Best Ways to Use a Tax Refund

Over the past few years, the average federal tax refund has come to about $3,000. That’s not exactly chump change. With the filing deadline approaching, it’s not too early to begin thinking about how you’ll use a refund this year. Here are five pointers to keep in mind.

Over the past few years, the average federal tax refund has come to about $3,000. That's not exactly chump change. With the filing deadline approaching, it's not too early to begin thinking about how you'll use a refund this year. Here are five pointers to keep in mind.

1. Pay down debt

It's not as much fun as booking a trip to the Caribbean, but cutting down the amount of debt you owe is one of the best money moves you can make. Outstanding loan and credit card balances can hurt your credit score, making it more difficult to get the best rates on new borrowing. If you're saddled with credit card debt, consider paying off the balance with the highest interest rate first.

2. Save for retirement

Whether it's a 401(k) plan or an individual retirement account, you'll do yourself a huge favor by starting to save for retirement or ramping up your savings rate. Although putting away 10% of your pre-tax income is a good starting point, you'll eventually want to approach 20%. Compound interest and investment returns help the money in these accounts grow, so you'll thank yourself once you retire.

3. Home improvement

If you're a homeowner, taking care of repairs around the house can be a great long-term investment. Just remember to be strategic when it comes to deciding what to fix. Replacing a garage door or installing a new steel entry door can be among the least expensive improvements, at less than $2,000 each on average. But they can provide some of the best returns on the dollar in terms of the market value they add to your home, according to Remodeling Magazine.

4. Save for emergencies

Because it's best to leave money in retirement accounts alone so it can grow over the years, it's important to build a rainy day fund. This should consist of three to six months of living expenses, and the money should be readily accessible. You might be forced to use these funds when you least expect it, to handle medical emergencies or a broken down car that needs immediate repairs. A tax refund probably won't cover half a year's living expenses, so continuing to add to your emergency fund will help you hit your savings goal.

5. Focus on needs

As tempting as it may be to splurge on a new television, you'll probably end up regretting using your refund for anything that lacks long-term value. That includes vacations, shopping sprees and decadent nights out on the town.

If you consistently receive substantial refunds but never put them to good use, consider asking your employer to adjust what's withheld from your pay. That way, you'll avoid giving the government too much money and can use it to cover more pressing needs.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

Planning on using your tax return to save for retirement or emergencies?

Smart Money: Best Moves for 20-Something Investors

When it comes to investing early in life, you likely have two things on your side: time and flexibility. Although a 2015 survey found that most millennials don’t think they’ll have enough money saved for retirement, investing is one way to help build wealth for the future. Here are some of the best investments you can make in your 20s.

When it comes to investing early in life, you likely have two things on your side: time and flexibility. Although a 2015 survey found that most millennials don't think they'll have enough money saved for retirement, investing is one way to help build wealth for the future. Here are some of the best investments you can make in your 20s.

Real estate

If you have enough money set aside for a down payment, consider buying a home with rentable space, so you can live in one section and rent out the rest. Any rent you receive can help cover the mortgage and other expenses; the tax benefits of homeownership are substantial, and the home's value will likely rise over time.

However, owning property comes with added costs, such as insurance, taxes and maintenance, while related income can drop if rental space goes unoccupied. There's also the risk that property values might decline or rise only slowly, and if you wind up with an unruly tenant, evictions can be time-consuming and expensive. Unlike selling stocks or investment funds, you might find it harder to sell a home, should that become necessary. Property ownership generally should be regarded as a long-term investment.

401(k) plans

If your employer offers a 401(k) plan, it's a good idea to participate and see whether a Roth option is available. If it is, you can designate some or all of your contributions for a Roth 401(k), which means you forgo an immediate tax benefit, but withdrawals, including any investment gains, are generally tax-free. Younger investors are often in a better position to invest in riskier vehicles such as stocks as part of their retirement accounts, because they have more time to recoup any losses they may suffer.

Index funds, or funds that track the index of a specific financial market, are typically an easy-to-manage way for investing in the stock market. From 2005 to 2015, for example, the Standard & Poor's 500 Index of U.S. stocks grew an average of roughly 8% per year. While past performance doesn't indicate future returns, $5,000 invested in an S&P 500 index fund that gains 8% annually, with $60 a month added to the investment, would produce a nest egg of about $200,000 in 35 years.

Of course, there are other alternatives such as investing in individual stocks or commodity funds. As you get closer to retirement, it's smarter to take a less-risky approach by shifting money to more conservative investments such as government bonds. (Some brokers offer mutual funds that will do the rebalancing for you, investing heavily in stocks when you're younger and moving the money more toward bonds as you approach retirement age.)

Roth IRA

If you don't have a Roth 401(k) option, then a Roth IRA can be another way to accumulate tax-free wealth. These come with a contribution limit of $5,500 annually, along with other income-based restrictions. These funds can be invested similarly to a 401(k).

Keep in mind that investing retirement funds can expose you to the risk of losses. If you prefer the lowest possible risk, certificates of deposit offered by banks and similar savings certificates available from credit unions are generally insured for up to $250,000 but deliver relatively low returns.

As you decide how to invest your money, remember that starting now can make a big difference in determining the amount of money you'll end up with later on, as a retirement calculator will indicate. Assess what investments make sense for you based on the money you have and the risk you're willing to take to give your financial future a good boost.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

It's never too early to start planning for the future!

Empowering young people with a foundation of financial understanding

In our growing financially complex world, it is crucial to empower young people with a foundation of financial understanding and capability.
We are proud to have brought EverFi financial education to over 4,600 students in 12 local schools in the 2015-2016 school year. We are equipping students with critical money skills needed for a sound financial future.

In our growing financially complex world, it is crucial to empower young people with a foundation of financial understanding and capability.

We are proud to have brought EverFi financial education to over 4,600 students in 12 local schools in the 2015-2016 school year. We are equipping students with critical money skills needed for a sound financial future. Contact us to learn more about the Everfi program.

 

7 Tips to Prevent Tax ID Fraud

As Americans begin the process of filing tax returns, identity thieves are scheming to get their hands on that money. Tax identity theft has been the most common form of identity theft reported to the Federal Trade Commission for the past five years. Identity thieves look for every opportunity to steal your information, especially during tax season. Consumers should be on high alert and take every step they can to protect their personal and financial information.

Tax identity fraud takes place when a criminal files a false tax return using a stolen Social Security number in order to fraudulently claim the refund. Identity thieves generally file false claims early in the year and victims are unaware until they file a return and learn one has already been filed in their name.

To help consumers prevent tax ID fraud, F&M Bank is offering the following tips:

1) File early. File your tax return as soon as you’re able giving criminals less time to use your information to file a false return.

2) File on a protected wi-fi network. If you’re using an online service to file your return, be sure you’re connected to a password-protected personal network. Avoid using public networks like a wi-fi hotspot at a coffee shop.

3) Use a secure mailbox. If you’re filing by mail, drop your tax return at the post office or an official postal box instead of your mailbox at home. Some criminals look for completed tax return forms in home mailboxes during tax season.

4) Find a tax preparer you trust. If you’re planning to hire someone to do your taxes, get recommendations and research a tax preparer thoroughly before handing over all of your financial information.

5) Shred what you don’t need. Once you’ve completed your tax return, shred the sensitive documents that you no longer need and safely file away the ones you do.

6) Beware of phishing scams by email, text or phone. Scammers may try to solicit sensitive information by impersonating the IRS. Know that the IRS will not contact you by email, text or social media. If the IRS needs information, they will contact you by mail first.

7) Keep an eye out for missing mail. Fraudsters look for W-2s, tax refunds or other mail containing your financial information. If you don’t receive your W-2s, and your employer indicates they’ve been mailed, or it looks like it has been previously opened upon delivery, contact the IRS immediately.

If you believe you’re a victim of tax identity theft or if the IRS denies your tax return because one has previously been filed under your name, alert the IRS Identity Protection Specialized Unit at 1-800-908-4490. In addition, you should:

• Respond immediately to any IRS notice and complete IRS Form 14039, Identity Theft Affidavit.

• Contact your bank immediately, and close any accounts opened without your permission or tampered with.

• Contact the three major credit bureaus to place a ‘fraud alert’ on your credit records:

Equifax, www.Equifax.com, 1-800-525-6285

Experian, www.Experian.com, 1-888-397-3742

TransUnion, www.TransUnion.com, 1-800-680-7289

• Continue to pay your taxes and file your tax return, even if you must do so by paper.

More information about tax identity theft is available from the FTC at ftc.gov/taxidtheft and the IRS at irs.gov/identitytheft.

 

Protect Yourself Against a Sweetheart Scam

As we prepare for Valentine’s Day, we would like to take the opportunity to share a new trend in fraud – the Sweetheart Scam. Unfortunately, this fraud is often not reported due to embarrassment by the victim. The persons perpetrating the fraud are professional cons and are very good at manipulating their victims, often receiving $10,000 plus before the scam is stopped. 

The bank has noticed an upswing in this type of fraud and would like to help educate our customers as to how this occurs, and what you can do to protect yourself or a loved one from such a scam. 

Definition:

Wikipedia describes this as “a Romance Scam – a confidence trick involving feigned romantic intentions towards a victim, gaining their affection, and then using that goodwill to commit fraud. Fraudulent acts may involve access to the victims' money, bank accounts, credit cards, passports, e-mail accounts, or national identification numbers or by getting the victims to commit financial fraud on their behalf”.

How it works: Stolen Images

Scammers post profiles, using stolen photographs of attractive people, asking for others to contact them. This is often known as catfishing.  Letters (& emails or instant messages) are exchanged between the scammer and victim until the scammer feels they have groomed the victim enough to ask for money. This might be requests for gas money, bus and airplane tickets to travel to visit the victim, medical expenses, education expenses, etc. There is usually the promise that the fictitious character will one day join the victim in the victim's country. The scam usually ends when the victim realizes they are being scammed or stops sending money. Victims can be highly traumatized by this and are often very embarrassed and ashamed when they learn they have become a victim of a scam and that the romance was a farce.

Steps to take to protect yourself:

Run image searches of profile photos at images.google.com or TinEye.com to see if the image of the person that you are connecting with belongs to multiple profiles across the internet. Keep in mind that in an effort to entice women, scammers often use photos of men in the military, while attractive young women, particularly models and adult-film personalities, are used to attract men.

Never share your online banking credentials, including passwords. Especially beware of scammers who want to send you money by making a deposit through mobile banking – often submitting a fraudulent check and then asking you to forward the funds via wire transfer or through a purchased gift card to assist with medical bills. By the time the check is returned as fraud and deducted from your account, the funds that have been sent are unable to be retrieved.

If you encounter a scammer, immediately report the user to the dating service that you may be using and the FBI's Internet Crime Complaint Center.

Sources – Wikipedia, AARP and FBI Internet Crime Complaint Center

9 Tips for Paying Off Your Credit Card Debt

Buried in credit card debt? You’re not alone. According to NerdWallet, in 2015 the average U.S. household with debt had $15,762 in credit card debt at an average 18% interest rate. Here are nine tips on how to climb out.

Buried in credit card debt? You’re not alone. According to NerdWallet, in 2015 the average U.S. household with debt had $15,762 in credit card debt at an average 18% interest rate. Annual interest alone was $2,630, or more than $50 a week.

Here are nine tips on how to climb out. Remember, though, there are no magical solutions.

Stop spending more than you make

Tell yourself the truth. Analyze your bills to see where your money is going. Car payments, rent or mortgage, groceries and utilities are essentials; nearly everything else is subject to elimination or reduction. And don’t forget those $100 withdrawals from the ATM. Create a realistic budget and declare allegiance to it. Concentrate on the little things; just knocking off a $4 latte on the way to work can save $80 a month.

Keep paying on the cards

Failing to pay every month on every card just makes matters worse: The interest goes up and the debt goes up.  Always pay at least the minimum listed on the bill.  Not doing so may ruin your credit rating, making it harder to borrow money for essentials, such as a car, in the future.

Concentrate on paying off your smallest debt

The typical American has about four credit cards, so try pounding away at the one with the least debt. After you pay it in full, stop using it and apply the monthly payment to the next smallest bill. This “snowball effect” is a slow cure but leaves you with a feeling of accomplishment. This method, however, may cost you more in the long run, so read on.

Pay off the card with the highest interest

Pretty basic math here. Eliminating debt that costs you 28% is better than killing debt that costs you 18%. Try throwing your entire income tax refund or last month’s overtime pay at this bill. Then move on to the account with the next-highest interest rate.

Consolidate onto a lower-interest card

This can save you a ton in interest, especially if you eliminate all your other cards. Cards are available that will charge you 0% interest on the debt you have transferred.  However, this rate goes up after a specified time, usually 12 to 18 months. In addition, the issuer usually charges a fee — 3% is typical — on the transferred debt. Still, this can be a great deal if you can substantially reduce your debt in a relatively short time.

Take out a personal loan

Many lenders, including credit unions and banks, offer unsecured personal loans, meaning you don’t have to use your home or car as collateral. However, everything depends on your credit score. Below 620, interest rates will be high, although perhaps still below the rates on the credit cards it will be replacing. It’s worth shopping for.

Try a home equity loan

This loan, tapping the difference between the sale value of your home and money you still owe on it, also is based on your credit rating, as are home equity lines of credit. In addition, you could lose your home if you default. Consider with caution.

Cut a deal with the credit card company

This might be a long shot, but if you have a good credit history with the company and clearly have just fallen on hard times, it might negotiate with you on a lower interest rate. Like any other company, it wants to retain good customers.

Declare bankruptcy

This is the nuclear option. Yes, Chapter 7 bankruptcy will eliminate all your credit card debt and leave your home protected from repossession. However, it will be nearly impossible to get a mortgage for five years, and the filing will haunt you for up to a decade if you hope to finance anything at a reasonable rate.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved.

Ready to start eliminating credit card debt?

 

How to Get out of Debt in the New Year

A brand new year often inspires positive life changes such as breaking free of debt. If collections calls have been interrupting your dinner or you’re just stressed out from heavy-duty debt, here’s how to eliminate the burden.

Determine where you stand

In order to solve a problem, you need to fully understand it. Assess your situation by listing all your debts, including balance owed, interest rate and minimum payment required for each. Next, order your free credit reports to make sure you haven’t forgotten any debt or overlooked errors. Finally, compare your income and expenses and calculate how much you can realistically use toward debt reduction each month.

Don’t make things worse

The last thing you need is anything that increases your debt. Commit to not taking out any new loans or credit lines and, if possible, avoid incurring and charging additional expenses on existing accounts.

Take time for triage

You’ll save more in the long run by paying off debts with the highest interest rates first. This category usually includes consumer debt such as credit cards, personal or payday loans, and medical bills. Other types of debt, such as mortgages, car loans and student loans, typically have lower rates, making it more affordable to pay them off over a longer period. Throw as much money as you can each month at your highest-interest debt while still making timely, smaller payments on everything else. Then focus on paying down the next higher-interest loan.

Consider consolidation

When multiple debts are out of control, debt consolidation can be a lifeline. This refinancing process streamlines debts into a single monthly bill, often with lower interest and a smaller overall monthly outlay. This may help eliminate debt faster and less expensively. Home equity financing, personal loans and zero-interest balance transfer credit cards may provide effective options.

Improve cash flow

Even the best debt-reduction plans are useless without having enough money. Do the following to improve your cash flow:

• Bring bag lunches to work and eat fewer restaurant meals.
• Try free and inexpensive entertainment including parks, beaches and hiking trails, as well as local theater, concerts and sporting events.
• Sell unwanted items online or at yard sales.
• Take on additional part-time employment, ask for extra hours at work or turn hobbies into income.
• Make sure you’re getting the lowest prices for phone, internet, insurance and other consumer goods/services.

Set the odds in your favor

Why work hard to pay off debt just to end up in the same boat next year? These approaches can help ensure lasting success in curbing expenses and avoid building up debt:

Create a budget to keep future spending within your means.
• Continue to reduce unnecessary expenses.
• Commit to saving regularly, even if you can spare only a small amount each month, to protect against being thrown back into debt by unexpected events.
• Once credit cards are paid off, keep future balances low and try to pay them in full each month.
• Treat yourself to inexpensive rewards such as a new CD or ice cream to celebrate each important debt-reduction milestone.

Eliminating debt can bring dramatic changes over the coming year. In return, you’ll enjoy improved financial health, stress relief and the freedom to spend your paycheck on what really matters instead of having it siphoned away by past obligations.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

Interested in learning more about debt consolidation?

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6 Ways to Save More Money in the New Year

Even if saving has never been your thing and money is tight, the coming of a new year is an opportunity to change old financial habits. Here are some ways to become a more efficient saver.

1. Budget

Budgeting helps you organize your finances so you have money left over to save each month. It may seem laborious, but budgeting doesn’t have to be hard. Mobile apps cut a lot of the work and can help you track spending throughout the month.

2. Pay yourself first

Firmly commit to making a savings deposit monthly, even if you can only afford a small amount. Do this before paying your other bills.

3. Automate

If you’re not confident your resolution will stick or you want to simplify the process, automate your savings deposits. That way, a portion of your paycheck will automatically go to your savings account, or an amount you choose will be transferred from your checking to savings account each month. You won’t miss money that was never in your hands in the first place.

4. Make your money work harder

Compound interest is the interest paid on the interest your money earns in an account, and it allows your principal balance to grow faster. To fully benefit from compound interest, consider opening a high-yield savings account or a certificate of deposit that offers higher rates than the average savings account.

5. Plug up cash drains

It’s not always the big expenses that sabotage saving efforts; small expenses can add up and be a huge cash drain. To rein in spending and increase your cash surplus:

-Shop around for the lowest possible rates on utilities, insurance, TV, internet and mobile plans. Also, make sure you get discounts you may be entitled to.
-Check bank account statements for less obvious fees such as those for account maintenance, ATM use or having a low balance. If your accounts come with several fees, it may be time to find a financial institution that    costs less.
-Monitor daily spending and cut back on extras like lunches out, donut runs or fancy coffee.
-Explore free and low-cost entertainment options, including parks, beaches and hiking trails, as well as local concerts, theater and sporting events.

6. Bring in extra bucks

When trimming expenses doesn’t do the trick, the only way to create enough free cash for saving is to increase what’s coming in. You can:

-Sell unwanted items online or at a yard sale.
-Cash in credit or debit card reward points.
-Ask for a raise or for extra hours at work.
-Take on an additional part-time job or turn your hobbies or skills into dollars through tutoring, yard maintenance, dog walking, writing, crafting, musical performance or handyman work.

The benefits of saving kick in very quickly and only get better with time. A solid cushion in the bank protects you during emergencies and provides the means to travel, buy a home, get an advanced degree, or pursue whatever other dreams you may have.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

 

How to Avoid the Busy Holiday Scamming Season

You're not the only one joyfully anticipating the holiday season. Cyber criminals are all aflutter, too, as they look forward to the killing they'll make ripping off innocent shoppers like you. Here are some of the most common ways these thieves operate, because awareness can help you avoid becoming yet another victim.

Antisocial media

Beware those enticing ads that turn up on Facebook and other social media sites offering vouchers, gift cards and deep discounts, as well as the online surveys these ads often link to. These offers are often only empty promises designed to steal your personal information.

Additionally, if you receive concert, theater or sporting event tickets as a gift, never post pictures of them online. Cyber thieves spend lots of time monitoring social media, just waiting for the opportunity to create phony tickets they can resell from your barcode image. If your ticket is resold, you might just find yourself out of a seat on the night of your event. It's also unwise to post live from an event that gives criminals a heads-up that your home is empty and ripe for picking. Better to wait until the next day to post about the wonderful time you had.

Pandora's inbox

It may be a mystery to you how cyber thieves got your private email address, but it's chillingly clear they're up to no good. Your inbox may fill up with all kinds of legitimate-looking product offers and delivery notices this holiday season, but clicking on links of bogus ones or entering personal information on the linked sites can provide criminals with the opportunity to steal your identity.

Apps are far from immune

With mobile apps available for just about everything, it's a sad sign of the times that certain free mobile apps (often disguised as games) have been specifically designed to steal personal information from your phone. This is a particularly scary development since many people use their phones to secure their cars and homes. For this reason, only install apps from familiar companies and, at the very least, find a third-party review from a trusted site if you're interested in an app from an unfamiliar source.

USB Trojan horses

Lots of people use portable USB drives, which makes it all the more important to avoid those being distributed as giveaways this holiday season unless they're from a trusted source. These innocent-looking devices are often used as a method of introducing malware to computers.

Gifts that keep on giving … to criminals

A spirit of generosity is traditional at holiday time, but if you're not careful, your donations may never make it to the needy. Fake charities that skillfully tug at your heartstrings abound at this time of year, just waiting for you to willingly give your hard-earned cash to scammers. Before donating, be sure to check out charities thoroughly, to make sure that they're not only legitimate, but also that they allocate the bulk of funds toward their causes rather than “administrative costs.”

Tips to avoid holiday scams

These strategies will also help keep you a step ahead of scammers:

-Only shop online with reputable businesses you trust, using secure websites with an address that begins with https.
-Don't shop or bank over public Wi-Fi.
Protect your credit card privacy by covering your account number with your hand when shopping in public.
-Don't respond to suspicious unsolicited calls or emails. Only open email attachments from senders you trust, and contact businesses only through their official websites, phone numbers or email addresses.
Monitor your credit to catch fraud at its earliest stages.

Scammers may be smart, but you can still outsmart them. A little foreknowledge and caution go a long way toward ensuring you'll enjoy a safe and memorable holiday season.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

Fraud Alert – November 10, 2016

FRAUD ALERT – Our fraud detection system notified F&M Bank of what appears to be a debit card fraud event occurring in the State of California this evening.

As a precautionary measure, F&M has placed an auto restriction that requires the use of a PIN for transactions greater than $75 at merchants such as grocery stores and discount stores in the state of California.

To safeguard your accounts and your identity, learn more about F&M Bank’s Identity Theft Protection Services.