Invest Wisely – First Bank https://localfirstbank.com North and South Carolina Community Bank Wed, 24 Oct 2018 00:29:10 -0400 en-US hourly 1 Planning the Right Mix for Retirement https://localfirstbank.com/article/planning-the-right-mix-for-retirement/ Tue, 10 Jun 2014 13:01:08 +0000 https://localfirstbank.com/?post_type=article&p=2837

by Allen D. Smith, Executive Vice President at First Bank

As the head of First Bank’s wealth management group, I know that many of our business customers need help preparing for retirement. As you enter this important stage in your financial well-being, are you setup to leave the workplace one day financially empowered?

Small business owners are often at the greatest risk of under-saving. Some may even withdraw from their retirement savings too soon to cover business expenses. In a period of flat interest rates, stretched monthly expenses, and recovering real estate equity, financial growth feels impossible at times.

So what’s the best way to approach your retirement, especially when your focus is on your business right now?

It starts with a plan. That sounds simple and is often overstated. But too often, small business owners enter retirement or semi-retirement without a thoughtful or updated long-term plan. Some principals we review with our clients whether you are 35 or 65 include:

Investment Risk Grading

Not everyone is moving toward a conservative approach in the later years. Have you graded your investment behavior recently? We develop a market plan and risk spread that help you analyze where, when, and how you want to invest your retirement funds.

Savings Optimization

Diversified savings options make allocation and analysis of CDs or other long-term saving options as important as ever before. Our advisors map interest and savings potentials for clients to help inform a safe and effective retirement strategy.

401k and IRA Planning

401Ks and IRAs remain important options for long-term financial well-being. These accounts have varying advantages and disadvantages and warrant expert analysis every few years as you near retirement.

Insurance Optioning

Life insurance and long-term care planning are a balancing act between now and the future. We include these options as part of a larger analysis of where to spend or save.

Trust and Estate Legal Analysis and Planning

Legal expertise is pivotal when planning estates or trusts. Our expert legal team provides detailed, but understandable guidance in shaping family and generational financial planning.

As a small business owner or employee, you understand the pressures on long-term financial gain. You’ve experience it firsthand.

Thousands of Baby Boomers are retiring each year, unsure if there money will work for them. Many Generation X-ers have relied to their savings to soften home equity loses. And Millennials still struggle to find a good starting point for retirement savings in their twenties thanks to a slow recovering job market.

These challenges are not going to disappear in the next decade. But a strong financial partner and expert in your local community can provide the best financial track to combat these external pressures.

We won’t sell you any “surefire” secrets about timing the market. And we won’t sell you any off-the-shelf solutions. Instead, you’ll get personal advice on retirement from professionals who really listen to you.

We live in an uncertain investing climate. But one thing that never changes is our desire to earn our clients’ trust with every interaction.

We’re in the business of planning for tomorrow. That’s why we know the importance of starting today.

Sincerely,

Allen D. Smith

Securities and insurance products are offered through INFINEX INVESTMENTS INC., Member FINRA/SIPC. INFINEX INVESTMENTS INC. and FB Wealth Management, a division of First Bank, are affiliated entities. Investment and Insurance Products are:

NOT Bank Deposits NOT FDIC-Insured HAVE NO Bank Guarantee
NOT Insured by any Federal Government Agency May Go Down in Value
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How to Retire in North Carolina https://localfirstbank.com/article/how-to-retire-in-north-carolina/ Thu, 05 Jun 2014 14:22:30 +0000 https://localfirstbank.com/?post_type=article&p=2832

Do you dream of retiring and spending the rest of your days relaxing and enjoying life in beautiful surroundings? If so, retirement in North Carolina may be for you.

Why North Carolina?

Low cost of living

When you retire, you’ll likely be on a fixed income, so a low cost of living will help make the most of your savings. Overall, the cost of living in North Carolina is below the national average, although it does depend on the area you choose to retire in.

Even in the more expensive areas such as Asheville, Charlotte, or Raleigh, you are going to get more bang for your buck than you would in many other states.

The landscape

North Carolina is one of the most beautiful states in the country. No matter where you live in North Carolina, you’re only a day away from the beach or the mountains.

Visit the Great Smoky Mountains, Chimney Rock State Park, or Grandfather Mountain in the western part of the state, or head east to experience the southern charm of the towns of Moore County, or Wilmington, New Bern, and the Outer Banks. With over 300 miles of barrier island beaches, you’re sure to find a little piece of paradise to call your own.

The climate

Retirement in North Carolina will enable you to get a taste of all 4 seasons. Summers are hot with temperatures usually hovering in the 90s. The humidity is mostly bearable outside of the occasional warm week in August.

Winter temperatures rarely fall below the 20s, and a few snow or ice storms per season are just enough. By the time you begin to tire of it, it’s gone.

Though it often starts with a deluge of pine pollen, spring in North Carolina is bright and fresh. You can’t help but want to be outdoors, experiencing the sunshine and cool breeze.

And Autumn brings with it beautiful and vibrant colors—for some of the best views the state has to offer, consider a car ride along the Blue Ridge Parkway.

Activities for everyone

Do you love playing golf? Try one of the over 400 golf courses the state has to offer, including the famous Pinehurst No 2.

If you prefer arts and entertainment, a visit to the Triangle or Charlotte will provide plenty of opportunities, from shopping to museums, music to performing arts.

Are you a sports fan? North Carolina is host to professional sports teams including the NBA’s Charlotte Hornets and the NHL’s Carolina Hurricanes.

Visit Raleigh/Durham, the mecca of NCAA Basketball, where Duke, the University of North Carolina, and NC State go head to head in heated rivalries.

How to Get There

Retirement in North Carolina sounds pretty great, doesn’t it? Here are some tips on how to make it happen.

Take advantage of your employer’s 401(k)

You’re probably already familiar with a 401(k). If your company offers one, be sure to make the most of it. In many cases, your employer will match up to a certain percentage of your contributions, so you should invest at least the full amount your employer is willing to match. If you don’t, you’re leaving money on the table.

The best way to guarantee your discipline with your retirement savings is to set up an auto draft from your paycheck. The money will be deposited directly into your account every pay period, and you don’t even have to think about it.

Unless you find yourself in extreme circumstances, refrain from withdrawing any of the funds from your 401(k) until you retire. Otherwise, you will be subject to penalties that will nullify much of your contributions.

Open an IRA

Even if your employer doesn’t offer a 401(k) or if you’re self-employed, there are still ways to save for retirement. Traditional IRA’s and Roth IRAs can be set up to help you save for retirement.  Traditional IRA’s allow you to put pre-tax dollars away and accumulate the earning tax deferred.  When you withdraw from the Traditional IRA the funds will be subject to taxes.

Roth IRA’s offer plans that allow funds to be deposited after they are taxed. The funds accumulate tax free and they are not subject to taxes when they are withdrawn from the account.

Regardless of whether or not you are contributing to a 401(k) plan, an IRA or a Roth IRA might a good idea. Start by maxing out your contributions to the 401(k), at least up to the point that your employer will match.

Live the dream

A relaxing retirement in North Carolina is well within reach. Depending on your age, you may have to contribute a higher percentage of your income to retirement savings in order to make your goals a reality. The most important thing is to create a plan and stick to it.

Just remember, the sacrifices you make now will be worth it when you’re taking in the breathtaking sites of the Great Smoky Mountains or standing at the top of the Cape Hatteras Lighthouse.

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Basics of Estate Planning https://localfirstbank.com/article/basics-of-estate-planning/ Fri, 30 May 2014 18:35:46 +0000 https://localfirstbank.com/?post_type=article&p=2817

Planning for your future? You don’t have to do it alone. We talked to wealth management expert Russell Sugg to understand, at a high level, how to think about an estate plan.

What is estate planning?

Estate planning, at the highest level, is about protecting your assets and often, passing those assets on to the next generation.

How would you help a client get started?

Contrary to what some people might imagine, we don’t start with numbers and charts. First, we need to get to know the client personally because we make a personalized estate plan for every client. We need to know what their current financial needs are and what they anticipate their needs will be in the future.

There are a lot of factors to consider: age, how much longer a person expects to work, their family situation, their investment tolerance. At a deep level, it’s really about understanding someone’s goals, hopes, and dreams.

It sounds like this is something people need to take some ownership over.

The client has to be involved—it’s all about them and not something that they can get up and walk away from completely.

This also means we’re selective about our customers because we’re looking to be their trusted partner in planning their future.

Can you describe that partnership a bit more?

We usually don’t just manage money. We provide additional value and expertise.

You can think of estate planning as an interlocking puzzle—insurance, taxes, investments—it’s a comprehensive picture. Planning or managing it piecemeal usually doesn’t work.

That’s why we take a multi-disciplinary approach based on the client’s time horizon. And you can’t just be driven by the markets either; they come and go. Good estate planning should account for market and other risk as much as possible.

What are the most common challenges you see?

For clients who are retired or will be soon, IRA distributions and descendent planning are very important. Younger clients can be more concerned with building sufficient wealth.

My overall advice to those considering an estate plan: find a trusted advisor and take a comprehensive approach.

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5 Things You Need to Know Before You Become a Landlord https://localfirstbank.com/article/5-things-you-need-to-know-before-you-become-a-landlord/ Tue, 01 Apr 2014 12:59:53 +0000 https://localfirstbank.com/?post_type=article&p=2689

Hey, here’s a great idea! You know that extra house, apartment, or in-law suite you have sitting around doing nothing? Why not lend it out to people and make some fast cash? What about that house for sale down the street? Why not buy it and rent it out? Seriously, how hard could it be to be a landlord?

Not so fast, eager capitalist. Whether you want to be a landlord as part of an overall investment strategy or just because you can’t sell your house and want to move, you need to take the time to think things through.

Here are 5 items to cover before you decide to become a landlord.

Run the numbers.

Does being a landlord actually make financial sense for you? It’s the most obvious question for any business owner, and make no mistake—when you’re a landlord, you’re running a business.

Consider all of your costs, including your mortgage payment, insurance, repairs, marketing, and the value of the time you’ll spend managing everything. Then, compare similar rental properties for a clear-eyed look at the kind of monthly income you can reasonably expect.

Now ask yourself: is renting that property worth it?

Of course, you may already be sinking money into a property you own. That might change your financial calculations—even if you don’t break even, you might still be able to recoup some of your investment.

Or it might be better to just sell the property. You need to run the numbers to know.

Look at the legality.

You know the contracts you’ve signed when you’ve rented properties? You’ll be responsible for those now.

You’ll also want to stay on the right side of the law, which varies by state. For example, here’s a booklet on tenant rights in North Carolina. And here’s a chapter on Landlords and Tenants from the North Carolina General Statutes. Don’t worry; you don’t need to memorize all of this information. But you should make sure you understand your responsibilities and obligations as a landlord.

Ultimately, you might want to work with a lawyer. In that case, add those costs when you run the financials.

Master marketing.

Putting your property on Craigslist or another online listing service is just the beginning.

You’ll also have to give tours of the property and make sure it’s in viewable condition. You could hire someone to do this for you, but once again, that will add to your overall costs.

Prepare for management and maintenance.

Depending on the lease agreement, landlords can be responsible for a wide variety of property maintenance.

This isn’t just to keep the current tenant safe and happy—it’s to keep the property in good condition for future tenants or buyers. This could mean anything from refreshing a chipped coat of paint to climbing out of bed to fix a broken toilet at 3 in the morning.

Want to hire a property manager or maintenance person to deal with this for you? Sure! But you guessed it, you’ll have to add it to your costs.

Expect the unexpected.

Tenant behavior can be unpredictable, even if you try to get the best-behaved occupants possible. You’ll need to be ready for unpleasant surprises.

Even if you hire a management company to run the day-to-day affairs, there will still be decisions that only you as the owner can make. If the air conditioning unit needs to be replaced, your property manager might have to give you a call. Plus, you still need to find people you trust as property managers.

Despite its challenges, being a landlord can be very rewarding. For a frank discussion on what to expect, and how renting a property might fit your personal financial situation, talk to a mortgage banker at First Bank.

 

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5 Reasons to Consider a Home Equity Line of Credit (HELOC) https://localfirstbank.com/article/home-equity-line-of-credit/ Fri, 08 Nov 2013 18:45:43 +0000 https://localfirstbank.com/?post_type=article&p=686

Your home is your most valuable asset and investment. One of the benefits of ownership is the ability to take a loan out against the equity your home has accrued. This is called a home equity line of credit.

Your home’s equity can be determined by finding the difference between the fair market value of the property and the outstanding balance of all liens on it (typically your mortgage).

Equity increases as property values go up and you pay down your mortgage balance. A home equity line of credit then can provide many benefits for those with good credit and a chunk of their mortgage paid off.

Consider the Following

  1. You can use it for big purchases. A home equity line of credit, which uses your home as collateral, frees up a large sum of money when it’s most needed and fills in any gaps in savings that you might have. It’s best for big projects such as major home improvements, college education costs, debt consolidation, and even a dream vacation.
  2. You can borrow any sum up to your credit limit. Don’t feel comfortable with the total amount for which you’ve been approved? No worries; you can often just borrow up to what you need.
  3. You’re protected from exorbitant interest rates. You may even be able to deduct the interest from your income taxes.
  4. Your repayment is at your own speed, provided you meet the minimum. Unlike a mortgage, which can stretch on for 15 to 30 years, the home equity line of credit usually has a payment span of roughly 15 years. Lenders may allow you to pay more than the minimum to pay down the principal each month to minimize the impact of the interest.
  5. Once you pay down your line, you may have it available for further use when you need it. Need to replace your roof after a particularly tough hurricane season? Have unexpected medical costs? If your home equity line allows for renewal after repayment, you can utilize the line a second time to cover unexpected costs or future projects.
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Mortgage Basics https://localfirstbank.com/article/mortgage-basics/ Fri, 01 Nov 2013 14:38:07 +0000 https://localfirstbank.com/?post_type=article&p=542

You’re finally ready.

You’ve been saving up for a long time, you know how many bedrooms you want, you know what your ideal backyard looks like, and you can’t wait to meet your future neighbors.

You are prepared to purchase your first home.

As exciting as this time in your life can be, it’s important to remember that this is a very big decision. Before you take out a loan, you need to be sure that you understand the basics of the mortgage process.

Qualifying and Getting Approved for a Mortgage

Pre-qualification

If you’re going to start looking at houses, you will need to have a price range in mind. This is where getting pre-qualified comes in.

A loan officer can briefly review your information including debt, income, and assets to give you an idea of how much you will qualify for. Usually, this is a quick and simple process that can be done in person or over the phone.

Pre-approval

Just because you pre-qualify for a loan amount doesn’t mean that you will actually be able to get a mortgage for the full amount.

If you want to know exactly how much money you have to spend, you need to get pre-approved. A pre-approval means that the lender collects and thoroughly reviews all of the necessary financial information in order to commit to a specific loan amount.

Types of Mortgages

Fixed-rate mortgages

A fixed-rate mortgage means that the interest rate and mortgage payments are determined when the mortgage is taken out and never changes. These are the most popular types of mortgages and are generally 15-year and 30-year loans.

By spreading out the loan over a long period of time, 30-year fixed rate mortgages provide the borrower with lower payments.

While this may free up money for the borrower to use for other things, these loans usually come with a higher interest rate than 15-year fixed rate mortgages.

In addition, the borrower will pay significantly more interest throughout the life of the mortgage and it will take longer to build equity in the home.

Fifteen-year fixed-rate mortgages, on the other hand, offer lower interest rates but higher monthly payments in order to pay off the balance in half the time.

By cutting the loan term in half, a higher percentage of each payment goes towards the principal, helping the borrower build equity faster than a 30-year fixed-rate mortgage.

Adjustable rate mortgages (ARM)

If you’re in a position where you need low monthly payments early in the loan term, an adjustable-rate mortgage may be a good option.

Interest rates start low and increase over the life of the loan based on market interest rates. The borrower takes on a degree of risk with these types of loans as interest may fluctuate.

Components of a Monthly Mortgage Payment

Principal

The principal is the full amount borrowed to purchase a home. A borrower can reduce the amount of money he or she is borrowing by putting down a larger down-payment.

The quicker a borrower pays the principal, the more equity they have in the home.

Interest and points

Mortgage interest is the fee that the lender requires the borrower to pay in order to borrow money. In addition to interest, some lenders also charge points.

A point is equivalent to 1% of the total balance borrowed.

Property tax

In order for a community to provide public services such as roads, schools, and parks, it must require property owners to pay property tax.

This tax is based on a percentage of the value of your home.

Insurance

There are two basic types of insurance that homeowners will pay each month for their home.

The first is property insurance, which protects you against risks including fire, weather damage, and theft. Depending on the risks associated with your homes location, you may need to purchase fire insurance, flood insurance or earthquake insurance, among others.

The second type of insurance you may need for your home is private mortgage insurance (PMI). You may be required to purchase private mortgage insurance if you pay less than a 20% down payment on your home. This limits the risk to the lender, in case the borrower defaults on their loan.

Get Started!

Now that you have a basic understanding of mortgages, it’s time to start looking for your new home! If you’d like to learn more about mortgages and the home-buying process, feel free to reach out to a mortgage specialist at a First Bank branch near you.

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Am I Ready to Buy My First Home? https://localfirstbank.com/article/am-i-ready-to-buy-my-first-home/ Fri, 01 Nov 2013 14:10:28 +0000 https://localfirstbank.com/?post_type=article&p=537

Undoubtedly, one of the most significant financial milestones in life is the purchase of your first home. And while there are many benefits to homeownership, there’s a lot to think through and plan before you take the plunge.

Below we’ve outlined the top perks of homeownership and some tips on how to get started with the process when the time is right.

Benefits of Home Ownership

More control

When renting, landlords usually don’t like it when you paint the walls or change the landscaping at an apartment.

But when you own a home, you have the freedom to truly make it yours. If you are new to home-improvement projects, start small by painting a room or changing the fixtures.

Then as you feel more comfortable with your renovation skills, you may be interested in larger projects like a kitchen remodel or new hardwood floors.

The best part: When you’re a homeowner, you always have a canvas.

A place to settle down

Moving is a long, stressful, and often expensive process. By purchasing your own home, you have a place to stay for as long as you’d like.

Think about where you see yourself in the future and consider the following:

  • How do you feel about where you live now? Do you like it enough to spend the next 5-10 years there?
  • Do you want to have a family? How large of one?
  • Do you want pets or need a fenced-in backyard for your new dog?
  • How far is your commute?

Buy a home that will be able to accommodate your needs now and in the future, from bedroom space to acreage. This will give you the peace of mind knowing that you always have room to expand—just be sure not to overspend.

The best part: You have the opportunity to grow some roots in your community.

Equity accrual

When you pay rent to your landlord or apartment complex, you never see that money again. It simply guarantees that you have a place to stay for the next month.

When you own your home, every mortgage payment builds equity. If you stay in your home long enough, you may even pay it off completely.

The best part: The accrual of wealth through your home will help tremendously as your near retirement.

Questions to Consider

How’s your credit?

Before you begin applying for loans and attending open houses, you should take a look at your free annual credit report.

If you have poor credit or a significant amount of debt, it will be more difficult to qualify for a mortgage. Even if you do qualify, your interest rates will be higher, and you may have to contribute more money for a down payment.

Tip: Review your credit report and make sure there are no mistakes. If necessary, take a few months to clean up your credit and pay down your debt. In the long run, the better rates are well worth the extra time it will take to prepare.

Do you have a secure income?

When you decide to purchase a home, you’re committing to pay the mortgage for the next 15 to 30 years—or until you sell the house.

You should have a stable and sufficient income before you make that kind of commitment. If you’re living paycheck to paycheck, even a small financial setback could make it difficult or impossible for you to make your mortgage payment or to cover the unexpected costs of homeownership from leaky pipes to water damage.

Tip: Consider what a realistic mortgage payment would look like for you. Then create a budget that includes saving enough money to pay for unexpected, potentially pricy expenses.

Have you saved up a down payment?

A few years ago, you could easily get a mortgage that didn’t require any down payment. Today, however, these types of loans are extremely difficult to find and qualify for.

You need to anticipate bringing as much as 10% of the purchase price to the table for an offer. Even if your loan requires less, you need to consider the other closing costs.

Tip: FHA loans, often a good option for first-time homebuyers, require a low down payment, but you still have to have at least 3.5% of the cost of the home.

Next Steps

Do you think you’re ready to take the next step?

  • First, get pre-approved for a mortgage.
  • Then, once you know how much house you can afford, it’s time to start house hunting!
  • Ask your friends or family for real estate agent referrals, or if you want to investigate on your own, use a website like Realtor, Zillow, or Trulia to find homes in your area that meet your needs.

If you’d like to learn more about the home-buying process or if you have any questions not covered by the above article, feel free to come in and talk to a mortgage specialist at a branch near you.

This article originally appeared in Homestead, our home-buying and personal finance magazine.

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5 Common Mortgage Myths Debunked https://localfirstbank.com/article/5-common-mortgage-myths-debunked/ Fri, 01 Nov 2013 13:43:00 +0000 https://localfirstbank.com/?post_type=article&p=534

While it’s important to do your research during the home-buying process, you can’t believe everything you hear.

We’ll help you spot the popular mortgage myths and reveal the truth behind them.

Myth 1: Once you’re pre-qualified, you’re guaranteed the loan amount.

If you are thinking about purchasing a home, getting pre-qualified is essential to give you a general idea of your budget.

But it’s important to remember that you haven’t been officially approved for that amount yet.

During pre-qualification, your lender looks at your assets and credit report to determine how much you can reasonably expect to be approved for. This doesn’t entail a deep dive into your finances, so the lender isn’t making any commitment at this point — it’s simply a ballpark figure with which to begin your house hunt.

A pre-approval, on the other hand, is much more comprehensive. Your lender will find out everything that they need to know about your financial well-being to approve you for a loan amount.

Note: Once you get pre-approved, it doesn’t mean you can stop worrying about your credit.

Lenders still have the right to check your credit at any time before your mortgage closes, and any additional credit obtained before you close on your home will have to be counted in your debt to income ratio. Depending on the amount of the increased credit, you could nullify your pre-approval.

Myth 2: Thirty-year fixed-rate mortgages are always the best.

When people think of a traditional mortgage, it’s a 30-year fixed-rate mortgage that comes to mind.

While these mortgages are a common and popular option, they aren’t necessarily the best choice for everyone. Today, conventional wisdom maintains that the average homebuyer lives in his or her home for around 7 years. This makes potential fluctuations in adjustable-rate mortgages a less important factor.

Adjustable-rate mortgages (ARMs) have a stigma attached to them because the interest can fluctuate. What people fail to consider is that these types of loans have interest rate caps to limit how high the rate is able to go. If you’re looking to stay in your home for a long time, a fixed-rate mortgage may be a great option. If not, some ARMs may be more suitable.

There is no one-size-fits-all solution. Each lender and mortgage is different, so it’s important to read the fine print and understand all of the terms before deciding which type of loan is right for you.

Myth 3: If you’re looking to save money, it’s better to rent.

People often think that renting is less expensive than owning a home.

The fact is, it’s almost always less expensive to pay a mortgage than to rent a comparable home. When you rent, the landlord, real estate company, or apartment complex is responsible for maintenance.

Of course, this convenience is baked into the price you pay each month for rent. As a homeowner, these expenses are your responsibility, but if you are prepared for them, it will almost always cost less than the premium you will pay to rent.

Another perk of owning a home is that it gives you the opportunity to build equity. When the lease is up on your rented apartment, you are free to leave, but the money you paid throughout your lease term is gone.

Owning a home allows you to build wealth slowly over time instead of throwing your hard-earned money away every month.

Myth 4: You should always pay off your mortgage as quickly as possible.

While it’s natural to assume that you want to pay off your mortgage as quickly as possible, it may not be the best use of your money.

Paying down your mortgage may lower your principal but it’s not the same as instant equity. When you pay your mortgage, the only guarantee is that you’re lowering your overall loan balance.

Rather than paying more into your mortgage each month to pay it off sooner, consider investing that extra money.

The interest you earn on these investments may be higher than the interest you pay on your mortgage. Also, keep in mind that the interest you pay on your mortgage may be deductible at tax time.

Myth 5: You can’t get a good loan unless you have a 20% down payment

The old rule of thumb used to be that you needed to put at least 20% down on a home. If you put down less, your interest rate would be worse and you’d have to pay Private Mortgage Insurance (PMI).

Today, there are many more options out there for mortgages. The Federal Housing Administration (FHA) offers mortgages with as little as 3.5% down.

In addition, “piggyback” mortgages have become more popular in recent years. These loans enable the borrower to take out a second mortgage in order to lower their loan-to-value ratio under 20%. By doing this, the borrower is no longer required to get private mortgage insurance.

Now that you know the truth about these mortgage myths, you may be ready start the home-buying process.

This article originally appeared in Homestead, our home-buying and personal finance magazine.

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