Planning for Two: Coordinating Finances With Your Spouse

July 24, 2019 by Comerica Bank


Financial planning can be a major hurdle for new couples. Choosing to partner in life is a big step: It requires a great deal of trust and openness. Clear conversations about key issues such as a target minimum balance for accounts or how to manage saving and spending are critical.

It can be easy to focus heavily on big-picture issues. How much debt is each partner carrying into the relationship? How do you want to share responsibility for individual debt now that you're a couple? What are your savings goals? Those are the kinds ofmajor issues you'll often find in advice articles for partners getting started in life together. Managing key day-to-day financial issues can fly under the radar.

Everyday financial considerations for new couples

Managing your finances as a couple may force you to reconsider best practices around managing your bank accounts. Whether you choose to open new shared accounts, to maintain individual accounts or to blend the two options, it can help to revisit core banking issues that can influence your decisions. Here are a few primary considerations to keep in mind:

Balancing account types

At any given time, you may want to maintain a balance of checking, savings and money market accounts.

Checking accounts are great for money that is going to move in and out of the account frequently. You can configure them for direct deposits and payments, making them a natural fit for regular expenses such as rent or predictable bills.

Savings accounts let you set aside cash so it can earn interest. You can access money in a savings account, but there are often specific account policies that make it beneficial to only use funds from savings when you really need it. The account is not designed for frequent withdrawals.

Money market accounts blend checking and savings. They deliver interest comparable to and sometimes exceeding savings and you can also write a limited number of checks per month.

Mixing and matching these account types based on what you and your partner need can give you the right blend of flexibility and stability with your everyday banking resources.

Addressing hard-and-fast rules

If you are taking the step to share income, you may want to also create a few rules on how you will both use your money. For example, many couples will work to discuss any spending before making a purchase, but also set a baseline for what they consider a small enough amount to allow spending without having a conversation.

Identifying goals for a minimum account balance can also be helpful. You may want to do this to avoid overdrafting your checking account or to ensure you always maintain enough funds in your savings and/or money market account to ensure you are getting sufficient value from interest.

It is also worth talking about any bank policies — such as maintaining a certain minimum account balance for accounts, how the firm handles automatic payments and what happens when you overdraft — so both of you know what to expect.

Setting a foundation for financial partnership

This is not an exhaustive list of the kind of banking issues new couples should keep in mind. But as you consider these primary matters, you can start laying the groundwork for financial transparency with your partner. Getting on the same page and setting clear expectations can position you to avoid relationship stress due to financial uncertainty later down the line.

If you are looking for some help to navigate these issues, reach out to Comerica Bank today. We would be happy to talk with you and your partner about strategies we have helped couples enact to manage their day-to-day banking needs in today's fast-paced digital world. We also offer online banking tools to help you and your partner manage your finances together.

 

This information is provided for general awareness purposes only and is not intended to be reliedupon as legal or compliance advice.

 This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.

 

      

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Considerations to Make When Figuring out How to Pay for Daycare

July 22, 2019 by Comerica Bank

The matter of how to pay for daycare can leave many parents and guardians with sleepless nights. The high costs of child care are exacerbated by the educational and social development offered by daycare services. The result is often escalating costs and a need to build family schedules around the way a daycare functions.

These barriers can create a great deal of stress. But as families consider how to pay for daycare, they do have a few options at their disposal, including methods to defray the costs of care or manage their finances in a way that eases the burden of dealing with expenses.

Limiting the costs of daycare

There are a few ways to reduce how much your family is spending on child care, even without going with a lower-cost alternative. Finding the right care provider is challenging enough. Trying to switch just to save a bit of money is not always simple. However, you can work with your employer to see what options you may have available. In particular, many businesses today are more open to offering flexible work schedules, especially for those responsible for taking care of family members. Making arrangements to work at alternate hours some days can reduce the amount of time your child spends in daycare, cutting your costs.

If you do not need all-day coverage, you can also consider nanny share programs in which multiple households work together to pay a full-time nanny, with the child care provider splitting time between the participants.

Another child care assistance option comes in the form of a flexible spending account. Some employers offer flexible spending accounts as a means for employees to pay for key expenses either with pre-tax income or at a reduced tax rate. Many banks also offer savings programs designed to help families pay for education-related expenses.

Additionally, there are numerous child care assistance programs from state and federal government agencies. The specific provisions around these initiatives can be highly variable, but the government has created a centralized resource you can use to explore opportunities and find out what may work for your family.

Simplifying financial management to handle expenses

The saying, "Time is money," may be a cliché, but it is used repeatedly for a reason. Your time is valuable and, when it comes to managing the cost of child care, time you spend balancing the budget and handling payments could otherwise be spent with your child. Modern banking solutions are providing increased access to digital services, letting you automate payments and manage your account from a wide range of devices and locations. Even if you are only saving a half an hour a week that would be spent writing checks, mailing bills, and otherwise arranging finances with your daycare provider, that time adds up quickly over the years.

Mobile and online banking solutions can also provide instant visibility into account balances, making it easier to budget by reducing the need to manually track expenses.

When you are considering how you will handle the costs of daycare, it is important to think about more than just the monetary factor. The costs in terms of time and management can also add up in a hurry, and today's digital banking tools can help you along the way.

Comerica Bank can help you in this process. We offer robust mobile and online banking tools to help you manage your account and access key services at your convenience. We can give you the easy access to banking resources you need.

 

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.
 

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Assessing the Financial Pros and Cons of an Advanced Degree

July 19, 2019 by Comerica Bank

Getting an advanced degree presents a rare mix of incredible potential and extreme risk. On one side, you could end up getting the degree and obtaining a high-paying job that makes student debt easy to deal with and sets you up for long-term earnings. On the other, you could be left with huge costs, more debt than you can handle and poor job prospects. Sometimes an advanced degree does not lead to significantly higher salaries. In other cases, the specialization that comes with a master's degree or PhD means you have fewer job options at your disposal, and you end up unable to work in your field or forced to relocate to a more expensive region.

The potential risk is not necessarily a reason to avoid pursuing an advanced degree, but it is a reason to be more careful about researching the degrees you are considering. You may also want to open a checking account online so you get full digital visibility into your income and expenses at any time, from any location. Complete financial visibility can make it easier to project what you can really afford when it comes to seeking an advanced degree.

The ROI potential of advanced degrees

The Georgetown University McCourt School of Public Policy, Center on Education and the Workforce®, regularly analyzes higher education trends and how they impact society. One of its studies, the "Five Rules of the College and Career Game," found that median earnings increase relative to level of education. The median annual salary of professionals with bachelor's degrees was $62,000 in 2018. That median annual salary figure jumped to $80,000 for those with graduate degrees. However, the study also found that the specific major or area of study pursued can be highly influential on salary potential. There are plenty of instances in which bachelor's degrees can lead to earnings that outpace the median salary of those with advanced degrees.

Advanced degrees can drive a serious return on investment, but the extent to which the degree is valuable depends heavily on the specific career outcomes you can expect from your degree. In simplest terms, the financial upside of an advanced degree comes in the form of higher lifetime earnings. But the downside that counters this benefit is high levels of debt and potential challenges in initial earning potential.

Optimizing financial management to minimize risk

Calculating the actual return on investment you can expect from an advanced degree requires a careful analysis of your current financial situation, job prospects in the sector where you want to work and the cost of the programs you are considering.

To do that, you need easy, daily access to your bank accounts. You do not want to be waiting for paper bank statements that get mailed to you each week. You likely do not want to be tracking your spending manually in a check register. Instead, online banking tools can give you immediate, constant access to your accounts. Web and mobile banking solutions let you understand your spending through complete and easy visibility into what you spend and how. You can use this visibility to calculate your living costs, assess how much debt you can afford, and project how much new income after pursuing a degree can help you evaluate ROI potential.

Comerica Bank blends our longstanding tradition of highly relational financial services with modern, digital banking opportunities. We can give you the tools you need to manage your accounts and provide banking products that help you gain a stronger understanding of your financial situation. From there, you can be better positioned to keep up with everyday costs and save for major expenses like pursuing an advanced degree.


This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.


 

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Should You Use a HELOC for Financial Emergencies?

June 18, 2019 by Comerica Bank

A home equity line of credit (HELOC) is a fairly common type of loan that allows homeowners to use their home equity as a revolving line of credit. In simpler terms, it lets you turn your home's equity into cash without selling the property. It works like this: Lenders loan a homeowner a percentage of the property's value – up to 85 percent in some cases, according to NerdWallet® – minus the amount of the existing mortgage. Like a credit card, the loan acts as a revolving line of credit for a draw period that usually lasts 10 to 15 years. Once that period is up, a repayment period usually lasting 15 years begins.

Most homeowners who leverage a HELOC do so with the intention of funding home-improvement or remodeling projects. Others will use it to help finance a child's college education, or as a way to cover a large expense such as the purchase of a new automobile. But what about financial emergencies? Is it advisable to use a HELOC loan to cover unexpected expenses?

Understanding the risks

Ideally, homeowners will have another source of emergency funds saved up that they can access more quickly than a HELOC loan. This is because there are several risks involved with a HELOC. First, a HELOC loan needs to be paid off once the draw period comes to an end. This may be problematic under certain circumstances, for example, if the financial emergency is induced by a health incident that may leave the homeowner unable to achieve gainful employment by the end of the draw period. A homeowner who is unable to make payments on the principal as well as the interest on the loan risks foreclosure.

Another factor worth considering is that a HELOC has a formal application and approval. It isn't the same as a savings account in that the funds are not immediately available. The borrower may need to pay a fee upfront, and time to closing may vary according to many factors, some of which are beyond the borrower's control. This means the applicant may need to wait weeks or longer before they can access their cash.

Note that most HELOCs also have an adjustable interest rate. This means that interest rates may increase with baseline interest rates, ultimately bloating your repayment obligations. Draw rates from your line of credit as well as your repayment rates may also affect your interest rates.

While the interest on HELOCs used to fund home improvement projects may have tax benefits, most other uses of HELOC funds will not land you a tax break, according to Forbes®.  This includes interest on a HELOC for unexpected expenses such as last-minute traveling or sudden medical costs. Likewise, using a HELOC to pay off student loans or credit card debt at a lower interest rate will leave you ineligible for tax deductions on the interest payments.

The verdict: Best used as a last resort

The equity in your home can certainly act as a valuable source of funding, especially for home-improvement projects. However, the risks of using a HELOC as a source of emergency funding typically outweigh the benefits. Prudent homeowners may use a HELOC to fund unexpected expenses, but usually this is only for the most dire of circumstances in which no other option exists. Even then, repaying a HELOC depends on your ability to achieve some financial stability before the end of the draw period. If that is infeasible for any number of reasons, a different course of action such as a personal loan may be the better option.

There is a right time and a wrong time to use a HELOC as source of funding, and knowing the difference is half the battle. To learn more, contact the experts at Comerica Bank.

 

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, compliance or accounting advice. You should consult your own tax, legal, compliance and accounting advisors before engaging in any transaction.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.   


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Pros and Cons of Remodeling Vs. Moving

June 18, 2019 by Comerica Bank

Almost all homeowners eventually face the question, "Does my property still satisfy my lifestyle?" If the answer is "no" – because your family is growing, the kids are moving out or you're just ready for something new – you need to ask a crucial follow-up: "Should I remodel my home, or should I move?"

Sometimes the answer is easy. If location is the problem, no amount of remodeling will suffice. However, the decision-making process is usually more involved. Homeowners need to consider personal factors such as how attached they are to the property and how long they could see themselves staying should they choose to remodel.

Practicality also weighs into this decision. What is the extent of the remodeling, the cost for those renovations, the amount of time it would take? How might it affect long-term property value, and do you have the capital on hand for remodeling?

As you deliberate, it helps to have all the information you need to make the right choice for your circumstances. That's why we've enumerated some pros and cons to help you make your decision.

Remodeling pros

Remodeling is ideal if you're happy with the school district, local amenities, property taxes and other locational factors. This means that if you're mainly interested in a kitchen with new counters and appliances, or a refurbished patio space, it's in your best interest to remodel your home rather than go through the trouble of putting it on the market and leaving the area you like. Both of these remodeling jobs in particular can yield significant returns on the value of the property.

Financially speaking, a home equity line of credit may make remodeling the more enticing option. A HELOC loan's value is determined by subtracting your existing mortgage from a percentage of your home's value. Presuming you have a healthy credit score (640 or higher) and debt-to-income ratio (the low 40s or less), a HELOC loan provides a revolving line of credit for a set period of time, usually 10 to 15 years, known as the draw period. The loan may have a fixed-rate payment option or a variable rate option. It’s important to closely assess both options, as a fixed-rate HELOC may be more consistent than a variable rate but can end up costing more in the long term since you pay for the additional convenience of an unchanging rate.

A HELOC loan for home improvement can also be applied to a more substantial remodeling effort (adding a new floor), and may also qualify you for tax deductions, according to Forbes®. Ideally, though, you would have enough equity to finance the whole project with a HELOC loan, as this will help lock in interest rates.

Remodeling cons

The most obvious con of remodeling is that it can also be disruptive since you are, in effect, living in a construction zone with workers possibly coming in and out depending on the extent of the project.

Remodeling can also be a financial liability. First, there's the possibility of an unexpected cost arising. This is not unusual, especially for larger-scale remodeling that uncovers previously unresolved issues. The other risk factor is "over-improving" your home. Real estate prices are affected by location, meaning you won't get full return on investment if your renovations are made in a neighborhood with mostly starter homes.

By comparison, remodeling a home to raise the value to match other homes in the neighborhood would likely yield higher return on investment. In other words, you don't necessarily want to put yourself in a position where you have the priciest home in the neighborhood, especially if you intend to eventually sell your house.

Moving pros

The most obvious benefit of moving over remodeling is that you don't have to deal with contractors or live in a construction zone for several months at a time. A new home is also the ideal option for a homeowner who is generally displeased with his or her location, whether it's because the school district leaves something to be desired or because they could use a change of scenery.

In some cases, selling a home with good equity may just be more financially beneficial than remodeling. Rather than borrowing against your equity, you may instead cash out by selling the property, and then use the money to move into a better home.

Another key benefit of moving is that if the home was recently constructed, it’s probably more energy efficient than an older property, which can save money on utilities. And, if the house is new or in good condition, additional spend on repairs may be minimal.

Moving cons

Ironically, the only thing more expensive and time-consuming than renovating your home is buying a new one. The costs of property are generally increasing, partly because nationwide housing inventory has been relatively low in the past year. This means it's harder and more expensive to find a home. Furthermore, because most homes sell quickly on the market today, the seller may not have very much time to make a decision when searching for a replacement home.

There's also no way around the fact that moving is expensive. Realtor fees (for buying and selling), relocation costs, renovations to make your existing property more marketable and countless other expenses add up fast. The process of buying and selling a home is also generally stressful. It demands time, money, patience, coordination and a willingness to act quickly to beat the competition, knowing well that you may end up in a house you actually like less than your old home. This doesn't factor in the emotional strain of moving, the possibility of a longer commute and other personal factors.

The bottom line

Due to generally low inventory and the fact that many American homeowners currently have equity, more people are choosing to remodel instead of move, according to MarketWatch®.

Remodeling spending as an alternative to moving is on the rise, and many of those projects, unsurprisingly, are financed with HELOC loans. Talk to a Comerica Bank lending expert today to learn more.

 

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.    

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