presented with many options. On the other hand, if you include your risk tolerance and liquidity needs, it will respond based on that extra information. The downside is, if you don’t know what additional information would be helpful for the answer you’re seeking, responses can be limiting or not relevant. A human financial advisor will naturally ask these types of follow-up questions.

 

Ask for the possible negative outcomes of following its advice. This may provide a more balanced view and help you decide if the advice is worthwhile for your specific goals.

 

It’s biased. Gen AI is designed to give responses it thinks are aligned with your existing beliefs. Most of the time, it will agree with you. In contrast, a human financial advisor can be more objective and share information that isn’t always easy to hear.

 

Sources matter. Pay attention to the sources the Gen AI is using to inform its responses and ask yourself if these are sources you can trust.

How much to save depends on your situation. Single-income households should save six months’ worth of living expenses (housing, utilities, groceries, debt payments, transportation, etc.), while others can get by with three months, like dual-income households working stable jobs. For those that are self-employed in a volatile industry, they should target at least one year’s worth of expenses.

 

Consider the age of your home and car. The older these get, the more likely an expensive bill will come sooner or later.

 

Start small and build from there. Saving months’ worth of living expenses can feel overwhelming, but don’t get discouraged. Take the first step by putting away a set amount every week and don’t touch it unless it’s an emergency. Having access to $500 to cover a surprise expense without going into debt can be a starting goal that you can gradually build.

 

Keep things liquid. The unexpected is just that, unexpected. Don’t keep emergency funds tied up where you can’t easily access them. A safe option is a high-yield savings account, where you can earn more than a standard savings/checking account while having the ability to withdraw funds as you need them. Establish automatic transfer (weekly, monthly, every payday—whichever works for you) so you don’t even have to think about it. 

When you don’t use a credit card for an extended period, the issuer may close it or reduce the limit. They aren’t required to notify you in advance either. Closed or reduced lines of credit affect your utilization ratio, which is essentially the amount of credit you use versus what you have available. When a credit card closes, it potentially raises your credit utilization, which is evaluated for your credit score.

 

Credit history also plays a role in your credit profile. If a credit card that you’ve had for many years closes (whether by you or by the issuer), it could considerably impact your credit history. In addition, closed accounts can stay on your credit reports for as long as ten years.

 

To avoid your cards being flagged as inactive, use them every few months, even for small amounts. A passive method is to use your credit cards for recurring bills such mobile phone service, gym membership, steaming services, utilities, etc.

 

So, is it ever a good idea to close a credit card? If you find yourself paying more in interest and annual fees versus the rewards you receive, it may justify account closure. Just be mindful how long you’ve had the card and the credit limit attached to it, especially if you plan to apply for other loans in the near future. 

1. Plan ahead. Reduce food waste and impulse shopping by setting up a weekly meal plan to create your shopping list. See what’s already in the fridge and pantry to avoid buying what you don’t need. If you’re a regular at a particular shop, chances are you know the general layout, so organize your shopping list by section to avoid wandering and buying more than you intended.
2. Pay attention to per-unit pricing. While considering if an overall price is worth adding an item to your cart, checking out the unit price (by ounce, pound, etc.) is helpful, too. Buying the bigger package doesn’t always mean you’re getting more bang for your buck.
3. Embrace prep. Instead of pre-cut fruit and salad mixes, wash and cut produce yourself. Instead of pre-made meals, look up some easy-to-follow recipes using ingredients you already have, plan to buy, and will use repeatedly. Making a dish yourself also allows you to adjust to your taste preferences and dietary needs.