Millionaire Secrets to Success

Patience and hard work aren’t all you need to reach financial success. We’ve got some secrets from self-made millionaires to help you make your own fortune:

• Set some clear goals. You’ve got to dream big if you want to succeed on a large scale. Don’t be afraid of your ambitions. Start with a list of what you want to achieve this year, and then select the one goal that would have the greatest positive impact on your life, something you feel real passion for. Then get to work.
• Educate yourself about money. Even if you don’t have your sights set on becoming the next Warren Buffett, a good understanding of finance will help you set priorities and make decisions about spending, investments, and savings. Immerse yourself in all the information you can find about the field that interests you. Knowledge is power.
• Think of yourself as your own CEO. Whether you work for a boss or for yourself, view your career and success as your own. That means taking full responsibility for what happens to you—your decisions, failures, and triumphs. It also means putting all your energy into your goals. Motivational guru Brian Tracy advises taking the “40+” approach: You work 40 hours a week for survival, but that’s only the beginning. Every minute you devote past that 40 hours is devoted to your success.
• Serve other people. Structure your goals so they’re not just about you. You’ll earn support from the people whose help you need by showing them how your achievements will benefit them—and you’ll feel better about yourself than you would if you concentrate only on what’s in it for you.
• Learn to sell yourself. Whatever you create, you have to sell to someone else. You’ll need to understand sales and marketing no matter what industry you’re in. But at the same time, you have to sell others on your abilities. Be honest and reliable so customers, investors, and other important stakeholders know they can trust you to take care of them.

Lions, Tigers, Bears, and Lenders?

Let’s play a game. I’ll give you a word and you tell me what comes to mind. Ready?

“Predator.”

Did you think of a prehistoric animal with claws and stabbing teeth? Or, a stealthy cheetah prowling for gazelle in the grassy plains of the Serengeti? Perhaps a portly Siamese cat stalking a house sparrow?

How about a slick-talking and personable sales person who promises easy credit? These crafty bipedal predators engage in an act called predatory lending — the practice of deceiving unsuspecting consumers with marginal credit into taking high interest loans, usually against the equity in their homes.

The Pitch
If you listen to the radio or read your junk mail, you’re probably very familiar with this pitch: “Slash your monthly payments by combining all of your high interest credit cards into a home equity loan. You’ll write just one check each month, and you’ll be able to deduct the interest from your taxes.” Many homeowners successfully use the equity in their homes to pay down debt in part because they’re able to secure prime loans, conventional loans at reasonable interest rates. Borrowers who obtain loans with good interest rates typically have a Fair Isaac & Company (FICO) credit score, a three-digit number that represents credit worthiness, in the range of 700 to 850. (Recall the credit score scale ranges from 300 to 850.)

Individuals who have marginal credit, a FICO score below 450, often qualify for what are known as subprime loans. Fair subprime lending has enabled low to moderate-income borrowers with blemished credit histories to secure credit. But, because of this population’s propensity to default on loans, subprime lenders charge higher interest rates for their loans. According to the consumer advocate group Association of Community Organizations for Reform Now (ACORN), predatory lending practices—financing excessive fees, charging higher interest rates than a borrower’s credit history justifies, and prepayment penalties—occur most often in the subprime lending market.

Who is at risk for becoming a victim of predatory lenders? Low income, elderly and minority consumers who are anxious to have access to credit are at risk. Borrowers—particularly those who can’t speak English—who don’t understand the loan application process, are also at risk.

Predatory lending practices — a cursory look
As the subprime lending market has grown so has the incidence of unscrupulous lending practices. The following are examples of predatory practices that have stripped consumers of their wealth in the way of high-interest rates and exorbitant up-front fees, and if they can’t keep up their monthly payments, foreclosure.

Financing excessive fees into loans — Predatory lenders often charge up to eight percent in loan origination fees, compared to one to three percent assessed by other financial institutions.

Your right: If your lender wants to charge you more than three percent, find out why, and then consider applying for a loan at your credit union. In addition to offering fair loans at reasonable interest rates, these democratically controlled financial cooperatives counsel members on the differences and advantages of lending products and help them understand loan disclosures, rates, fees, and terms.

Charging higher interest rates than a consumer’s credit warrants — Consumers who don’t know their credit scores, or don’t understand that good credit scores can mean an interest rate difference of two to three percentage points (thousands of dollars over the life of the loan) are vulnerable to this predatory lending practice.

Your right: Protect yourself by checking your credit history and score. You can access a multitude of credit score providers online. Most providers offer a range of services from a one-time check of your score to a one-year subscription, which will enable you to monitor all changes to your credit information. If you use more than one provider, you’ll likely discover you have different credit scores. This is because providers may apply competing mathematical formulas to the data held by the three major credit bureaus (TransUnion, Equifax and Experian) to determine your score.

Consolidating debt in a high interest loan without regard to the borrower’s ability to make the monthly payments — The motivation for some lenders, especially when there is a significant amount of equity built up in the home, is foreclosure on the house which then can be resold for profit.

Your right: Before you consider borrowing money against your home, consider seeking help from a legitimate non-profit credit counseling service such as GreenPath Debt Solutions. To locate an office near you, go to the National Foundation for Credit Counseling’s (NFCC) Web site and click on the Member Agency Locator link. You can also call (800) 388-2227 for 24-hour automated office listings.

Attaching prepayment penalties to a loan — According to ACORN, more than two-thirds of subprime loans come with prepayment penalties, which come due when the borrower pays off a loan early through refinancing or sale of the house. One particularly disturbing example of a prepayment penalty is when it’s combined with an adjustable rate loan. In this instance, a borrower pays a lower rate in the first couple of years of the loan, after which, the rate rises dramatically. Unable to make the monthly payments, the borrower is forced to refinance, and in doing so, must pay a prepayment penalty, often several thousand dollars.

Your right: Predatory lenders often fail to call the borrower’s attention to the prepayment penalty clause in the loan application. Before you sign the papers, ask a lawyer or a trusted friend to review the documents.

Visit Wayne Westland Federal Credit Union for more!

Top 10 Ways to Prepare for Retirement

1. Start saving, keep saving, and stick to your goals

If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you're not saving, it's time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it's never too early or too late to start saving.

2. Know your retirement needs

Retirement is expensive. Experts estimate that you will need about 70 percent of your preretirement income—lower earners, 90 percent or more—to maintain your standard of living when you stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead.

3. Contribute to your employer’s retirement savings plan

If your employer offers a retirement savings plan, such as a 401(k) plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about your plan. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to get that money.

4. Learn about your employer's pension plan

If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit. Learn what benefits you may have from a previous employer. Find out if you will be entitled to benefits from your spouse's plan.

5. Consider basic investment principles

How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you'll have saved at retirement. Know how your savings or pension plan is invested. Learn about your plan's investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.

6. Don't touch your retirement savings

If you withdraw your retirement savings now, you'll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer's plan.

7. Ask your employer to start a plan

If your employer doesn't offer a retirement plan, suggest that it start one. Many retirement saving plan options are available. Your employer may be able to set up a simplified plan that can help both you and your employer.

8. Put money into an Individual Retirement Account

You can put up to $5,000 a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages.

When you open an IRA, you have two options—a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.

9. Find out about your Social Security benefits

Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. You may be able to estimate your benefit by using the retirement estimator on the Social Security Administration's website. For more information, visit their website or call 1-800-772-1213.

10. Ask questions

While these tips are meant to point you in the right direction, you'll need more information. Talk to your employer, your bank, your union, or a financial adviser. Ask questions and make sure you understand the answers. Get practical advice and act now.

Source: United States Department of Labor

How to Budget

You can make your own budget worksheet using either a pen and paper or a computer spreadsheet program. Think of your budget in terms of two things: money and time. Money, of course, is divided into its own two categories: Income and Expenses.

Follow these steps to make your budget worksheet:

1. List your income in a vertical column down the left side of the page. Think of all the sources of income (including paychecks and interest) that you receive. Also, consider how often this income becomes available to you. For example, are you paid weekly or every other week?


2. List your expenses below your income in that same column. Begin with major expenses such as a car payment, car insurance, food (including school lunches), clothing, and entertainment. Include all expenses, whether you pay in the form of a check, cash, credit card, or the amount is deducted from your credit union account. Remember to include any finance charges, such as interest on your auto loan.


3. Now, list the related timeframes in a row across the top of the page. For instance, does the expense or income occur weekly, per paycheck, monthly, quarterly, or yearly? Is the expense tax-deductible? If so, add a heading for this in your horizontal row. When you are finished you should have the beginning of a grid or chart. Use this as a worksheet to help you categorize and plan. When you first start using your budget worksheet, you might find that you change it often. That’s good! Your worksheet should be a working document.


4. Now that you have a “skeleton” worksheet, add anticipated expenses. Are you planning to go to college or participate in a wedding (as either a bridesmaid or a groomsman)? All of these require that you spend a lot of money. (Hint: Anticipate that you will have to spend more than you’d prefer, and budget accordingly. It’s better to be prepared than shocked.) You can also consider anticipated sources of income, such as the yearly birthday check from your Aunt Mildred. Be careful, though; don’t spend the money before you have it.


5. Don’t forget the “small stuff”! Do you buy soda pop or special coffee, eat lunch out, or buy snacks from the vending machine? If so, keep track of how often you do—and how much you spend. All of these purchases add up throughout the week, the month, and the year. So budget for these, or do without!

Remember: Use your budget as a tool to help you achieve your goals. Once you set up your categories and make it a point to record the appropriate dollar amounts, you’ll see how easy it is to continue recording your income and expenses.

The most difficult part is getting started. But once you have your plan in place, you’ll recognize the power of the information that you have at your fingertips!

Visit Wayne Westland Federal Credit Union for more!