Pathfinder Magazine: Volume 3

VOLUME 3 | 2018

PATHFINDER MAGAZINE

TRAVEL BUDGET Boston in the Fall

TAKE THE QUIZ!

What kind of saver are you?

PROS & CONS

Home equity loans

IHMVCU.org

IN THIS ISSUE PLAN

BORROW

The 5-Step Plan to Avoiding Ridiculous Purchases

What You Need to Know About Home Equity

INFOGRAPHIC: What Good Are HSAs?

Low Dollar, High Risk: How Payday Loans Trap 12 Million Americans Every Year

SAVE When Cutting Corners Doesn’t Make Cents QUIZ: What’s Your Saving Personality?

SPEND Travel Budget: Boston in the Fall How to Throw a Pinterest-Worthy Birthday Party (and stay frugal)

BRANCH LOCATIONS We’re Here for You! BETTENDORF 2839 AAA Court | Bettendorf, IA 52722 DAVENPORT 201 East 3rd Street | Davenport, IA 52801 2102 East Kimberly Road | Davenport, IA 52807 3646 West Kimberly Road | Davenport, IA 52806 DEWITT 1703 11th Street | DeWitt, IA 52742

309-793-6200 800-722-0333 Federally Insured by NCUA. Equal Housing Opportunity. Subject to credit approval.

NMLS #463074

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EAST MOLINE 358 17th Avenue | East Moline, IL 612644

MOLINE 1118 5th Avenue | Moline, IL 61265 2101 52nd Avenue | Moline, IL 61265 MONMOUTH 2 AmericInn Way | Monmouth, IL 61462 PROPHETSTOWN 334 Washington Street | Prophetstown, IL 61277 ROCK ISLAND 4206 5th Avenue | Rock Island, IL 61201

SILVIS GALESBURG 685 Avenue of the Cities | Silvis, IL 61282 404 West Carl Sandburg Drive | Galesburg, IL 61401 WEST BURLINGTON KEWANEE 403 South Gear Avenue | West Burlington, IA 52655 337 Tenney Street | Kewanee, IL 61443 MILAN 801 Tech Drive | Milan, IL 61264

Be in the know:

NEWS & UPDATES Meet your ITM...

INTERACTIVE TELLER MACHINES

Last month we introduced the Quad Cities to interactive video technology at our Rock Island branch in the drive-up and lobby allowing us to serve our members better and faster. With Interactive Teller Machines (ITMs) members can make deposits, withdrawals or transfers, make loan payments and get answers to account questions when it’s convenient for them.

OCT

27 NOV

We may be biased, but we think they’re pretty cool. One member at the Rock Island branch exclaimed “This is effing cool!” But don’t take our word or a fellow member’s word for it, stop by the Rock Island branch and experience it yourself.

NOV

2 p.m.

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All Day

22

All IHMVCU branches closed for Thanksgiving

NOV

6 p.m.

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Prophetstown Lighted Christmas Parade

DEC

24

It’s scheduled to open late November and will feature ITMs in the drive-up and lobby. Stay tuned for more details!

1 p.m.

All IHMVCU branches close early for Christmas Eve

All Day All IHMVCU branches closed for Christmas

DEC

1 p.m.

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All IHMVCU branches close early for New Year’s Eve

JAN

All Day

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We’re excited to announce our newest full-service branch will be located on the corner of 41st Street and Avenue of the Cities in Moline (4051 Avenue of the Cities).

Galesburg Holiday Parade

NOV

25

COMING SOON TO A CORNER NEAR YOU!

All Day All IHMVCU branches closed for Veteran’s Day

DEC

New Moline IHMVCU Branch

Bettendorf Halloween Parade

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So… where’s the teller?

All Member Service Representatives who service our ITMs are located at our Call Center in Milan.

7 p.m.

JAN

All IHMVCU branches closed for New Year’s

All Day

21

All IHMVCU branches closed for Martin Luther King, Jr. Day

FEB

All Day

18

All IHMVCU branches closed for Presidents’ Day

IHMVCU.org

PLAN

I almost bought a pool on a whim. No thought or research or preparation of any kind. It was sort of hot out and floating in your own pool, no matter how small, beats sitting in a lawn chair and misting yourself with a garden hose every. single. time.

The kind of pool I was about to buy was one of those hard-sided DIY pop-up pools that are supposed to last 5-6 years with proper maintenance. They run about $300 -$1000 depending on size, shape and the season during which you make this impulse purchase. Pools are (not surprisingly) more expensive in July than they are in October.

Every Midwesterner who’s ever sweated through a 102-degree day with 1000% humidity knows summer is best when you’re near a body of water. So why not put that body of water right in my back yard where I can enjoy it whenever I want?

Well, after giving it even 30 seconds of thought I came up with more than a few really good reasons why not. The first is that my backyard is a border-line disaster. Weed-filled former flower beds and vegetable patches are the main attraction if you walk through our gate.

Don’t get me wrong, having to stare at some overgrown garden beds and the world’s largest dandelion patch aren’t enough to ruin MY pool day. But the bugs that come with that much greenery are. No one wants to swim in a mosquito sanctuary.

The second is that we have two rowdy dogs who run and dig and well. . . go to the bathroom in our yard. We hire a poop-scooping service to clean it up once a week (the most ridiculous expense I will never, ever give up), which helps but doesn’t solve the problem.

The third is that there is a significant amount of manual labor and maintenance involved with having a pool in your backyard. I know this because growing up there was a pool in my parents’ backyard and I was lucky enough to find pool duty on my chore chart regularly.

And yet, I spent an entire day scrolling through Amazon and various farm and home store websites looking for the best deal. You see, I have an occasional problem with impulse control (see how much money I’ve been known to spend on takeout if you don’t believe me).

When I get an idea in my head, sometimes I just run with it. And while that has turned out to be a great idea sometimes (I adopted our first dog because I had a bad day), it has had a disastrous effect on our finances in others that I’m not willing to mention here.

Luckily before I bit the bullet and clicked that Buy Now button on my dream of a more aquatic summer, I went through what I’m now calling my 5 Step Program to Prevent Ridiculous Purchases.

The 5-Step Guide To

PREVENT RIDICULOUS PURCHASES

Amanda Spurgeon

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STEP

STEP

1

CAN YOU AFFORD TO PAY WITH CASH?

2 DOES IT FIT YOUR LIFESTYLE?

So you’ve asked yourself #1 and determined that yes, you do actually have enough cash on hand for this impulse buy. You don’t have to dip into The thing is, no matter how badly I wanted your emergency fund, you don’t have to borrow to sip a cocktail while leisurely floating on money from your brother and if you swipe your an inflatable pineapple, being hot is not an credit card it will be to take advantage of cash emergency. So, I really couldn’t afford to pay for back or some other rewards and then you’ll pay it with cash. it off pronto (because you actually have the Another temptation to spend money you don’t cash).or actual emergencies. have: credit cards. But your available balance That means you can buy it, right? Not isn’t cash, nor should it be treated as such. necessarily, friend. Just because you can afford Carelessly using your credit card to make silly something does not make it a good buy. purchases you can’t afford to pay off right Take a minute to consider whether or not this away is a great way to start drowning in debt. purchase will fit into your day-to-day life.

Rule of thumb? Avoid making a large purchase Circling this back to the pool, asking this question with your credit card if you can’t afford to pay it revealed a BIG red flag for me. off with actual, non-emergency-fund cash right away, and to only use your emergency fund for The set-up for one of these pop-up pools can be tedious and labor intensive, not to mention the actual emergencies.

In the case of the pool, the answer for me was yes IF I dipped into our emergency fund…

ongoing maintenance to keep the pool from turning into an algae farm/giant stink pit

But like I already said, my husband and I are kind of lazy. Especially when it comes to anything that even remotely resembles a chore. We aren’t pulling weeds in the backyard (which would’ve taken like an hour tops if we had done it before our yard became a jungle), and we definitely aren’t going to treat the water properly and test it or keep it clean enough that anyone would actually want to get in it..

If whatever you’re considering purchasing would require you to make a change to your lifestyle, my advice is to just walk away. Even if you have the best intentions, it’s unrealistic to think you won’t revert to your old ways. Not an active person? Leave the high-energy dog at the shelter. Constant traveler? Walk away from the houseplants.

Rule of thumb? Be real with yourself about what you can actually take on without changing your lifestyle.

IHMVCU.org

The 5-Step Guide To

PREVENT RIDICULOUS PURCHASES

(CONTINUED)

STEP

3 HOW LONG WILL IT LAST? Or, in other words: does the expected lifetime of this thing you’re about to buy align with the amount of moola you’re about to drop?

Usually, price indicates quality which in return indicates lifetime. That’s to say that, generally, the more you pay for something, the longer you expect it to last. I dropped a pretty penny on a pair of high-quality, handstitched leather boots about a decade ago. They’re still in perfect condition, and I fully expect them to become a family heirloom. To me, that justifies the price.

On the other hand, you may not feel too guilty if the $2 Old Navy flipflops you bought in May blow out by the end of August. That’s a pretty good amount of wear time considering the price, and you could reasonably replace them every summer without anyone accusing you of frivolous spending.

Rule of thumb? With the exception of really great clearance finds, if a deal seems too good to be true, it probably is. Do some research to determine the overall quality and how long it lasted for other people. If you’re dropping a couple hundred bucks on something that may only get you through one season, it may be wise to pass on it and look for something with a longer lifespan.

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STEP

4 WHAT KIND OF RETURN WILL YOU GET? I’m not saying every purchase should make or save you money, but you should get something out of it. A monetary return is great, but something that will improve your physical, mental or spiritual health can absolutely be worth it, too.

Purchasing the pool for my backyard would mean I no longer have to visit the public pool, which would not only save me money by eliminating the cost of admission (in several years), it would also improve my mental and spiritual health because I’d get to float around with an ice-cold cocktail in silence instead of eating a lukewarm hotdog on a beach towel while some screaming kid cannon balls into the shallow end.

Rule of thumb? If it brings some kind of value to your life, it’s worth considering the purchase (if it passes all of the above questions).

STEP

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HAVE YOU SLEPT ON IT? Even if something checks every box on the list and seems like a perfect fit, it’s almost always a good idea to sleep on it before you make a big purchase. If you’re anything like me, you’ll wake up with a clearer mind and hopefully an improved perspective of how this item will fit into your budget and your life.

Who knows, you might even wake up and find the thing has been marked down a couple bucks. Either way, it’s worth giving yourself some time to fully consider something before you buy it.

PLAN

HEALTH SAVINGS ACCOUNTS BENEFITS Amy Orr

HSAS + INDIVIDUALS = WIN HSAS WORK FOR YOU

HSAS EARN INTEREST

HSAs combine high-deductible health insurance with a taxfavored savings account. Money in this account can help pay:

Insurance deductibles Out-of-pocket expenses Qualified medical expenses including vision, dental, prescriptions and doctor visits

HSAS HAVE TAX BENEFITS Contributions are 100% tax deductible up to the annual limit*.

Any money left in the savings account earns interest tax deferred and is yours to keep year after year – unlike a Flexible Spending account, there is no “use it or lose it.”

Also, check to see if your employer matches contributions. If so, your employer’s contribution is pretax, so you’re not charged federal income tax on it.

And, withdrawals are tax free as long as they’re used for qualified medical expenses, even in retirement.

$3,450 /YR. for individuals

$6,900/YR. for families

+ $1,000/YR. if you’re over age 55

*2018 IRS guidelines for qualifying HDHP and contributions.

HSA IS YOURS FOR LIFE

Take it with you if you change jobs.

HSAS + EMPLOYERS = WIN WIN As a business owner, figuring out how to reduce costs associated with employee healthcare benefits is probably a top concern. One option might be to provide your employees with a High Deductible Health Plan (HDHP) along with a Health Savings Account (HSA).

EMPLOYER BENEFITS

EMPLOYEE BENEFITS

Lower insurance premiums

Lower monthly premiums

FICA savings

Contributions made pretax, earn interest and never expire

Lower annual premium increases Improved employee retention and attraction

Build savings for retirement

IHMVCU.org

SAVE

Rather than following a strict budget, some people prefer to cut corners on their everyday, or larger expenses. Which may sound like a good idea at the time, but it doesn’t always end up all sunshine and rainbows. For example, expenses like mattresses, shoes and manual labor will almost always justify spending the full cost. To save yourself money and frustration, check out what purchases you shouldn’t cut corners on below.

DOESN’T MA

YOUR TABLET BECOMES AN EXPENSIVE COASTER

EVERYONE NEEDS A GOOD PAIR OF SHOES

DRIVE MORE TO SAVE MORE?

That Black Friday deal looked great until your $50 tablet turned into a coaster on the coffee table. Don’t worry, we’ve all been there. With electronics it’s easy to cut corners and buy a cheaper version, but just like with everything else on this list, it ends up hurting you in the long run.

It’s pretty common knowledge that when you aren’t sleeping, you’re more than likely on your feet. Which makes it extra important that you invest in a good pair of shoes.

We know it’s tempting to drive out of your way when you see that gas is a whopping 50 cents cheaper in the next town over. But have you ever done the math to see if it’s worth the extra hassle?

With electronics, you get what you pay for.

It’s usually not what you want to hear, but unfortunately it’s true. The best thing to do when buying electronics is to do your research, shop around and see where you can find the best deal. By doing this, you’ll save yourself money, and a headache when your $50 tablet keeps shutting off for no reason.

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When Cutti

PATHFINDER

Think about your shoe purchases in the past.

Has it ever been worth it to buy that cheap pair of Target shoes? In most cases, the answer will be no. In the end you’ll spend double the amount of money because high quality shoes are meant to last longer than the discount options.

Think about it, you’re probably driving no less than 15 minutes out of your way, through traffic, and chances are there’s a gas station right next to your house. Which means driving that 15+ minutes in the opposite direction for a small savings will result in actually spending more money.

Before you go out of your way, do the math and see if it’s truly worth it.

ing Corners

AKE CENTS Sarah-Beth Floyd

WHEN YOU HEAR, “I KNOW A GUY”

LOW QUALITY MATTRESS = LOW QUALITY SLEEP

IT DOESN’T HAVE TO BE THIS WAY, MARSHA

Most people have that one friend who has “a guy” for everything. This isn’t a bad thing, but it can also get you into trouble. For example, say your friend’s cousin replaced his roof one time and now he’s offering to replace yours for way less than anyone else in the area.

The average human sleeps 8 hours a night (jealous). Over the course of your lifetime, it’s estimated that 26 YEARS of your life will be spent sleeping! Needless to say, you don’t want to spend those 26 years sleeping on an awful and uncomfortable mattress.

If you’re using these things as tools to save money, you’ll be relieved to hear that you don’t have to! Cutting costs doesn’t have to mean you cut corners.

Initially it sounds like a great idea. Way cheaper, your friend has recommended him and hello, CHEAPER! But if the “guy” does a poor job, you just wasted your time and money. Which will result in you paying at least double the price to get the job done correctly.

That’s why cutting corners on buying a mattress just isn’t worth it. In the long run, you’ll end up losing sleep and losing money when you have to buy another new mattress. Spend a little extra money, get yourself a nice mattress and thrive.

Everyone needs their beauty rest.

After all, making a budget doesn’t need to be super strict. In fact, the biggest thing is to be aware of your spending and finding where you can cut back.

IHMVCU.org

SAVE

MEMBER QUIZ:

WHAT DO YOUR SAVING HABITS SAY ABOUT YOU? Sarah-Beth Floyd & Amanda Spurgeon

What’s your emergency fund situation look like?

What’s your preferred way to stash your cash?

I have enough cash to cover a small expense, but would probably need some help to pay for anything more than a couple hundred dollars.

A

I have a set amount automatically deducted from each paycheck and deposited into an account that isn’t tied to my debit card.

I could cover a major expense or support myself/my family for at least a couple months if I were to lose my job.

B

I have automatic deductions set up for my emergency fund and a rainy-day fund, plus I put a percentage of my pay into a retirement plan.

C

Whatever I haven’t spent at the end of the month gets saved.

I have some cash stashed in my sock drawer, but I don’t have much money beyond what I need for my day-today expenses.

D

Uh… I’m supposed to be saving?

Where are you keeping any extra cash you may have?

A

A classic savings account so I can access it easily if I need it.

B

An interest-bearing account like a certificate of deposit or money market.

C

I prefer to keep my extra Benajmins beneath the mattress, thanks.

D

What’s this extra cash you speak of?

What’s your policy when it comes to managing expenses?

A

B

C

You’ve got your eye on a big-ticket item. Which sounds more like you?

D

A

If I have the cash, I’ll buy it right away.

B

I do some research to make sure it’s worth it, then save a little from each paycheck until I can afford it.

C

Impulse buys are where I shine – if I’ve got the cash or room on a credit card it’s as good as mine.

A

D

Big-ticket items are always out of my price range, but I might add it to my Amazon Wishlist.

B

D

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I usually shop generic and stick to a budget, but I do occasionally splurge when I’ve got extra cash after saving and paying the bills.

My saving and spending is such a welloiled machine I always know I can cover a purchase before I make it, and can afford to splurge when I want to.

I always buy the cheapest version of everything, even if it means replacing it more often.

I’m just trying to make sure all my bills are paid on time, let alone focus on budgeting.

What’s your plan for retirement?

C

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Sometimes I put my spare change into the cup holder in my car.

I’m focusing on building an emergency fund right now, but maybe once I meet that goal I’ll start thinking about retirement.

I’m automatically deducting a percentage from my paycheck and putting it into a taxadvantaged retirement account, plus I’ve spoken with an advisor about my future needs.

I’ve got awhile before I need to start thinking about retirement, but sure, I’ll probably save for it.

Social Security will still be around then, right? I’m planning on that.

Answers Mostly A’s

YOU’RE GETTING THE HANG OF THIS SAVING THING You know you need to put money away for emergencies, and you’ve mostly begun saving for bigger purchases instead of relying on a credit card. You’re on the right track, but you might benefit from some research on the best type of account for your funds. Don’t settle for a classic savings account if your money could work harder for you in a certificate of deposit or money market account. If you’re neglecting retirement savings, remember that compound interest is your friend. The sooner you start contributing a retirement account, the better.

Mostly B’s

YOU’RE A SAVVY SAVER You’re saving money to reach your goals and making sure you take advantage of all the low-risk ways you can put your money to work for you. Maybe it’s time to start looking into some higher-risk investment strategies, if you’ve got the stomach for it.

A financial advisor can help you make safe choices.

Mostly C’s

YOU’RE AN OLD-SCHOOL SAVER You’re cutting back expenses where you can and stocking away extra cash when it makes sense, but you might not be taking advantage of all the options available to you. When it comes to reaching your financial goals, save smarter not harder. Consider an interest-bearing savings account so you can start earning dividends on your savings. Plus, banks and credit unions are federally insured (unlike your sock drawer) so no matter what happens your funds are protected Mostly D’s

YOU’RE A SAVING NEWBY You don’t have a lot of extra cash to begin with, so why take the time to figure out what all those different accounts are, right? Wrong. It may seem silly to deposit your loose change, but those pennies can add up quickly. Don’t let a lack of knowledge keep you from reaching financial success once you’re more firmly on your feet.

BORROW

The Pros and Cons of

HOME EQUITY LOANS

Elizabeth VanCamp

My husband and I recently purchased his grandparents’ house and we’re excited about adding our own touch to this family home. The house has so much nostalgia for my husband, and it has some really awesome features, like a brick fireplace and a deck that spans the entire length of the house.

Even with all the great features, we, like many new homeowners, have a list of home improvement projects we’d like to do. While most of the updates and improvements are cosmetic (here’s looking at you, Pepto-Bismol pink bedroom and baby blue bathtub), there are some really big projects that we’d like to take on too, like finishing the basement.

Upon looking into the cost of this project—basements cost an average of $40,000—we realized that we wouldn’t be able to afford to do it any time soon without taking out a loan. A home equity loan seemed like a logical choice, but we wanted to truly understand the pros and cons of this kind of loan so we could decide if borrowing against our home would be the right route for paying for a big home project like this.

What is a Home Equity Loan?

A home equity loan allows you to borrow equity against the value of your home to pay for things such as home improvement projects, college, or a vacation. Are you confused by what that means? I was too at first. Let me give you an example to make it a little clearer: Let’s say you bought your home for $150,000 and it’s still valued at that amount, and you’ve paid $50,000 on your mortgage, leaving your balance at $100,000.

Depending on your financial institution, you can apply for up to 85% of your home’s value. Since your home is still valued at $150,000, 85% would be $127,500. After subtracting what you still owe on the mortgage ($100,000), you would have $27,500 in equity to borrow.

IHMVCU.org

Loan Option:

BORROW

HOME EQUITY LINE OF CREDIT

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A HELOC is very similar to a home equity loan, but one of the main differences is how you draw the funds. With a HELOC, you use your equity as a line of credit, similar to a credit card. You pull from the equity you get approved for as needed, and your payment will change depending on the amount you’ve taken out.

Similar to a home equity loan, HELOCs use your home as collateral, so there’s a risk of losing your home if you don’t make your payments on time. Additionally, HELOCs have variable rates so although rates are typically pretty low, they

PATHFINDER

could suddenly spike and leave you with uncertainty about how much your next month’s payment will be.

home’s equity. However, some of the risks a HELOC presents are making me rethink this option.

Something that really sounds the alarm for me is that because this loan isn’t a lump sum, if your credit score or the value of your home changes, your lender could potentially lower your limit or freeze your access to the line of credit altogether. If you’re not a fan of uncertainty (me either!), this could be stressful for you.

Many Americans have no problem utilizing this kind of loan, however. With HELOCs being a good compromise between a big lump sum of money and racking up credit card debt, it’s no wonder that according to Trans Union, around 10 million people are expected to utilize them between 2018-2022. Talk to your financial institution about whether a HELOC would be the right fit for your next big project or purchase, like that reliable car you’ve been wanting to buy.

Before doing my research, I thought this option would be the better choice for when we’re ready to finish our basement because we wouldn’t be tempted to take all the equity our credit union offers us, and would just take what we need for the project. We have become very responsible with our credit card and feel some peace of mind knowing that credit is there in case we really need it. Since this kind of home equity loan works similarly, I thought it might be the right fit for keeping us accountable to our

Loan Option:

HOME IMPROVEMENT LOAN A home improvement loan is another choice you have when trying to complete a project around your house. Like the home equity loan, home improvement loans have low rates and fixed payments, and you’ll receive the funds in a lump sum.

There are some key differences between home equity and home improvement loans.

While you might be eligible to take out a very large amount through a home equity loan, many financial institutions have lower caps on home improvement loans, such as $7,500.

Also, some banks and credit unions require you to use a home

improvement loan for actual home improvement projects, so you don’t have the same kind of freedom for how to spend the loan.

I’ve taken out a home improvement loan before and had a great experience with it. I was able to replace my leaky roof and install a wooden privacy fence for my dogs, and I wasn’t riddled with sudden, high interest debt. Because the loan wasn’t very large, the payments were manageable and I even paid off the balance earlier than expected.

Loan Option:

REFINANCE YOUR HOME A third alternative to a home equity loan would be refinancing your home for more than its value so you can remodel or do repairs. IHMVCU offers a Fannie Mae HomeStyle Renovation Mortgage for those who want to purchase a home that needs work or those who already own a home that needs some major upgrades.

Buyers (or homeowners who are refinancing) can bundle the cost of the home with the cost of repairs and remodeling so they have the convenience of only one mortgage payment.

This type of loan can help you stay in a home you love that just needs a little extra, well, love.

Or it can help you afford that home that’s in the perfect location but needs some serious TLC. Some things to be aware of with the Fannie Mae HomeStyle Renovation Mortgage are: • Repairs and other home improvement projects need to be completed within 12 months of the loan origination • The closing process for Fannie Mae HomeStyle Renovation Mortgages can take longer than traditional mortgages • Not all lenders offer this kind of loan This kind of loan is a great concept and could be the perfect fit for you and your home improvement needs, but make sure you fully understand how it all works before applying.

WHICH LOAN OPTION IS BEST?

The Pros There are lots of good reasons to consider a home equity loan. They often have low, fixed interest rates, and no annual fee, plus you’ll have fixed payments and the loan’s interest could be tax deductible (but you’ll need to talk to your tax advisor about that). One of the biggest perks? You can use the lump sum for whatever you want, not just home improvement projects.

This kind of loan is enticing for me because we could easily apply for one and have enough equity (due to the market value of our home currently being so high) to complete our basement right now instead of 4-5 years down the road. But, if you’re like me, and are very cautious when something sounds just a little too good, read on to the cons of home equity loans.

The Cons I didn’t own a home during the 2008 housing crisis but I remember the negative ripple effect it had throughout the country on homeowners and the economy. It scares me to borrow against my house, essentially taking out a second mortgage.

I wouldn’t apply for a mortgage for $40,000 more than I needed, why would I take out that large of a loan now?

It turns out I’m not alone in this thinking. Search for information on home equity loans online and you’ll find countless articles encouraging people to use caution when borrowing against their home’s equity. However, the general things to be wary of if you decide to go this route are: • This loan will be in addition to the mortgage you’re already paying • There are closing costs associated with this kind of loan (talk to your financial institution about what fees you’re responsible for) • Using all your equity can have negative repercussions if property values drop • If you default on your payments, your financial institution can foreclose on your home • If you sell your house before you’ve paid off your home equity loan, you’ll need to sell your house for a price that will cover both your mortgage and the additional loan

None of these loans can be labeled as “the best”, because they each have positives and negatives, and none of them will work for every situation, project, or purchase. Narrow down what you want to accomplish with the loan and figure out the total amount you’ll need to borrow, then talk with your financial institution about which choice might be best based off that information.

Although taking on new debt (or borrowing against your home’s equity) can sound kind of scary, these loans generally have positive outcomes. Make sure you can afford the additional loan payment and try not to use the full equity of your home, and you’ll be able to complete that home improvement project (or take that vacation or pay for a college education) in no time!

IHMVCU.org

BORROW

Amanda Spurgeon

I recently posted a question on Facebook: have any of my friends ever taken out a payday loan?

This quick survey really only taught me one thing. A lot of people have very strong opinions about payday loans, whether they’ve ever used them or not.

This is probably due in large part to some anecdotal coverage of the payday loan industry in the news recently (see: this segment from Last Week Tonight with John Oliver).

I may not need to tell you this, but the overwhelming opinion of payday loans is intensely negative. Run a quick poll on Facebook for yourself or enter a query on Reddit’s r/personalfinance and you’ll see what I’m talking about.

Average Joe seems to clearly understand that payday loans are bad news.

Why, then, are twelve million Americans getting wrapped up in this get poor quick scheme every year? Not because they don’t understand the potential dangers of payday lending. Rising inflation and stagnant wages have left the average American few places to turn when they can no longer make ends meet and when faced with a decision like getting evicted or spending half the year paying off a $375 loan, the risk is worth it.

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WHAT’S THE DEAL WITH PAYDAY LOANS AND LENDERS ANYWAY? You probably see these shops pretty frequently without thinking much of them. According to Google Maps, there are at least 10 of these establishments within a fifteen-minute drive from my house. Prior to starting this research, I was only aware of one on my drive to work, but once you start looking for them, they’re everywhere.

The products they sell are generally billed as twoweek, fixed-fee loans with a lump-sum repayment plan. The requirements vary from lender to lender, but generally all you need to get approved is an active checking account and proof of income. A credit check is seldom required, making them a goto for those with poor or no credit.

On the surface, they seem relatively harmless.

Borrowers agree to pay a one-time fee, usually around $10 - $15 per $100 borrowed, and pay the loan back within two weeks. Because these loans average only $375, it doesn’t seem unreasonable to expect payment that quickly, right?

And yet, according to research from Pew, the average borrower has to renew a $375 loan eight times before they’re able to pay off the principle and end up paying $520 in fees all for the original loan.

than income. For example, low-income homeowners are less prone to usage than higher-income renters: 8 percent of renters earning $40,000 to $100,000 have used payday loans, compared with 6 percent of homeowners earning $15,000 up to $40,000.”

Payday loans may be marketed as a solution for unexpected expenses, like car repairs or medical bills that come up when you’re between paychecks, but most borrowers use these loans to pay routine living expenses. In a recent survey, 69% of respondents said they used these small dollar loans to cover known recurring expenses, like their rent or mortgage, credit card bills, utilities or to purchase necessities like food or hygiene products.

Knowing how these loans are frequently used, it’s easy to jump to the conclusion that financial education, on budgeting, reducing expenses or even just the dangers of these predatory loans, can help prevent more borrowers from falling into the trap.

But is education the issue? My gut says no, and social media is one way to validate it.

Gathering information for this article I spent a short amount of time skimming posts on Reddit. What are people in the online forum saying about payday loans?

individuals without four-year degrees, one may draw the conclusion that financial instability and outside economic factors, rather than low income and lack of financial education, are the real issues leading borrowers to seek assistance with their everyday expenses.

Making such a claim may seem crazy given the strength of our current economy. On the surface, things are looking pretty good for American workers: 1.5 million new private-sector jobs have been created since the beginning of the year and unemployment is the lowest it’s been in decades at only 3.9%. How could I possibly blame payday loan usage on “outside economic factors?”

Because despite a growing jobs market, wages are stagnant for everyone but the highest earners.

According the Bureau for Labor Statistics, your paycheck may actually be worth less now than it was a year ago. From July 2017 – July 2018, prices rose 2.9% while wages grew only 2.6% during the same period, meaning many Americans will likely need to work more and for longer hours to maintain the standard of living they enjoyed a year ago.

That’s because at the end of two weeks, their financial situation hasn’t improved. They can’t afford to pay back the whole $375, but they can afford to pay another $50 fee to renew the loan.

Five out of the first 15 posts start something like this, “So I knew it was a bad idea before this ever started, but I was in a bind. . .” or, “I’ve heard a lot of bad news about payday loans, but I need a couple hundred dollars. . .” or, my personal favorite, “To clarify, I know payday loans are terrible. I’m not stupid. . .”

Speaking of that standard of living, it may not even be that great to begin with. Let’s put it in terms of dollars and cents. According to the Labor Department, the average “real” wage (the wage after adjusting for inflation), is $10.76 as of August 2018, down from $10.78 at the same time last year.

A recent report from Pew Research Center says the real wage now has about the same buying power as it did 40 years ago.

So now a product marketed as a short-term solution for an unexpected or one-time expense becomes a five-month ordeal. Where’s the disconnect? To find out, we need to understand who takes out these loans in the first place

Now I’m not saying a handful of posts online are indicative of the knowledge held by all payday loan borrowers, but I do think it shows that to some extent, borrowers know that they’re setting themselves up for trouble.

“In fact, in real terms average hourly earnings peaked more than 45 years ago,” writes Pew’s Drew Desilver. “The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.”

WHO TAKES OUT PAYDAY LOANS AND WHY?

If ignorance about the inherent dangers isn’t the problem, could it be a lack of overall financial knowledge? Would teaching frequent borrowers how to set a budget, ways to cut back on expenses etc. help prevent them from seeking these predatory payouts to help make ends meet?

So what does all that actually mean? While earning more might make the average person feel like they’re on track to improve their finances it doesn’t actually mean they’re any better off or have any more income than they did in previous years when they earned a lower wage. Until wage growth exceeds that of inflation, this isn’t likely to change.

According to the Pew Charitable Trust’s small loan research, the people who frequently seek out payday loans are surprisingly diverse. Though most payday loan borrowers are white women between 25 -44, there are five main groups of people likely to have used a payday loan: • Those who don’t have a four-year college degree • Those who are separated or divorced • Those who earn less than $40,000 a year • African-Americans • Home renters

WHERE EDUCATION FAILS TO SOLVE THE PROBLEM

Based on what we know about short-term lending, one might assume that income is the main factor in determining what makes these groups more likely to seek a payday loan, but according to Pew Charitable Trusts, income is just a small piece of the puzzle:

To some extent, financial education may help borrowers who seek payday loans to repair the financial situation that drove them to borrow over time, but does nothing to solve the short-term issue of needing cash now. Debt elimination plans can take months or even years, depending on the circumstances. Reducing expenses is a good guideline for everyone, but what if you’re already only spending the bare minimum to survive? Should you give up a home in a safe neighborhood to save a few hundred dollars a month and live in fear somewhere dangerous?

“It is notable that, while lower income is associated with a higher likelihood of payday loan usage, other factors can be more predictive of payday borrowing

With the price of rent on the rise in most major markets, the high cost of divorce and limited highpaying job options outside the labor sector for

With the dollar taking us shorter and shorter distances every year, it’s not surprising that 12 million Americans find themselves in need of shortterm funding to make ends meet. Yes, financial planning is important but it can’t increase the value of wages or solve problems inherent with the lumpsum payment system associated with these small dollar, short-term loans.

Though legislators are working to reform the payday loan industry and curb predatory lending, their attempts only address the issue from the side of regulation and do nothing to address the economic factors that lead Americans to seek these small, expensive loans in the first place. Until we can fix the consumer side of the issue, I expect we’ll see continued usage of payday loans despite the known, inherent dangers.

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Travel Budget:

BOSTON IN THE FALL

LEARN SOMETHING NEW There are so many learning opportunities in Boston, and several cost $20 or less. Even if your budget for your trip is small, you might be able to afford visiting a few of the following:

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BOSTON CHILDREN’S MUSEUM

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HARVARD MUSEUM OF NATURAL HISTORY

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PEABODY MUSEUM OF ARCHEOLOGY & ETHNOLOGY

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JFK PRESIDENTIAL LIBRARY & MUSEUM

$

20

PEABODY ESSEX MUSEUM

FREE

BOSTON PUBLIC LIBRARY

$

$

Elizabeth VanCamp

I recently went on a trip to Massachusetts to visit family in Northampton, and to take my daughter to her first Red Sox game in Boston. Although we only stayed in Boston for a day, I’m lucky enough to have spent an entire week there a few years back.

Due to being college students and newlyweds, my husband and I did that first trip on a shoestring budget, and we still think of it as one of our favorite vacations together. I wanted to share some insight with you on how you can enjoy the awesome city of Boston even if you’re tight on cash.

One of the things I love most about Boston is that it’s a city with endless opportunities for fun and learning, and it can be enjoyed on almost any budget. Don’t let a tight budget stop you from having a great time when you visit the city!

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PATHFINDER

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BUY A GO BOSTON CARD If you’ve never heard of Go City Cards, I’m about to introduce you to a travel game changer. The company offers cards, such as the Go Boston Card, that can save you up to 55% on various attractions versus paying the regular admission price.

You can choose the right Go Boston Card that fits your trip plans and budget to make the most of your visit. The cheapest card (a one-day pass to as many attractions as you’d like to see) is $59 per person. This is a great deal, but if that price doesn’t fit your budget, there are still many inexpensive things to see and do without.

VISIT THE PUBLIC GARDEN Boston’s Public Garden is filled with beautiful plants and flowers, and has a lagoon, ducks roaming about, and musicians providing a peaceful ambience.

You can simply take a stroll through the huge garden, or you can grab lunch from a nearby restaurant and enjoy it underneath a tree.

You can also take a swan boat ride around the lagoon (a tradition dating back to 1870!) for $4 per adult and $2.50 per child. Don’t forget to visit the statues of Mrs. Mallard and her ducklings, who were the subjects of Robert McCluskey’s book, “Make Way for Ducklings”.

TAKE A HISTORIC TOUR Whether you want to take a guided tour or venture out on your own, Boston has a lot to show you. You can explore the Freedom Trail for $12 for adults, $10 for students and seniors, and $6.50 for kids. At only 2.5 miles long, this tour is doable for most people.

If you would rather explore sites on your own, like my husband and I did, find a map of the city’s historic sites (we bought ours from our hotel’s concierge for $3) and get to it! The city is easy to navigate on foot but the MBTA Subway is very easy and cheap to use if walking is a challenge for you, and you’ll have a great time exploring all the history Boston has to offer.

VISIT FAMOUS PUBS Don’t you want to go where everybody knows your name? Originally called the Bull and Finch Pub, the Cheers bar in Beacon Hill is a fun destination whether you’re a fan of the show “Cheers” or not (and it provides a great photo op).

Another bar that’s worth visiting is the Pour House. When searching for it on Google, you’ll find it listed as the #1 Bar in Boston. While I can’t verify that fact, I can tell you from experience that this bar is a winner. What’s not to like about great food at cheap prices within walking distance to Fenway Park?

TOUR FENWAY PARK Whether you’re a baseball fan or not, seeing Fenway Park up close is a pretty great experience. As the oldest Major League Baseball stadium still in use and a member of the National Register of Historic Places, it’s sure to please almost anyone who visits.

A tour is just $20 per adult and takes you throughout the whole ballpark.

This includes the towering Green Monster, Fenway’s 37.167’ tall left field wall, which was part of the original 1912 construction of the park.

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How to throw a

PINTEREST-WORTHY BIRTHDAY PARTY

(AND STAY FRUGAL) Elizabeth VanCamp

As my daughter’s first birthday approached, the stress about planning her party hung over my head like a dark cloud. As I researched ideas, I was quickly inundated by images of perfect first birthday parties—adorable cake smashes, elaborate decorations and party favors, and perfect arrays of food—and I felt slightly defeated.

In addition to not being a born party planner, I’m also very frugal, so I didn’t want to spend a bunch of money on a party that my daughter wouldn’t even remember. But, my husband and I wanted to make the party enjoyable and cute for our guests (and for us). I began my search for an affordable way to throw a Pinterest-worthy first birthday party that wasn’t a total snoozefest.

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MAKE A PARTY BUDGET

DECIDE ON A THEME

PICK A LOCATION

First thing’s first: decide how much you want to spend on the party. Once you know the maximum amount you want to spend, you can divide that into sub-budgets for invites, location rental, decorations, and food. Knowing the budget for each aspect of my daughter’s party made me feel slightly less stressed and better prepared me for planning the party.

Whether it’s a cute, coordinated theme (like “Mr./Ms. Onederful” or “Wild One”) or something simpler, deciding a general theme will make buying decorations and party favors easier on you. For instance, our theme was pastels, so pretty much anything light and cheery was welcome for her party. Nothing really matched— we used flowers, word balloons (which said, “Party”, “Yay”, and “One”—so cute!), and table cloths with different patterns—but everything was pastel colored, and we loved how fun and simple it all was.

This step will require you to have an idea of how many people will attend the party. Once you know that, you can decide if you can host it at your house (or at a loved one’s home, if they’re willing) or if you’ll need to rent a space.

PATHFINDER

If you need to do the latter, there are plenty of inexpensive options at community centers or churches. Some places in the Quad Cities cost as little as $20 per hour (like the Bettendorf Community Center), so don’t despair about your party budget if you need to rent a space!

Keep it simple. Most people are there to ooh and ahh over your child, and they won’t even notice half of the details.

DECIDE WHAT YOU CAN DO WITHOUT A PROFESSIONAL Can you bake, make delicious food, or put together decorations like a boss? Anything you can do on your own for the party will save you money. I picked up on some serious cake decorating skills from my mom growing up, so I decided to make her cake myself.

FIND DECORATIONS, PARTY FAVORS, AND OTHER SUPPLIES

Once you’ve decided on the theme, start looking for decorations early so you have time to find the best deals, and don’t limit yourself to one store. I started looking around for decorations and supplies about a month in I found inspiration for her cake while searching, advance, and bought them whenever I saw a “simple birthday cake ideas” on Pinterest. good deal. About 50% of our party supplies Remember, our theme was pastels, so I didn’t (including those word balloons I mentioned have much to guide me when deciding what her earlier) came from Target’s dollar section. I also cake would look like. Luckily for me, about five found supplies at Michaels and on Amazon, minutes into the search, I found the cutest cake and I even got a few things from the farmer’s idea. It was simple but very much my style and market. pastel themed.

You can also find great additions to your party I got out my mom’s old Betty Crocker cookbook, at the Dollar Store or a thrift or antique store. found a recipe for a vanilla cake, and tried to Take some you-time and go antiquing—you recreate the Pinterest cake. If you decide to might be surprised by all the cool pieces you make the cake yourself, I suggest doing a trial find to make your child’s birthday uniquely run. Thankfully I did because the first cake was adorable. the definition of a “Pinterest fail”. My second We opted not to include party favors. For us, attempt yielded a much better cake and, even they were an unnecessary added expense, with the two separate attempts, I still saved and everyone seemed to have a great time about $50 by making it myself. despite their absence. However, if you decide to That being said, don’t take on anything give them out, there are plenty of inexpensive that’s going to make this party too stressful. things you can offer, like bubbles, candy, or If baking a cake or making food for a huge homemade cookies. number of people is just going to cause you anxiety, consider hiring someone to take over those aspects of the party. You can also ask a friend or family member to help so you’re not solely responsible for all the work. From my experience, most people are happy to help with putting together an adorable first birthday party.

SET REALISTIC EXPECTATIONS In the age of Pinterest perfect parties, it’s easy to put pressure on yourself to throw the cutest, most coordinated birthday party for your child.

But it’s important to set realistic expectations and goals for this party so you don’t end up taking out a small loan for it. Pick which details are most important to you and plan the party accordingly.

And remember that the point of your child’s first birthday party is to celebrate them (not to have an Instagram ready party), so it’s alright if every last detail isn’t picture perfect. I know that not every detail of my daughter’s party was picture worthy (in fact, we forgot to take pictures throughout the party!) but it was fun for all involved, and low stress for me, which is a win-win.

Planning a frugal birthday party can feel impossible, but you can do it! Deciding on a budget, keeping things relatively simple, and planning ahead will keep you from breaking the bank, and will help you stay cool, calm, and collected. The best thing you can do is plan a party that will be enjoyable for you and your child. The rest is just details.

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BETTENDORF 2839 AAA Court | Bettendorf, IA 52722 DAVENPORT 201 East 3rd Street | Davenport, IA 52801 2102 East Kimberly Road | Davenport, IA 52807 3646 West Kimberly Road | Davenport, IA 52806 DEWITT 1703 11th Street | DeWitt, IA 52742 EAST MOLINE 358 17th Avenue | East Moline, IL 612644 GALESBURG 404 West Carl Sandburg Drive | Galesburg, IL 61401 KEWANEE 337 Tenney Street | Kewanee, IL 61443 MILAN 801 Tech Drive | Milan, IL 61264 MOLINE 1118 5th Avenue | Moline, IL 61265 2101 52nd Avenue | Moline, IL 61265 MONMOUTH 2 AmericInn Way | Monmouth, IL 61462 PROPHETSTOWN 334 Washington Street | Prophetstown, IL 61277 ROCK ISLAND 4206 5th Avenue | Rock Island, IL 61201 SILVIS 685 Avenue of the Cities | Silvis, IL 61282 WEST BURLINGTON 403 South Gear Avenue | West Burlington, IA 52655

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