Newsletter Published for the Members/Owner’s Summer 2014 Edition Savings & Benefits of Buying Used E ver wonder why the used-car industry is such a big hit? The price tag attached to a used vehicle is usually several thousand dollars less than for new cars. If you buy a new car, it typically depreciates about 20% in value the minute you drive it off the lot. Start looking for the right used car by dong some research. Check out websites such as Carfax.com, Edmunds.com, and Vehix.com. These sites help you find exactly what you are looking for, including safety rating, vehicle condition, and a vehicle history report. When you’re selecting a used vehicle, keep in mind that insurance companies base insurance premiums on your age, year of the car, make, and how likely you are to get in an accident. In general, the cost of insurance on a used car is lower because the comprehensive and collision costs are usually lower. Many dealerships offer certification programs that can protect you if any mechanical problems arise after you purchase your vehicle. Be sure to read the fine print of the certification to see what it covers. Buying a certified used car can add on a significant chunk of money to the price tag but can be money well spent. On the other hand, if you plan to buy a noncertified used car, make sure to have a qualified mechanic inspect it first. To find the best deal on financing your used vehicle, make Ulster FCU your first stop. Call or stop in today to learn more about our low auto-loan rates. We offer the same low rates on both new and used autos. Financing Your New Car I f you decide to finance your car, be aware that financing obtained by the dealer, even if the dealer contacts lenders on your behalf, may not be the best deal you can get. Contact the Ulster FCU directly. Compare the financing that we can offer you with the financing the dealer offers you. Because offers vary, shop around for the best deal, comparing the annual percentage rate (APR) and the length of the loan. When negotiating to finance a car, be wary of focusing only on the monthly payment. The total amount you will pay depends on the price of the car you negotiate, the APR, and the length of the loan. Sometimes, dealers offer very low financing rates for specific cars or models, but may not be willing to negotiate on the price of these cars. To qualify for the special rates, you may be required to make a large down payment. With these conditions, you may find that it’s sometimes more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment. Before you sign a contract to purchase or finance the car, consider the terms of the financing and evaluate whether it is affordable. Before you drive off the lot, be sure to have a copy of the contract that both you and the dealer have signed and be sure that all blanks are filled in. Trading in Your Old Car Discuss the possibility of a trade-in only after you’ve negotiated the best possible price for your new car and after you’ve researched the value of your old car. Find out what your current vehicle is worth before you negotiate the purchase of a new car. Check the National Automobile Dealers Association’s (NADA) Guides, Edmunds, and Kelley Blue Book. This information may help you get a better price from the dealer. Though it may take longer to sell your car yourself, you generally will get more money than if you trade it in. Considering a Service Contract Service Contracts that you may buy with a new car provide for the repair of certain parts or problems. These contracts are offered by manufacturers, dealers, or independent companies and may or may not provide coverage beyond the manufacturer’s warranty. Remember that a warranty is included in the price of the car while a service Con’td. following page, see: “Service Contract” Ulster Federal CU is the Place for Car Insurance T hat’s because the TruStage Auto & Home Insurance Program is built on the same foundation as we are: Good rates, excellent service and solid value. With discounts for being a member and easy switching from your existing carrier, it’s worth a quick phone call to get a quote. To get started, just call 1-888-380-9287 or visit: TruStageAutoHome.com. For a quick quote, you’ll need three things:  Your driver’s license number  Your vehicle identification number (VIN)  A bit of personal information Isn’t it time for car insurance the Credit Union way? TruStage Auto & Home Insurance Program is made available through TruStage Insurance Agency, LLC and issued by leading insurance companies. Money & Credit M oney matters. And using tried and true strategies for dealing with money - or the lack of it - can make a big difference to your present and your future. Whether you are saving, spending, or borrowing money, this is information you can’t afford to overlook. Shopping & Saving Realistic budgeting is the key to maintaining a financing safety net and spending wisely. Whether you’re shopping for things you buy routinely—or saving for that occasional big ticket item—planning is key. These shopping tips can help you save money on everyday purchases, as well as on some products and services you buy once in a while. Buying & Owning a Car Having a car can be an expensive proposition. Read tips on buying vs. leasing, negotiating the best deal, financing, getting the most out of warranties and service contracts, using gas efficiently, and avoiding repossession. Credit and Loans Decisions about credit and loans involve lots of factors, including how much money you need, what terms you’re offered, and who is behind the offer. If you are choosing a credit card or wondering whether offers of credit and loans are on the up and up, these tips can help. Dealing with Debt Debt collection, debt management, debt relief, debt settlement...Debt is a four-letter word that’s the subject of some complex laws. Learn how to exercise your rights under the Fair Debt Collection Practices Act-and how to recognize debtrelated scams and frauds. Ulster Federal Credit Union Board of Directors Continued, “Service Contract” _______________ contract costs extra. Before deciding to purchase a service contract, read it carefully and consider these questions:  What’s the difference between the coverage under the warranty and the coverage under the service contract?  What repairs are covered?  Is routine maintenance covered?  Who pays for the labor? The parts?  Who performs the repairs? Can repairs be made elsewhere?  How long does the service contract last?  What are the cancellation and refund policies?  Is the service contract transferrable should the vehicle be sold? Mary R. Bishop, Chairperson Linda Combs Akins, First Vice Chairperson John Mizerak, Second Vice Chairperson Richard Moore, Treasurer Judith Hansen, Secretary Janet Winter, Recording Secretary, Patrick Berardi Henry Gleich Steven Milton Dennis Pitcock HOLIDAY CLOSINGS: Credit Union Offices will be closed for the following up-coming holidays: Labor Day, Monday, September 1st Columbus Day, Monday, October 13th Veteran’s Day, Tuesday, November 11th Thanksgiving, Thursday, November 27th Christmas, Thursday, December 25th New Year’s Day, Thursday, January 1st    Make wise financial decisions. Develop effective saving habits. Protect yourself against future predatory credit offers. Six Simple Ways to Rev-Up Your Savings Y ou can meet your goals with automated deposits and investments. Many people starting out in their careers find themselves burdened with lots of debt (perhaps from student loans, credit cards, and car loans) and very little savings for future needs. But there are simple strategies for gradually building small savings or investments into large sums, even during your school years, and often with the help of automated services that make it easy. Here are key examples: 1. Save for specific goals - You should have a savings plan for large future expenses that you anticipate - perhaps education costs, a home or car purchase, starting a small business, or preparing for retirement (even though that may be many years away). And, young adults just starting out to be responsible for their own expenses should build up an emergency fund that would cover at least six months of living expenses to help get through a difficult time, such as a job loss, major car repairs, or unexpected medical expenses not covered by insurance. 2. Commit to saving money regularly - This is important for everyone, but especially if you are supporting yourself financially. 3. Aim to save a minimum of 10% of any money you earn or receive - Putting aside a designated amount is known as “paying yourself first,” because you are saving before you’re tempted to spend. 4. Put your savings on auto-pilot - Make saving money quick and easy by having your employer direct-deposit part of your paycheck into a federally insured savings account. Your employer or your financial institution may be able to set this up for you. If you don’t yet have a steady job, you can still set up regular transfers into a savings account. 5. Make use of tax-advantaged retirement accounts and matching funds - Look into all your retirement savings options at work, which may come with matching contributions from your employer. Chances are your retirement savings will hardly reduce your take-home pay because of what you’ll save in income taxes, and the sooner you start in your career, the more you can take advantage of compound growth. If you’ve contributed the maximum at work or if your employer doesn’t have a retirement savings program, consider establishing your own IRA (Individual Retirement Account) with a credit union or investment firm and make regular transfers into it. Remember that you can set up an automatic transfer from a checking/share draft account into a savings/investment account for retirement for any purpose. 6. Decide where to keep the money intended for certain purposes - For example:  Consider keeping emergency savings in a separate federally insured savings account instead of a checking/share draft account so that you can better resist the urge to raid the funds for everyday expenses. Be sure to develop a plan to replenish any withdrawals from your emergency fund.  For large purchases you hope to make years from now, consider share certificates which generally earn more interest than a basic savings account because you agree to keep the funds untouched for a minimum period of time.  For other long-term savings, including retirement savings, young adults may want to consider supplementing their insured deposits with low-fee, diversified mutual funds (a professionally managed mix of stocks, bonds and so on) or similar investments that are not deposits and are not insured against loss by the NCUA or FDIC. With nondeposit investments, you assume the risk of loss for the opportunity to have a larger rate of return over many years.  For healthcare, find out whether you are eligible for a health savings account (HSA), a tax-advantaged way for people enrolled in high-deductible health insurance plans to save for medical expenses. Think about ways to cut your expenses and add more to savings. For your financial services, research lower-cost checking/share draft accounts at your credit union and some competitors. And, if you are paying interest on credit cards or fees for spending more money than you have available in your checking/share draft account, develop a plan to stop. More broadly, look at your monthly expenses for everything from food to phones and think about ways to save. Help Saving for A Home E xcept for Veterans Administration loans, it still generally takes some cash up front to get into a home. How much cash you’ll be required to have up front depends on the type of mortgage (whether FHA or conventional) and your personal financial situation. The better your credit, though, the lower the down payment the lender will typically expect. How much will you need to save? If you are applying for an FHA loan and your FICO score is between 500 and 579, plan on a 10 percent down payment or more. If your score is 580 or better, you may be able to qualify for a 3.5 percent down mortgage. Conventional mortgages tend to have somewhat higher down-payment requirements. You begin to become competitive for a 5 percent down mortgage when you have a FICO score of around 660, though lenders vary widely in practice. However, to save on private mortgage insurance costs (PMI), you may want to go with a VA loan, if you qualify, or save up 20 percent. So what’s the best way to go about saving that money? Here are the factors to keep in mind: Safety. Unless you are planning to wait years to buy your home, you don’t want to take a lot of risk with this money. Hopefully, you will have your down payment saved up within a year or two. It doesn’t make sense to risk a large market loss and throw your dream of home ownership off schedule. Liquidity. You don’t want to lock this money up for years. You want to be able to access your money quickly and cheaply. Returns. You want to get a reasonable return, or yield, on your money. But don’t sacrifice safety for yield if it means risking your goal of home ownership. A Guarantee. Investments carry risk. But some financial vehicles come with an in-writing guarantee. Examples include balances in checking and savings accounts and share savings certificates at credit unions, which come with a guarantee of up to $250,000 in the event the credit union becomes insolvent. Banks have a typical arrangement via the Federal Deposit Insurance Corporation. COMMON OPTIONS ~ So where should you put your money? Here are some common options that have stood the test of time – along with the advantages and disadvantages of each. Cash. You can stuff cash in a mattress or coffee can. This is convenient, but not very secure. Your money is subject to the hazards of theft, flood, fire or loss. It also generates no return whatsoever. Checking or Savings Accounts. These generally produce a small return, but at least it’s something. They are, however, very convenient, if you are disciplined about not spending the money that’s earmarked for your down payment. If your savings is very small, it may make sense to keep it here instead of paying fees to maintain a low balance account. These are guaranteed against bank failures up to $250,000 per account holder, either from FDIC (for banks) or the National Credit Union Share Insurance Fund, or NCUSIF. Because credit unions are mutually-owned by depositors just like you, you can frequently get a better deal in the long run by using a credit union. Certificates of Deposit (AKA “Share Savings Certificates” at Credit Unions). These typically pay a higher yield than checking or savings accounts, and also qualify for federal insurance coverage. However, they do require you to commit your money for a specific period of time. The penalty for early withdrawals is usually the equivalent of six months of interest. Money Markets. This is a type of mutual fund that’s made up of low-risk, shortterm bonds and commercial paper de- signed to maintain a stable per-share price of $1 per day. By and large, they have been able to do so, historically, though there are no guarantees. They may offer higher yields than guaranteed accounts, and do not require a time commitment. However, there is a possibility that your money market will lose money. Some financial institutions do offer insured money markets. OTHER OPTIONS: Permanent life insurance. If you own a permanent life insurance policy, such as a whole life policy, it accumulates cash value over time. Whole life and well-funded universal-life insurance policies can be effective tools for savers – especially since whole life insurance cash value receives a guaranteed crediting rating and is guaranteed never to decline in value as long as you pay premiums as scheduled. Individual Retirement Arrangements. You can withdraw up to $10,000 from your IRA to put a down payment on a home with no penalty. For traditional IRAs, you will need to pay income taxes on any such withdrawals. Thrift Savings Program. If you are a federal employee or member of the United States military, the Thrift Savings Program, or TSP, allows you to borrow money to make your down payment on a home on advantageous terms. For more information, visit www.tsp.gov. 401(k) Loans. Some employers allow you to borrow from your 401(k). Typically, you will need to repay the loan within five years or face taxes and penalties on any remaining balance. However, if you leave your employer, you will have to repay the loan immediately or face taxes and penalties on what you’ve withdrawn. This makes using 401(k) loans tricky for longer terms – especially where employment prospects are not certain. Whatever vehicles you choose to utilize in accumulating your savings, Ulster Federal CU is ready to assist. Come in and speak with one of our lending or financial services professionals for a no-obligation consultation, or simply some advice on how to get started. We want to be part of your home-ownership dream. Ready to finance your next home? Still want to learn more? If you’d like to discuss your home financing options with a Mortgage Loan Specialist, call 845-339-5544.