It’s Prime Time to Review Your Interest Rates

On Wednesday, Dec. 14, 2016, the prime rate increased as a result of the Federal Reserve Open Market Committee actions. The prime rate is the rate banks typically charge their most credit worthy customers, and is used to determine rates on consumer loan products such as credit cards or auto loans. This means that products with a variable interest rate will see an increase in rates. If you have a fixed rate, the prime rate increase will not impact your existing product.

What does this mean for USAA members? Unless you have a significant amount of variable rate debt, the impact should be minimal. On your January statement, you will see an increase in the amount of interest, which will increase the minimum payment on your USAA credit card. Over the next couple of months, you can also expect to see an increase in fixed rates for any new loans you take out. On a positive note, it is also possible that deposit rates could increase slightly.

How can you decrease the impact of changing interest rates?

  • Pay off credit card balances in full each billing cycle. The interest rate is irrelevant if you never have to pay it.
  • Look for options to consolidate variable rates into a fixed rate. USAA Bank offers fixed rate personal loans. You can use the Personal Loan Calculator and the Debt Consolidator Tool on the page to see if it makes sense for you.
  • Consider consolidating variable rate student loans to a fixed rate. For federal student loans, visit the student aid website to learn more about your options. Before making the decision to consolidate, be sure to consider any loss of benefits from the original loan. For private student loans, contact your lender to discuss options.
  • If you are planning to make a major purchase, such as a vehicle, now may be the time to move. As long as you can afford the payment and other associated costs, such as insurance and gas, then buying before rates increase could save you money.
  • Stick to a budget. Those most impacted by an increase in the prime rate typically carry a significant amount of variable-rate debt. Following a budget can help you avoid overextending yourself and getting into a financial bind.

Rates may be increasing, but they are still far below what we have seen in the past (13% in 1984). Following sound money management principles can help reduce the impact and alleviate the stress associated with increasing rates. USAA is here to help.


Resolve to Be Financially Ready for 2017

A new year brings new resolutions. In fact, 45% of Americans typically make New Year’s resolutions, according to a Statistic Brain survey, and 34% of those resolutions are related to money.


Resolutions can sometimes be difficult to keep, but a few simple principles can help you stay on task. The USAA Financial Rediness Score FRS tool incorporates our core advice principles and helps you see where you stand today. It also suggests steps you can take to improve financially and stay on course if challenges arise.

Let’s discuss those principles:

Spend less than you earn. This sounds simple, yet it has become more challenging. Everywhere we turn, we’re bombarded with advertisements, credit offers, solicitations for money — and the list goes on. FRS helps assess whether you manage your spending and credit in a healthy manner and points you to additional resources for help.

Protect your life, loved ones and possessions. We are a financial services company that offers insurance, but that’s not why this principle is important. Imagine you’re in an at-fault automobile accident and have insufficient coverage, putting your finances in jeopardy.

Or what if you depend on a loved one for income and he or she dies, leaving you to struggle both emotionally and financially? FRS will assess your current coverage and guide you to find out how much insurance you may need.

Save enough for emergencies. Unfortunately, no one is immune to life’s many curveballs. You can either be prepared or put your financial goals at risk. FRS will assess whether you have an adequate emergency fund and help you create a plan to achieve this goal if you haven’t already.

Save now for retirement. Young, old or somewhere in between, retirement planning is important. The sooner you get started, the better off you may be. FRS will assess your retirement needs and help you dive deeper into retirement planning.

Have a will and other legal documents.

Whether single or married, with or without kids, everyone should have some basic legal documents in place. Wills are not just for the wealthy.

Have a plan, review it annually and update with major events.

Getting from point A to point B is much easier with a map. Having a plan for your financial goals is no different. This can be as simple as a starting with a budget, but everyone should know what they need to do financially and the steps needed to get there.

I encourage all of you to stick with your money-related New Year’s resolutions in 2017 and beyond. If you haven’t already, use the FRS tool for your own assessment. I’ve got a few money-related resolutions of my own, and FRS has given me a road map to help.

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‎01-09-2017 07:10 AM

Content provided courtesy of USAA.

By Mikel Van Cleve, CFP®

When it Comes to Life Insurance, Start With “Why?”

$15 trillion is a big, scary number. No, it’s not the United States’ national debt. It’s the amount of financial needs left uncovered by Americans who don’t have adequate life insurance protection. Considering that 43% of us have no life insurance at all, most households face a staggering level of financial risk.1

When trying to understand a complex problem, we should start with “why?” So, why do you need life insurance? No matter how you look at it, the answer lies in wanting to protect the people you love so that your death doesn’t become a financial burden.

 

How much insurance do I need?

USAA uses the acronym L.I.F.E to demystify life insurance needs:

 

  • Liabilities—Coverage should fully pay off all debts.
  • Income—Coverage should supplement or replace at least five years of after-tax income.
  • Final expenses—Coverage should include final medical or funeral costs.
  • Education costs—Coverage should offset school or college expenses.

 

Add up all those figures and then subtract the amount of life insurance you privately own, and/or assets your family has already saved for these expenses. The net amount is your basic need for additional life insurance.

 

What type of insurance is right for my situation?

 

It varies from family to family, but typically you’ll need a combination of term and perm coverage. While you’re young and your needs are high, the majority of your insurance should be term. As you get older and more financially secure, your temporary needs likely will decrease, and you’ll want life insurance to help your family achieve wants, dreams or wishes.

 

If having a combination of insurance types exceeds your budget, it may be best to get the right amount of term coverage today and convert to a permanent policy later in your life. Conversion benefits help you continue all or a portion of your coverage in a permanent policy without having to prove insurability in the future. This is a great resource to ensure that your insurance plan adapts to the changes in your overall financial plan.

 

If you are one of the many Americans who are under-insured or uninsured, take action today to be your family’s protector.

 

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‎09-12-2016 07:10 AM

Content provided courtesy of USAA.

By Sean Scaturro