Archive for category: Personal Finance

The global Coronavirus pandemic is an unprecedented experience for Americans alive today. It’s natural to feel a lot of anxiety about the future, including the future of your portfolio. Luckily, market volatility is not unprecedented. In this article, we’ll apply the lessons of previous market downturns to help you develop a sensible economic outlook for whatever stage of life you’re in now. Have questions? Contact one of our Virginia-based Financial Advisors today.

Long-Term Financial Goals in your 20’s and 30’s

In this stage of life, you have the power to take the long view and buy low, which will help you take advantage of upswings when the market inevitably turns around. In general, you want to buy less when the market is high and more when it’s low. This is when you are most likely to benefit the most from compound interest.

Start Now

Whether you’re just out of college, building your career, or married with kids, now is the time to get your finances in order and put a financial plan in place. Even if you can’t afford to save much right now, whatever you can put into your investment accounts will benefit you in the long run. You can reduce total interest paid on debt, benefit from flourishing markets, and be financially prepared for unexpected emergencies or expenses.

• Open a retirement account if you don’t already have one. If you don’t qualify for an employer sponsored plan, you can open your own Individual Retirement Account (IRA).
• Boost your emergency savings. Start with a manageable goal like $1,000 and work your way up to a month of living expenses, then a few months.
• Pay down debt. If you have credit card balances, start with the lowest one and throw a little more at it each month until it’s gone. Then tackle the next-highest balance. If you don’t have credit card debt, look at student loans or a car loan. The sooner you can pay off these debts, the more money you’ll be able to save.

Invest For The Long-Term

Set aside three to six months’ salary in a savings account for a rainy day. This will come in handy if you lose your job as well as for unexpected expenses and emergencies like a trip to the ER or a big car repair. Keep your emergency funds in cash in an FDIC-insured savings account.

• Take advantage of compound interest as soon as you can. Earn interest on the interest you receive by adhering to a disciplined investing plan.
• Don’t make any drastic financial changes right now if it’s not necessary. Instead, focus on saving aggressively and putting any extra money towards retirement.
• Keep savings in cash or CDs so the funds are readily available for any significant expenses or purchases you will make in the near future.

Practice Dollar-Cost Averaging

This is an investment strategy* in which assets are purchased regularly at a fixed dollar amount. For example, 401(k) plans use dollar-cost averaging by making regular purchases according to the participant’s pay schedule and contribution. As a result, investors could end up buying certain investments at a discount during periods of market underperformance.

*Dollar-cost averaging is a method of helping to control risk. It does not assure a profit or the avoidance of loss. Investors should consider their ability to continue a dollar-cost program in periods of declining markets.

In Your 40’s and 50’s, Get Out Ahead Of Market Volatility

This life stage includes the prime income-earning years when you’re likely to have the greatest savings power. Stash away as much cash as possible while it still has a few decades to compound.

Start Diversifying With Safer Investment Options

Diversify your portfolio* info safer investment options such as bonds, bond mutual funds, CDs, and Money Market Accounts. These options tend to be more stable as markets change, helping to protect your portfolio from dramatic ups and downs.

*Diversification is a method of helping to control risk. It does not assure a profit or the avoidance of loss.

Consider Additional Principal-Protecting Options

Consider an annuity or a life insurance policy, especially if you have a family that is dependent on your income. The younger and healthier you are, the more likely you are to qualify for a lower rate.

In your 60’s and Through Retirement

Now it’s time to create a more risk-averse investment strategy.

For those nearing or already entered into retirement, it’s essential to protect the assets that will carry you through the entirety of retirement. The best approach is to set up three buckets of investment money that can financially carry you through each phase of your retirement:

• 5-Year Bucket: Short-term income to fund immediate needs.
• Intermediate Bucket: This is for money invested in a moderate-risk portfolio that can continue to grow over the next 6 to 15 years.
• Long-Term Bucket: Finally, you have money that can be aggressively invested and won’t be touched for 16 years or more.

Build A Retirement Budget

The amount of money you need to live on in retirement depends on how much you’ve saved so far and what a “comfortable life” looks like for you.

Start by making a list of your current expenses. Include both fixed bills, such as housing costs, as well as discretionary spending for items like clothing, travel, entertainment, and so on.

How much of your salary are you living on now?

If you’re spending close to all of what you make now, it’s a good idea to “test run” your retirement by trying to scale back and only spend 70 percent or so of your income. Yes, you may drop some expenses in retirement (less spending on transportation, a paid-off house to live in) but other costs of living could rise (healthcare, property taxes). And if you want to enjoy travel, classes, and other leisure/enrichment activities that aren’t free, you’ll probably spend more on that in retirement and need to budget accordingly.

Have you saved enough?

A number of factors (some out of your control) will determine how much yearly cash your retirement savings provides. If you don’t feel like you have enough, don’t get dejected. Just keep focusing on saving. You can, on average, double your nest egg balance in the last ten years or so of your career. People age 50 and older are even permitted to make larger “catch-up contributions” to 401(k) plans and IRAs.

Seek Out Other Income-Producing Assets

The more streams of income you have, the better your overall financial stability will likely be. For example, many retirees take on part-time jobs to supplement their savings. This could relate to a passion or hobby, such as working in a garden store if you love plants, or teaching a class at the local community college to share your expertise from a long career.

Also consider income-producing assets such as real estate/investment properties, dividend-paying stocks, and/or variable annuities.

Best Practices For All Life Stages

• Don’t make any spontaneous decisions or changes. Talk to your financial advisor to discuss your financial goals and concerns before making any rash decisions, especially decisions related to retirement savings or investments.
• Don’t make early withdrawals. If you take an early withdrawal from your 401k before age 59.5, you’ll pay ordinary income taxes and a 10% penalty. Withdrawing money early also forfeits tax-advantaged growth and can trigger a higher tax bill.
• Get a financial planner. Professional financial managers can help you navigate the market turbulence and prevent you from making detrimental financial decisions during market volatility.
• Reassess and rebalance on a regular basis. Whether it’s quarterly, semiannually, or annually, make a standing appointment to review your investments and assets to ensure your finances are where you want them to be.

F&M Bank’s Osaic Institutions Investment Executives Can Help You Navigate the Market!

Whatever stage of life you’re in, our financial planners can help you understand your options and develop a strategy for your investment portfolio that matches your individual goals for retirement. Feel free to reach out with any questions you may have or schedule a consultation with an Osaic Institutions Financial Advisor at any of our locations in Staunton, Harrisonburg, and the greater Shenandoah Valley.

 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

We hope that you remain healthy and safe as we endure this pandemic. COVID-19 has impacted everyone in our community in some way, but some financial relief is on the way. As individual economic impact payments from the CARES Act are distributed, we hope this serves as a helpful resource.

Electronic Deposit of Individual Economic Impact Payments

If you filed taxes in 2018 or 2019 and included your bank routing and account number for payments or refunds, and this information has not changed, the IRS has the information it needs to send your payment electronically.

If you file taxes, but the IRS does not have your direct deposit information, you can provide that online through the Get My Payment portal. This portal can also be utilized to check your payment status or confirm your payment type if you are unsure.

If you are not required to pay taxes, but want payment electronically deposited, you can sign up. The IRS and the U.S. Treasury launched this website where you can enter your information, including bank account details, to indicate where you would like your stimulus money deposited.

Paper Check Individual Economic Impact Payments

If instead of direct deposit, you receive a paper check in the mail, you may deposit it through the F&M Bank mobile app, or at any of our drive thru locations.

Social Security Recipients

The IRS will use direct deposit by the Social Security Administration to facilitate payments. If the direct deposit information you have provided in the past is for a bank-issued prepaid debit card, you will receive your funds on that card account.

As a reminder, the F&M Bank routing number is 051404419. To find your account number, please reference the bottom of your F&M Bank checks. It is the number listed directly beside the routing number we have included above.

Scams Related to Individual Economic Impact Payments

Although we are facing a pandemic, fraudsters are still at work. There will be a large amount of funds disbursed to qualifying individuals. Accordingly, there is a risk for fraud of various types. The IRS has announced various ways individuals can be on guard against these types of bad activities.

Do not provide any banking information to anyone claiming to be registering you for your relief payment. F&M Bank will never call, text or email you directly asking for personal information such as your account number. Even if your Caller ID indicates the call is from F&M Bank, it is better to be safe than sorry. Please, hang up immediately and call your local branch to inquire if the call was legitimate.

In a time of uncertainty and isolation we are all reaching for more information, especially from respected institutions such as the Centers for Disease Control (CDC), the World Health Organization (WHO) and respected hospitals and research facilities. But unfortunately cybercriminals are using the names of these institutions to lure unsuspecting individuals into fake offers, giving out personal information, and clicking on download links that can infect their computers. This can lead to fraud, identity theft and the loss of account information and passwords. As with all things related to the coronavirus outbreak, it pays to be vigilant.


In short, if you have accessed an online article, blog, or website that is not familiar, and you don’t feel 100% safe, do not click on offers or download documents, interactive maps or programs. This may be an attempt to introduce a malicious computer virus, ransom-ware or other program into your phone, tablet or PC for the purpose of collecting your personal information. If you click on a link and you are asked for permission to download, or give access to your photos, contacts, etc., think twice. Do you really understand what this program or app is going to do with the information you are providing? Like the coronavirus we need to be very careful about the things that we virtually touch and what we allow to touch us!


See below two recent articles from the Federal Trade Commission about coronavirus scams:

Avoid Coronavirus Scams

Types of Coronavirus Scams


As always, if you feel that you might be a victim of identity theft or you have a question about the safety of your accounts or your login information please contact us. We can help.

As people seek to file their tax returns this year, cybercriminals will be busy trying to take advantage of this with a variety of scams. Citizens may learn they are victims only after having a legitimate tax return rejected because scammers already fraudulently filed taxes in their name. According to the Internal Revenue Service (IRS), there was a 60% increase in 2018 in phishing scams that tried to steal money or tax data. The IRS identified 9,557 fraudulent tax returns as of only February 24^th, 2018 for the last filing season. As everyone aims to file their returns among all this fraud, the following advice will explain how tax fraud happens and provide recommendations on how to prevent it from happening to you or how to get help if you are unfortunately affected by a tax scam!

How is tax fraud perpetrated?

The most common way for cybercriminals to steal money, financial account information, passwords, or Social Security Numbers is to simply ask for them. Criminals will send phishing messages often impersonating government officials and/or IT departments. They may tell you a new copy of your tax form is available. They may include a link in a very official looking email that goes to a website that uses an official organization’s logo and appears legitimate, yet is fraudulent. If you attempt to login into the false website, or provide any personal information, the criminals will see what you type and try to use it to compromise your other accounts and file a false return in your name.

Additionally, much of your personal information can be gathered online from sources like social media or past data breaches. Criminals know this, so they gather pieces of your personal information from a variety of sources and use the information to file a fake tax refund request! If a criminal files a tax return in your name before you do, you will go through the arduous process of proving that you did not file the return and subsequently correcting the return.

Criminals also impersonate the IRS or other tax officials, demanding tax payments and threatening you with penalties if you do not make an immediate payment. This contact may occur through websites, emails, or threatening calls or text messages that seem official but are not. Sometimes, criminals request their victims to pay “penalties” via strange methods like gift cards or prepaid credit cards. It is important to remember that the IRS lets citizens know it will not do the following:

• Initiate contact by phone, email, text messages, or social media without sending an official letter in the mail first.
• Call to demand immediate payment over the phone using a specific payment method such as a debit/credit card, a prepaid card, a gift card, or a wire transfer.
• Threaten you with jail or lawsuits for non-payment.
• Demand payment without giving you the opportunity to question or appeal the amount they say you owe.
• Request any sensitive information online, including PIN numbers, passwords or similar information for financial accounts.

How can you protect yourself from tax fraud?

• File your taxes as soon as you can…before the scammers do it for you!
• Always be wary of calls, texts, emails, and websites asking for personal or tax data, or payment. Always contact organizations through their publicly-posted customer service line. If they contact you end the call and call the organization on the phone number on their website. As mentioned previously, the IRS will initiate contact on these issues by mail through the postal service.
• Don’t click on unknown links or links from unsolicited messages. Type the verified, real website address into your web browser.
• Don’t open attachments from unsolicited messages, as they may contain malware.
• Only conduct financial business over trusted sites and networks. Don’t use public, guest, free, or insecure Wi-Fi networks.
• Use strong, unique passwords for all your accounts and protect them. Reusing passwords between accounts is a big risk that allows a breach of one account to affect many of them!
• Shred all unneeded or old documents containing confidential and financial information.
• Check your financial account statements and your credit report regularly for unauthorized activity. Consider putting a security freeze on your credit file with the major credit bureaus. This will prevent identity thieves from applying for credit or creating an IRS account in your name.

If you receive a tax-related phishing or suspicious email at work, report it according to your organization’s cybersecurity policy. If you receive a similar email on your personal account, the IRS encourages you to forward the original suspicious email as an attachment to its phishing@irs.gov email account, or to call the IRS at 800-908-4490. More information about tax scams is available on the IRS website and in the IRS Dirty Dozen list of tax scams.

If you suspect you have become a victim of tax fraud or identity theft, the Federal Trade Commission (FTC) Identity Theft website provides a step-by-step recovery plan. It also allows you to report if someone has filed a return fraudulently in your name, if your information was exposed in a major data breach, and many other types of fraud.

Content from the Community Institution and Association’s Cyber-Tip Newsletter

When it comes to student financial advice and new graduate money management, plenty of books, articles, and websites have been written about the dos and don’ts of personal finance for the under-30 crowd. But you’re a busy college student–who has the time to read all of the info out there and sort fact from fiction? Trust your local Shenandoah Valley community bank to narrow the scope of advice to the best financial tips for students. We’ve kept this guide short enough to read and specific enough to use. Check it out so you can identify the best financial decisions for college students and recent grads and avoid costly money mistakes.

Ignoring Living Expenses

Do you feel like renting is just throwing your money away? Buying your first home may seem impossible or far off, but it doesn’t have to be. Here in Virginia’s Shenandoah Valley, there are state and federal homebuyer assistance programs, as well as other options to make it easier for you to become a homeowner. Instead of making someone else’s investment pay off, you can invest in yourself. And while rents can only go up, a fixed rate mortgage guarantees you’ll have the same monthly home payment as long as you live in the house. Check out our Mortgage and Home Loans page for more info on home financing in the Shenandoah Valley.

Homebuyer Assistance From The Virginia Housing Development Authority (VHDA)

 First-time homebuyers in Virginia can get help with their down payment and closing costs through VHDA’s two options:

• The Down Payment Assistance Grant provides funds for your down payment as a gift that doesn’t need to be repaid.
• The VHDA Plus Second Mortgage is a 30-year fixed rate loan. Qualified buyers can borrow up to 1.5 percent more than the sales price, effectively reducing or eliminating the need for a down payment and closing costs. It can also make your monthly mortgage payments more affordable.

Federal Homebuyer Programs

 In addition to these state-level programs, several federal agencies administer homebuyer assistance programs.

• FHA Loans: These home loans are insured by the Federal Housing Administration, making it easier for first-time buyers and others to get a mortgage. FHA Loans usually have a lower down payment requirement than conventional home loans, which is helpful for students or recent college grads who want to buy a home but don’t have a lot saved to put down.
• VA Loans: Guaranteed by the U.S. Department of Veterans Affairs, these home loans cover up to one hundred percent of the purchase price, so no down payment is required. Eligibility is limited to U.S. Veterans, Service Members, and certain spouses. If you are a recent grad who served or is currently serving in the military, a VA Loan is a great way to buy your first house.
• USDA Loans: Available as guaranteed or direct loans, from the U.S. Department of Agriculture, these home loans are available to buyers who meet income and rural area requirements.

Family Assistance

 If you can’t get a mortgage loan on your own, perhaps a parent or other family member can help. There are several options for family members who want to assist a college student or recent grad with a home purchase.

• Down Payment Gift: If you can qualify for the loan itself but don’t have down payment money, a family gift might be all you need to make homeownership a reality. The giver simply needs to provide a gift letter. Anything up to $14,000 per recipient per year meets the threshold of the IRS’s gift tax exclusion.
• Family Loan: If a parent or other relative has enough asset liquidity to purchase the house themselves, they can be your mortgage lender. This is mutually beneficial, allowing the lender to earn interest and making it possible for borrowers with non-traditional employment or other excluding factors to purchase a home.
• Mortgage Co-Borrower: Also known as co-signing on the mortgage, this option allows parents to help a child become a homeowner without gifting money.

The Investment Property Approach

 As the cost of tuition and on-campus living expenses increase, many families are looking at alternatives to paying for traditional room-and-board. For example, some parents buy a home or condo near their child’s college as an investment property. The child can live there, rent-free or not, during their student years. Parents can generate income by renting out a room to another student or purchasing a duplex and renting out one of the units. After the child graduates from college, the family can decide what to do next. The child may want to buy the home from their parents or the parents can keep it as an investment property or sell it. Even recent graduates can take this approach to home buying by renting out a room to a housemate.

Ignoring Your Credit Score

If you’re like most college students and recent grads, your credit score is probably the last thing on your mind. However, access to credit becomes more important the further you get into adulthood. With no credit history or a low score, it’s much harder (and sometimes impossible) to get a car loan, credit card, mortgage, and other types of financing. A high credit score also results in lower interest rates, so you pay less for the amount borrowed. And people–landlords and employers, for example–often use your credit score as a way to assess your overall trustworthiness. That’s why now is the time to build your credit score or rehabilitate a damaged one.

How To Build Your Credit Score

 Before the age of 18, your credit history is a “tabula rasa” (blank slate). Once you open a credit card account or put a utility bill in your name, you start to build credit history and (hopefully) a good score. Federal law entitles you to a free annual credit report from each of the three major agencies (Equifax, Experian, TransUnion). Take advantage of this service to ensure all information is correct and see what lenders who check your credit will see.

The primary ways to build a high score are to open a variety of accounts (credit as well as utility bills), make on-time payments every month, and maintain a healthy debt-to-credit limit ratio. So, a freshman in college might become an authorized user on a parent’s credit card and put their cell phone bill in their own name, regardless of who is paying it. Once you move to your own apartment, put at least one of the utility bills in your name if you’re sharing with roommates. At age 21 it becomes easier to get your own credit card. The key, of course, is not to charge more than you can repay. You might use the card to make just one purchase a month and pay it back on time–that simple act will help you build a good credit score. And of course, if you have student loans, work with your lender to create a repayment schedule you can afford. On-time student loan payments will also build your credit score.

 How To Rehabilitate a Low Score

 Sometimes youthful follies are harmless, but occasionally they leave lasting repercussions such as a low credit score. If you racked up credit card debt and didn’t pay it, ignored your student loan after graduating, or any number of other credit-destroying acts, you’ll need to devote time and energy to rebuilding your credit score. One good place to start is your local community bank, like F&M. Smaller banks are generally more willing to work with people who don’t have perfect credit. You may be able to open a secured credit card or take out a small personal loan as a first step to filling your credit report with positive records.

You may also need infrastructure to help you budget and pay bills on time. For example, F&M Bank’s Squirrel is a free personal finance management tool linked to all of your accounts. With Squirrel, you can track cash flow, make budgets, see where your money goes, and stay on top of bill due dates. Additionally, Credit Karma and Credit Sesame are free apps that help you track your credit score–a good motivator when you’re trying to improve it.

Ignoring Your Student Loan

We’ve touched on student loans briefly in the previous section as a way to build or break your credit score. One of the reasons it’s so important to be proactive about student loan debt is that it’s all but impossible to get rid of. Unless you qualify for a federal student loan forgiveness program or find yourself in a rare situation such as the closure of your alma mater, the only way out is through death. Unlike credit accounts, student loan debts are almost never forgiven in bankruptcy proceedings. And even if you qualify for loan forgiveness or cancellation, you’ll need to make payments until then.

The bottom line? Minimize the amount you borrow while in school and take steps to pay down your student loan as soon as possible, even before you graduate. Remember that unless your loan is federally subsidized, it accumulates interest even while you’re still in school. So even making small payments can help to keep the balance down.

Another important action is to use student loan funds ONLY for school expenses. That’s right–you can borrow more than the cost of tuition but you really shouldn’t. Get a part-time job to cover additional living expenses or live at home if possible. Whatever you do, don’t use a student loan “refund” for entertainment expenses or unnecessary purchases.

Finally, take advantage of the Internet to find and apply for scholarships and grants online through tools like Scholly. After you graduate, contact your lender to work out a repayment plan you can afford and don’t go into forbearance. Also, avoid student loan refinancing, which can add to your balance even though it promises a better interest rate.

Ignoring Free Money

One of the best pieces of financial advice for new graduates is to not leave money on the table. When you get your first full-time job after college, be sure to sign up for any retirement accounts your employer offers, like a 401(k). While some money will come out of your paycheck, your employer will also contribute “free money” to your account. The same thing goes for health savings accounts (HSAs) and other employee benefits.

While still in school, take advantage of any student discounts you encounter. Often, all you need is a valid ID. These savings may range from movie tickets and discounts at restaurants and museums, to Amazon Prime free shipping and a lower price on an Apple computer. What they all have in common is free money.

When it comes to personal finance, make sure all of your accounts pay interest or rewards. In other words, put your money to work to make more money. For example, F&M offers cash-back or interest-earning checking account options as well as a rewards credit card.

One last way to ignore free money is to hold onto things you no longer need. Use Craigslist, Facebook Marketplace, and old-fashioned yard sales to exchange furniture, textbooks, and other unused stuff for cash.

F&M Is Invested In The Success Of Local Students

From James Madison in Harrisonburg to other regional schools like Bridgewater College, Lord Fairfax Community College, Blue Ridge Community College, Eastern Mennonite, Mary Baldwin, American National University, F&M cares about the success of our local students. That’s why we give out annual scholarships to students at Lord Fairfax and Blue Ridge Community Colleges, offer summer internships for students interested in learning more about the banking industry, and employ 22 alumni from area colleges (including former interns). We also engage in on-campus events, such as the Bridgewater College business expo, to familiarize students with local companies who are looking to hire college graduates. For more student financial advice and to learn more about the services we offer, contact us today or visit your nearest branch in Harrisonburg, Staunton, and across the Shenandoah Valley.