Financial Flexibility: The Case for the HELOC

DavidJonesCircle David Jones, Lender – Spring Green

 

One of the most underrated products in banking today is the Home Equity Line of Credit or HELOC.

What is it? How can you use it? Why would you want to?

Consider this, in lending a crucial component of whether a loan is approved or not is collateral. The greater the value of the collateral, the less risk the financial institution must assume, the better the rate and a greater likelihood that the loan will be approved. A HELOC is exactly as its name suggests, a line of credit backed by the equity you’ve built in your home. Because the risk associated with the loan is minimized by the collateral, the rate on the line is generally more competitive than other types of loans.

Once approved, the line can be accessed at any time. The funds are commonly used for home improvements, tuition payments, and credit card or debt consolidation. But, they can also be used in case of an emergency, for a vacation or just about any other expense you can think of. Interest is only charged when the line is in use and, in most cases, the interest is tax deductible*.

In brief, I recommend a HELOC to all who qualify for one and have need of financial flexibility. In a pinch, those funds are readily available for any need at minimal cost to the borrower. Plus, the tax benefits cannot be overlooked. It really is an inexpensive safeguard.

*Consult your tax advisor
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Tools for Mastering Your Finances

If you’ve ever read about personal finance, the chances are good that setting a budget will come up at some point in the discussion. It’s among the most common recommendations in improving personal finances. Our first blog post discussed budgeting, 7 Tips to Set Yourself Up for Financial Success, but setting a budget is the easy part. Following up, tracking, and reconciling accounts each month is where the real work takes place.

But….

Advancements in technology are simplifying what used to be a time-intensive undertaking. Now the work takes place up front and the follow-up is handled automatically through the use of personal financial management tools (PFMs). PFMs organize your spending, saving data and displaying it in an easy to read dashboard. You simply load your online accounts and updates take place overnight. These tools allow you to see trends in your spending by categorizing each purchase (Groceries, Auto, etc…) as well as updating balances and transactions in your investments, savings, and loans, giving you a complete financial snapshot in one location.

Through online banking at simplygoodbanking.com, our customers have access to FinanceWorks™, a personal financial management tool, which is a free service. When logged into online banking you can access FinanceWorks from your dashboard or via the “Manage Money” tab.

financeworks
Spending Dashboard Example

Everyday Examples

See how some members of our team here at the bank use FinanceWorks to stay on top of their finances, plan ahead, and reach their financial goals.

Candi Huebner, Personal Banker – Mazomanie

I love the information I can get from FinanceWorks! Knowledge is power and I want the power to control my expenses to get the most out of my spendable income. I’ve set my budget goals in FinanceWorks.  Then, throughout the month, I keep an eye on my progress and make adjustments in my spending if necessary. I also love the smart features of the program. After a little work up front it begins to recognize transactions and will automatically categorize future transactions so that I can see what percentage of my spending is going to what category. For example, all transactions done at my favorite grocery store are automatically categorized in my “grocery” budget.  Having the ability to look back at spending trends by category makes it so much easier to reign in my spending. Being an informed consumer makes all the difference.

There is also a “tax watch” tool that allows me to tag transactions I want to keep track of for income taxes. This saves me so much time when tax season rolls around.  A little work up front goes a long way.  A great tool and best of all, it’s a free service in online banking!


Quinn Christensen, IT Officer – Spring Green

In today’s digital banking environment, pretty much every financial institution offers online access to pull statements, check balances, etc. FinanceWorks has been a true convenience to me because I’m able to see all of my external accounts on one platform giving me a proverbial snapshot of all of my finances. The system automatically logs into those accounts for me overnight and gives me balance and transaction updates daily. I can also input the book value of all my assets & liabilities, even if its credit cards, loans, or brokerage and retirement accounts at other institutions.  I can also add the value of my house and vehicles making personal asset management quite convenient and easy.  It truly beats creating my own Excel documents because all of the input and reporting is done for me. Not to mention it’s protected by the same security measures that protect our online banking accounts.


Mike Peterson, Investment Center – Mazomanie

Using FinanceWorks has really simplified my finances. Accounts that I have outside of online banking like my retirement, auto loans and credit cards were easily loaded to my dashboard. Now instead of logging into my various accounts individually to check balances, see if payments were made, or look for any unsual activity, I can quickly check each account from my FinanceWorks dashboard. For example, each month I am able to see that my car payment was taken out and the updated balance of that loan. It enables me to stay on top of my bills, not to mention it’s exciting to see my loan balance go down.  Now it only takes me a couple minutes monthly to review my full financial picture.


Benefits:

  1. Complete Financial Picture – One Location
  2. Analyze Spending
  3. Simplified Budgeting
  4. Manage Bills
  5. Cash-Flow Analysis

We all have busy, complicated lives. That complexity makes it difficult to plan, budget, and make informed financial decisions consistently. Tools like FinanceWorks empower us to take control of our finances by using data and technology to our advantage.

For more information: FinanceWorks™ Demo

7 Tips to Set Yourself Up for Financial Success in 2017

Each new year brings with it new goals and aspirations, often in the form of resolutions. According to Google search data, new year’s resolutions rooted in personal finance are near the top of the list of most popular resolutions in 2017. Save more. Get control of debt. Find a way to earn extra income. These are all great personal initiatives that ultimately lead to one common outcome: Financial Success.

We asked our team for their thoughts, tips and habits for financial success and how to make 2017 the best year yet. Here is what they had to say:

1.  Build your emergency fund

An “emergency fund” should be your first savings priority. You should build this fund to $1,000 as quickly as possible with an ultimate goal of six months of budgeted expense. Do not touch this for everyday purchases. As “emergencies” happen, you are fully prepared to pay for said emergency instead of wondering where the money will come from.

− Joann Manteufel, Personal Banker

2. Goals. Budgets. Habits.

In terms of financial success, I am always a believer in establishing goals first. Whether that be saving for a down payment on a car, house, engagement ring, trip, etc… it is important to set your goal with a specific dollar value first, in my opinion.  From there you can establish a roadmap to guide you from where you are now to your end goal. That roadmap starts with a budget of your monthly income & expenses. Once you have established your goal and set your budget, you will know how much you can realistically save each month.  That figure is what I always tell my younger clients to set up on auto pay to have automatically transferred to their savings account.  After a few months of auto pay, people tend to look at the monthly savings as another bill and build it in to their thinking when planning out expenditures.  Budgeting requires discipline but once you take it seriously, it becomes a habit.  Once saving becomes a habit, it is adopted with regularity.

− David Jones, Commercial Lender

3. Staying Organized

It’s important to keep your financial documents organized. Each month I download a PDF of my financial statements to my computer so I can keep an electronic record. Then, in January, I transfer all of my saved statements onto a USB drive and deliver that along with a folder containing other important tax documents to my accountant.

Keeping my financial information organized gives me peace of mind when tax season comes around. It may take a little time commitment up front, but will save you time and worry down the road.

− Candi Huebner, Personal Banker

4. The Match

Take advantage of matching retirement contributions offered by your employer. This is the single easiest way to get ahead for retirement. January is a good time for a 401(k) checkup.

− Jay Heibel, CFO

5. Getting over the down payment hurdle

The main issue I run into with my customers is having  enough money available for a down payment. My suggestion to them is to start putting away money each month as if they were making a house payment. I look at what they can afford for a payment (Principal, Interest, Taxes & Insurance) and compare that to what they are paying in rent. Then, I have them “pretend” to make that mortgage payment by transferring the difference  between their current rent and their projected mortgage payment into a savings account. This allows them to get comfortable with that monthly payment while building a nice reserve for a down payment.

Example: Your rent is $700/month & your projected mortgage payment is $950/month. You would transfer the difference, $250/month, into a savings account to be used for a future down payment.

− Mary Lynn Johnson, Mortgage Lender

6. The Best Investment

I’m often asked what is the best investment? My response is always “time“. The magic of compound interest is something that I like to show my younger customers, especially, because it really accentuates the importance of starting to save NOW and not waiting for the “right time”. The difference that even a few years can make is significant. Whether you are just starting in your career or you’ve been putting off saving for years, today is a good time to start investing for your retirement.

Mike Peterson, Investment Center

7. Reduce Interest Expense, Build Equity

Be aggressive on debt repayment while maintaining an adequate amount of liquidity. Always pay credit card debt balances in full each month, if possible. Those are typically your most expensive forms of debt and can really dig into your bottom line. For vehicle and other short-term loans set up auto payments and even make your payment above the minimum required. These two strategies will reduce interest expense and help you build equity.

− Brian Gorman, President