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Investment Planning: The Basics
Why do so many people never obtain the financial independence that they desire? Often it’s because they just don’t take that first step — getting started. Besides procrastination, other excuses people make are that investing is too risky, too complicated, too time consuming, and only for the rich.
The fact is, there’s nothing complicated about common investing techniques, and it usually doesn’t take much time to understand the basics. One of the biggest risks you face is not educating yourself about which investments may be able to help you pursue your financial goals and how to approach the investing process.
Saving versus investing
Both saving and investing have a place in your finances. However, don’t confuse the two. Saving is the process of setting aside money to be used for a financial goal, whether that is done as part of a workplace retirement savings plan, an individual retirement account, a bank savings account, or some other savings vehicle. Investing is the process of deciding what you do with those savings. Some investments are designed to help protect your principal — the initial amount you’ve set aside — but may provide relatively little or no return. Other investments can go up or down in value and may or may not pay interest or dividends. Stocks, bonds, cash alternatives, precious metals, and real estate all represent investments; mutual funds are a way to purchase such investments and also are themselves an investment.
Note: Before investing in a mutual fund, carefully consider its investment objectives, risks, charges, and fees, which can be found in the prospectus available from the fund. Read the prospectus carefully before investing.
Why invest?
You invest for the future, and the future is expensive. For example, because people are living longer, retirement costs are often higher than many people expect. Though all investing involves the possibility of loss, including the loss of principal, and there can be no guarantee that any investment strategy will be successful, investing is one way to try to prepare for that future.
You have to take responsibility for your own finances, even if you need expert help to do so. Government programs such as Social Security will probably play a less significant role for you than they did for previous generations. Corporations are switching from guaranteed pensions to plans that require you to make contributions and choose investments. The better you manage your dollars, the more likely it is that you’ll have the money to make the future what you want it to be.
Because everyone has different goals and expectations, everyone has different reasons for investing. Understanding how to match those reasons with your investments is simply one aspect of managing your money to provide a comfortable life and financial security for you and your family.
What is the best way to invest?
- Get in the habit of saving. Set aside a portion of your income regularly. Automate that process if possible by having money automatically put into your investment account before you have a chance to spend it.
- Invest so that your money at least keeps pace with inflation over time.
- Don’t put all your eggs in one basket. Though asset allocation and diversification don’t guarantee a profit or ensure against the possibility of loss, having multiple types of investments may help reduce the impact of a loss on any single investment.
- Focus on long-term potential rather than short-term price fluctuations.
- Ask questions and become educated before making any investment.
- Invest with your head, not with your stomach or heart. Avoid the urge to invest based on how you feel about an investment.
Before you start
Organize your finances to help manage your money more efficiently. Remember, investing is just one component of your overall financial plan. Get a clear picture of where you are today.
What’s your net worth? Compare your assets with your liabilities. Look at your cash flow. Be clear on where your income is going each month. List your expenses. You can typically identify enough expenses to account for at least 95 percent of your income. If not, go back and look again. You could use those lost dollars for investing. Are you drowning in credit card debt? If so, pay it off as quickly as possible before you start investing. Every dollar that you save in interest charges is one more dollar that you can invest for your future.
Establish a solid financial base: Make sure you have an adequate emergency fund, sufficient insurance coverage, and a realistic budget. Also, take full advantage of benefits and retirement plans that your employer offers.
Understand the impact of time
Take advantage of the power of compounding. Compounding is the earning of interest on interest, or the reinvestment of income. For instance, if you invest $1,000 and get a return of 8 percent, you will earn $80. By reinvesting the earnings and assuming the same rate of return, the following year you will earn $86.40 on your $1,080 investment. The following year, $1,166.40 will earn $93.31. (This hypothetical example is intended as an illustration and does not reflect the performance of a specific investment).
Use the Rule of 72 to judge an investment’s potential. Divide the projected return into 72. The answer is the number of years that it will take for the investment to double in value. For example, an investment that earns 8 percent per year will double in 9 years.
Consider whether you need expert help
If you have the time and energy to educate yourself about investing, you may not feel you need assistance. However, for many people — especially those with substantial assets and multiple investment accounts—it may be worth getting expert help in creating a financial plan that integrates long-term financial goals such as retirement with other, more short-term needs. However, be aware that all investment involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful.
Review your progress
Financial management is an ongoing process. Keep good records and recalculate your net worth annually. This will help you for tax purposes, and show you how your investments are doing over time. Once you take that first step of getting started, you will be better able to manage your money to pay for today’s needs and pursue tomorrow’s goals.
Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CUSO Financial”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. The Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions company and is not a Registered Investment Advisor or broker-dealer. Investment products, services and advice are only provided through CUSO Financial, a subsidiary of Atria.
Life Insurance at Various Life Stages
Your need for life insurance changes as your life changes. When you’re young, you typically have less need for life insurance, but that changes as you take on more responsibility and your family grows. Then, as your responsibilities once again begin to diminish, your need for life insurance may decrease. Let’s look at how your life insurance needs change throughout your lifetime.
Footloose and fancy-free
As a young adult, you become more independent and self-sufficient. You no longer depend on others for your financial well-being. But in most cases, your death would still not create a financial hardship for others. For most young singles, life insurance is not a priority.
Some would argue that you should buy life insurance now, while you’re healthy and the rates are low. This may be a valid argument if you are at a high risk for developing a medical condition (such as diabetes) later in life. But you should also consider the earnings you could realize by investing the money now instead of spending it on insurance premiums.
If you have a mortgage or other loans that are jointly held with a cosigner, your death would leave the cosigner responsible for the entire debt. You might consider purchasing enough life insurance to cover these debts in the event of your death. Funeral expenses are also a concern for young singles, but it is typically not advisable to purchase a life insurance policy just for this purpose, unless paying for your funeral would burden your parents or whomever would be responsible for funeral expenses. Instead, consider investing the money you would have spent on life insurance premiums.
Your life insurance needs increase significantly if you are supporting a parent or grandparent, or if you have a child before marriage. In these situations, life insurance could provide continued support for your dependent(s) if you were to die.
Going to the Chapel
Married couples without children typically still have little need for life insurance. If both spouses contribute equally to household finances and do not yet own a home, the death of one spouse will usually not be financially catastrophic for the other.
Once you buy a house, the situation begins to change. Even if both spouses have well-paying jobs, the burden of a mortgage may be more than the surviving spouse can afford on a single income. Credit card debt and other debts can contribute to the financial strain.
To make sure either spouse could carry on financially after the death of the other, both of you should probably purchase a modest amount of life insurance. At a minimum, it will provide peace of mind knowing that both you and your spouse are protected.
Again, your life insurance needs increase significantly if you are caring for an aging parent, or if you have children before marriage. Life insurance becomes extremely important in these situations, because these dependents must be provided for in the event of your death.
Your Growing Family
When you have young children, your life insurance needs reach a climax. In most situations, life insurance for both parents is appropriate.
Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly day-care and housekeeping expenses. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths.
Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for child care with the remaining income.
Moving up the ladder
For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It’s important to review your life insurance coverage any time you leave an employer.
Keep in mind that when you leave your job, your employer-sponsored group life insurance coverage will usually end, so find out if you will be eligible for group coverage through your new employer, or look into purchasing life insurance coverage on your own. You may also have the option of converting your group coverage to an individual policy. This may cost significantly more, but may be wise if you have a pre-existing medical condition that may prevent you from buying life insurance coverage elsewhere.
Make sure that the amount of your coverage is up-to-date, as well. The policy you purchased right after you got married might not be adequate anymore, especially if you have kids, a mortgage, and college expenses to consider. Business owners may also have business debt to consider. If your business is not incorporated, your family could be responsible for those bills if you die.
Single again
If you and your spouse divorce, you’ll have to decide what to do about your life insurance. Divorce raises both beneficiary issues and coverage issues. And if you have children, these issues become even more complex.
If you and your spouse have no children, it may be as simple as changing the beneficiary on your policy and adjusting your coverage to reflect your newly single status. However, if you have kids, you’ll want to make sure that they, and not your former spouse, are provided for in the event of your death. This may involve purchasing a new policy if your spouse owns the existing policy, or simply changing the beneficiary from your spouse to your children. The custodial and noncustodial parent will need to work out the details of this complicated situation. If you can’t come to terms, the court will make the decisions for you.
Your retirement years
Once you retire, and your priorities shift, your life insurance needs may change. If fewer people are depending on you financially, your mortgage and other debts have been repaid, and you have substantial financial assets, you may need less life insurance protection than before. But it’s also possible that your need for life insurance will remain strong even after you retire. For example, the proceeds of a life insurance policy can be used to pay your final expenses or to replace any income lost to your spouse as a result of your death (e.g., from a pension or Social Security). Life insurance can be used to pay estate taxes or leave money to charity.
Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CUSO Financial”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. The Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions company and is not a Registered Investment Advisor or broker-dealer. Investment products, services and advice are only provided through CUSO Financial, a subsidiary of Atria.
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Money Talks: Understanding Your Escrow Analysis Statement
Click here to watch video on YouTube.
Understanding Your Escrow Analysis Statement
Understanding your escrow analysis statement for your mortgage can be confusing. Luckily, your friends at Gulf Coast Educators FCU are here to help. Let’s break it down.
What is escrow and do I have it?
Escrow is an account balance tied to your mortgage loan to pay your escrowed entities whenever they become due. Escrowed entities can include property taxes, insurance, and/or private mortgage insurance (PMI) when applicable. You can tell if you have escrow by reading your disclosure, reviewing your loan payments, or contacting the credit union.
How is my escrow payment calculated?
Escrow payments are calculated by adding the annual amount of escrowed entity’s payments and dividing this amount by 12 (months). View the example below:
Your escrow analysis statement has three main sections.
First – Your escrow account history. This is where you will see the payments you have made towards your escrow account. Here you will also see the payments that the credit union has made towards the entities in your escrow, such as your property taxes and homeowner’s insurance.
Next, you’ll see the escrow projections from the previous year. This section shows the differences in your payments from this year compared to last year. This will help you visualize the increase or decrease in your monthly payments.
The last page of the statement is your escrow projections for the upcoming year. The credit union reviews your account history with your current monthly payment to determine if your new payment will need to increase or decrease.
Surplus, Shortage, Deficiency…What does it all mean?
Now to decipher what it all means. You may see the following words next to a dollar amount on your statement: Surplus, Shortage, and Deficiency.
Surplus means that you paid more than you needed to into your escrow account. Typically, this means that the annual payment for one or more of your escrow entities decreased or remained the same. For example, if your property taxes or homeowners insurance cost decreased from the previous year. That surplus amount goes back directly to you.
Shortage means that you did not pay enough into your escrow account. Typically, this means that one or more of your escrow entities annual payments increased. As your lender, we pay your escrow entities, regardless of your balance. The shortage amount is how much you owe to your escrow account.
Deficiency means that you have shortage, but you are also negative in your escrow account as well. An escrow account requires at least 2 months worth of payments as a cushion, or safety balance. If you have a deficiency, that means you do not have enough money in your escrow account to cover the 2 months of payments and the shortage amount.
Putting It All Together
If you have a shortage or deficiency, you can pay this amount up front in full. If you cannot afford to make the full payment for the shortage or deficiency, that amount will be split into 12 equal amounts and rolled into your escrow payment for the next year.
At the end of your escrow analysis statement there is a recalculation of your escrow payment. If you have a surplus, your monthly payment will decrease. If you have a shortage or deficiency, your monthly payment will increase.
We hope this has helped you understand more about understanding your escrow account. If you have any questions, we are here to help.
How to send money with Zelle® safely
Located conveniently in your GCEFCU app, Zelle® enables you to send and receive money with friends and family, no matter where they bank. Follow these easy tips to use Zelle® safely:
- Only send to those you know and trust
- Beware of payment scams
- Treat Zelle® like cash
Zelle® is a fast, safe and easy way to send and receive money with people you trust, like your babysitter, your fellow PTA mom, your son’s soccer coach, or your coworker. Whether you just enrolled with Zelle® or have been an active user for a while, there are a few tips you should always keep in mind to ensure you are being safe when sending money.
Only send money to people you know and trust
Money moves fast with Zelle®, directly from checking account to checking account within minutes*. So, it’s important you know and trust the people you’re sending money to.
Why? Because you can’t cancel a payment once it’s been sent, if the recipient is already enrolled with Zelle®. And if you send money to someone you don’t know for a product or service you might not receive (like paying for something in advance), you may not get your money back. Keep in mind that sending money with Zelle® is similar to handing someone cash.
Beware of payment scams
One example of a payment scam is buying event tickets at a price that seems too good to be true from a stranger and never receiving them. If the seller asks you to use Zelle® to purchase the tickets, you should refuse unless the seller is a person you personally know.
Also, keep in mind that no one from GCEFCU will ask you to send them money with Zelle® as a test or to send money to avoid a fraud event. Neither GCEFCU nor Zelle® offers a protection program for authorized payments made with Zelle®. So, if you aren’t sure you will get what you paid for, you should use another payment method with purchase protection, such as a credit card.
Treat Zelle® like cash
Did your friend change phone numbers recently? It’s easy for people to change their phone number or email address. When in doubt, contact your friend to verify the email or U.S. mobile number they used to enroll with Zelle® before you hit “Send.” Another good check point for ensuring you’re paying the right person is to confirm the first name that is displayed for enrolled emails and U.S. mobile numbers.
If a person has already enrolled a U.S. mobile number or email address with Zelle®, you can’t cancel the transaction, so it’s important you get it right the first time.
If you’d like more information on safely using peer-to-peer payments, check out these articles from the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB).
- ✔ Helpful Tips for Using Mobile Payments Services and Avoiding Risky Mistakes
- ✔ Tips on Using Peer-to-Peer Payment Systems and Apps
- ✔ How to Keep Your Personal Information Secure Online
*U.S. checking or savings account required to use Zelle®. Transactions between enrolled users typically occur in minutes.
Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
What do I do with my old 403(b) when I switch jobs?
If you are an educator, changing jobs means you must decide what to do with the money in your 403b retirement account. Leaving the money in an old 403b may not be the best option since it is not growing and there will be no new contributions. Withdrawing the money makes it taxable income and Uncle Sam wants his fair share.
The best thing to do may be to roll that money over into a retirement account that earns money and will help the balance grow. An old 403b plan can be rolled into a traditional or Roth IRA, tax-free, giving you access to limitless investment options. It can also be transferred to a current employer’s 401k or 403b retirement plan where contributions can continue to be made up to annual federal limits.
Traditional or Roth IRA
One of the most popular options for rolling over an old 403b plan is to put the money into a Traditional or Roth IRA account. An IRA account is an independent account that is typically not offered by the employer. Basic IRAs typically have lower interest rates, but your money is completely safe and insured. If you opt to go with a financial advisor and open an IRA that is tied to stocks and bonds, you may earn more at a faster rate, but you also put your money at risk.
A good in-between option is a Premium Market IRA. With this type of IRA, your funds are completely secure, but you earn a higher rate that is tied to the market. It is tax-privileged, earns higher dividends, and your money is insured and safe, so you won’t have to worry about losing money because of the market.
403b
Sometimes, rolling over an old 403b means putting the money into a new 403b plan. If a new employer offers a plan with investment options you are comfortable with, then this may be right for you. It is important that you first familiarize yourself with the investment options and potential constraints of the new plan. However, many people enjoy the benefit of growing their nest egg quickly by keeping the bulk of their retirement in a 403b plan. An employer-sponsored 403b plan typically offers low administrative costs, making it an affordable option. There are no tax penalties for rolling money over into a new 403b plan, and you can still make tax-free contributions.
401k
If your new employer offers a 401k, then the IRS allows you to roll your old 403b retirement savings into that new account. This is known as a tax-free conversion. There are no tax penalties for this conversion, and you can still make tax-free contributions, subject to annual limits. Many employers also match contributions into a 401k plan, up to a certain percentage, allowing savings to grow quickly. As with the 403b option, the contribution limits are higher, and there is a catch-up provision for people over 50 years old. If you happen to max out your annual contributions, some employer-sponsored 401k plans have provisions that allow participants to make after-tax contributions as well.
Aside from growing your money quickly, a 401k plan offers a certain amount of asset protection, too. First, plan administrators must abide by the Employee Retirement Income Security Act, also known as ERISA. This means that they must comply with a set of fiduciary standards that put your best interest first, instead of pushing investments that may maximize profits. Plans are subject to full disclosure of historical performance and administrative fees. Assets are also protected from creditors and can’t be garnished, with a few minor exceptions. Many employer-sponsored 401k plans offer payroll deductions, making it easier to save for retirement.
The opinions expressed on this page are for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author of the article and may not reflect the views of the credit union.
Gulf Coast Educators FCU Ranked in Top 100 Best Performing Credit Unions
For Immediate Release: April 23, 2021
Caylee Smith, Marketing Director – csmith@gcefcu.org
Pasadena, TX: Gulf Coast Educators Federal Credit Union is pleased to share that we are listed in S&P Global Market Intelligence’s recent annual rankings of the Top 100 Best-Performing Community Banks and Credit Unions for 2020. GCEFCU is ranked seventh on the list and is the top performing credit union in the state of Texas.
Each year, S&P Global Market Intelligence scores every credit union based on five metrics. The scores are then measured against the industry mean and ranked accordingly. The five scoring metrics used are listed below:
- Member growth
- Average loans, net of Paycheck Protection Program (PPP) loans, per member
- Net worth as a percentage of total assets
- Delinquent loans as a percentage of total loans, net of PPP loans
- Return on average assets
Gulf Coast Educators FCU is proud to be named the best performing credit union in Texas, and one of the Top 100 Credit Unions for 2020. Our management team and board of directors strive to provide top quality and sound service to all of our members. For a complete listing of S&P Global Market Intelligence’s Best-Performing Community Banks and Credit Unions for 2020, click here.
About Gulf Coast Educators FCU: In 1948, eleven Pasadena ISD educators got together and formed what today remains a credit union dedicated to serving the financial needs of school employees in the state of Texas. The credit union offers its member-owners a full line of banking services, but through a cooperative ownership structure. To learn more about the credit union, visit www.gcefcu.org.
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Gulf Coast Educators FCU Designated a “Best of the Best” Credit Union for 2021
Pasadena, TX, February 17, 2021: MemberXP, a credit union member experience measurement platform, has named Gulf Coast Educators Federal Credit Union one of their 2021 Best of the Best award winners.
The coveted Best of the Best award is given each year to credit unions that have consistently provided exceptional member service, as reported by their own members. Only the highest-performing credit unions utilizing the MemberXP platform are given this honor. The Best of the Best award is independently granted by MemberXP based on specific and rigorous criteria. Taking into consideration the extreme challenges of delivering extraordinary member service during a nation-wide pandemic and economic crisis, this year’s award winners reflect some of the most agile and responsive credit unions.
MemberXP is a platform that allows credit union members to provide immediate feedback on the service they receive. Serving credit unions in the United States and Canada, MemberXP uses mystery shoppers and member surveys to gauge the overall member experience across multiple delivery channels, then deliver that data on an intuitive dashboard. The platform tracks specific experiences, such as applying for a loan, conducting a transaction — mobile, online or in branch — or opening a new account, and turns qualitative data into quantifiable and actionable information for the credit union.
“We are proud of our employees and how they have worked diligently during this time to ensure our members have a great experience. It is humbling to know that even during unprecedented times, our team is able to continuously deliver top quality service that our members have come to expect from their credit union,” remarked Eric Stegall, Chief Operations Officer of Gulf Coast Educators FCU.
“Throughout the last year, credit unions have once again shown they are willing to go above and beyond to connect and serve their members, no matter the challenges,” said Dave Adams, president and CEO of CU Solutions Group. “Every year the Best of the Best awards turns our attention to the trailblazers in our industry, that are truly dedicated to delivering brand-defining experiences and unparalleled member service dedication.”
About Gulf Coast Educators FCU: In 1948, eleven Pasadena ISD educators got together and formed what today remains a credit union dedicated to serving the financial needs of school employees in the state of Texas. The credit union offers its member-owners a full line of banking services, but through a cooperative ownership structure. To learn more about the credit union, visit www.gcefcu.org.
About CU Solutions Group: Headquartered in Livonia, Mich., CU Solutions Group is an award-winning credit union service organization that offers products and services in the areas of technology, marketing, HR performance and strategic advisory. The organization is home to national credit union-focused brands including Love My Credit Union Rewards, Save to Win, MemberXP, CUBE TV Studios, Compease and Performance Pro. The company has more than 100 investors comprised of credit unions, credit union leagues and credit union system organizations and maintains strategic partnerships with Intuit TurboTax®, GSTV and CU Risk Intelligence. For more information, visit CUSolutionsGroup.com.
About MemberXP: MemberXP provides actionable member research to credit unions via MemberView, its omnichannel voice of member platform and MemberShoppers, its mystery shopping platform. MemberXP serves credit unions across North America and in Canada ranging in asset sizes of $100 million to over $9 billion. Learn more about MemberXP’s Best of the Best Awards at MemberXP.com/best-of-the-best-award/.
For Immediate Release
Caylee Smith, Marketing Director – csmith@gcefcu.org