What’s a Good Use for a HELOC?

7-2018-HELOC-Freedom-4.75-EMAILWhen you take out a second mortgage, a name for a home equity line of credit (HELOC), you’re offering your house as collateral to secure another loan. The upside: You can gain access to up to 85% of your home’s value, minus your current mortgage balance and adjusted based on your creditworthiness.


The downside? If you can’t make your payments, you could lose where you live. Because the stakes are high, you want to make sure you use a HELOC for the right reasons. Here are a few.

Making home improvements

Most people who take out a HELOC do so to make home improvements. Experts say you should only do this if the improvements you’re considering will increase your home’s value. This way, the money you’re borrowing will be returned when you sell your house at a higher price.

The National Association of Realtors’ 2015 Remodeling Impact Report lists these six changes as the ones with the best return on investment:

  • Installing a new front door.
  • Installing new siding.
  • Upgrading your kitchen.
  • Adding on to your deck and patio.
  • Making an attic into a bedroom.
  • Installing a new garage door.

These improvements can range from a few hundred to tens of thousands of dollars, but they don’t change the footprint of your home and tend to be what future buyers look for.

Supplementing an emergency fund

Everyone should have an emergency fund to cover events such as unexpected car repairs and appliance breakdowns. Most people keep these in savings accounts, but you might consider a home equity line of credit as another source of cash. You only pay interest on the amount you borrow, and you could pay the loan off quickly to save money. Still, it makes more sense to have an emergency fund that’s earning a little interest rather than one that charges you interest.

Paying off high-interest debt

Because the average interest rate on a HELOC is much lower than the average credit card interest rate, many people think about using a HELOC to pay off their credit cards. This is a great strategy if you’re committed to never carrying a balance again. Otherwise, you’re just adding another debt at a lower rate.

Regardless of how you use a HELOC, remember that the interest rate is variable and may change each time you tap it. And you’ll have to repay the entire loan by the end of the payment period set by the lender. On the upside, the interest you pay on a HELOC is tax deductible, like your mortgage interest. If you use a HELOC for the right reason, that’s just one more benefit.

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If you’re looking to earn the highest possible yield on your investments without sacrificing the safety of government backed insurance, certificates of deposits or share certificates are one way to go. By using a laddering approach with your certificate purchases, you can take things up a notch, gaining even more from this already solid investment.

Stand out from the crowd and different creative idea concepts , Longest ladder glowing among other short ladders on light green background with shadows . 3D render


Certificates typically offer higher interest rates than regular savings accounts in return for locking in your money for a set time period. The longer that maturity period is, the higher your earnings. However, if you put all your money in one long-term certificate and interest rates rise before its maturity date arrives, you’ll miss out on the chance to take advantage of those higher rates. Also, if an emergency comes up, you won’t be able to access that cash without withdrawing the entire amount — and getting hit with penalties on your earnings.

Laddering is the perfect way to get around this dilemma. Rather than buying one large certificate, this strategy involves purchasing multiple certificates with staggered maturity dates. That way, a portion of your cash is freed up each year for you to reinvest in another certificate at current rates or use for other purposes.


A classic certificate ladder has five “rungs.” Each of these rungs represents a certificate of equal value, and their terms are staggered so that one certificate matures every year. For five years, for example, you could invest $5,000 this way:

  • $1,000 in a 12-month certificate
  • $1,000 in a 24-month certificate
  • $1,000 in a 36-month certificate
  • $1,000 in a 48-month certificate
  • $1,000 in a 60-month certificate

When the 12-month certificate matures, you can then use that cash to purchase a new 60-month certificate that will mature in year six, and continue this way so you get both the high returns that the longest-term certificates offer and the flexibility of having one-fifth of your investment freed up each year.


Laddering doesn’t have to be one size fits all. Those who can’t tie up money for a whole year might do well with a four-rung ladder consisting of a three-month, six-month, nine-month and 12-month certificate so that cash is freed up every three months. Or if you may need cash more frequently, build your ladder so that one certificate matures each month.

Another thing to consider is changing economic projections. When times are uncertain, a certificate ladder with equal rungs is the safest overall plan. However, if interest rates are clearly rising, you might want to invest a larger portion of your ladder fund in short-term CDs to take advantage of better offers as they become available. When interest rates are falling, it pays to invest as much as possible in long-term certificates, since you may not have an opportunity to lock in such good rates again for a long time.


Whichever approach you choose, certificate laddering offers a number of advantages over purchasing a single certificate:

  • Higher income plus liquidity: Once your first certificate matures, you’ll enjoy long-term certificate rates without giving up frequent access to your cash.
  • Flexibility: You’ll be able to adjust your ladder to changing economic conditions and your individual financial situation.
  • Peace of mind: Whatever happens, you’ve got it covered. When rates drop, you’ve already locked in your return. And when rates rise, you’ll have available cash to invest regularly.

Most financial experts agree that interest rates should be on the rise fairly soon, so it might be wise to build a shorter-term certificate ladder to keep your options open.

© Copyright 2018 NerdWallet, Inc. All Rights Reserved


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When was the last time you reviewed your insurance policies?

New American dream homeWhile no one likes to think about needing to utilize their insurance policies, it would be nice to know you’re getting the best deal. It’s worthwhile to take a little time now to know you’re covered for the future. Below are a few tips and tricks for receiving the best possible price and value on your policies.

Consider taking a higher deductible
For the best savings, opt for a $1,000 deductible on your auto or home policy. At that level, you’ll pay a lower premium and won’t be tempted to file any small claims.

Ask about discounts

Below are a few that may apply:

  • Multiple policies with the same company
  • College students living away from home
  • More than one car
  • No accidents or moving violations in three years
  • Student drivers with good grades
  • Members 1st member discounts*
  • Plus many more – just ask

Put your savings account to work
Consider using your Goal Savings account as a way to save for those smaller claims up to your deductible or to save for premiums. Plus, you earn interest!

As always, contact our licensed staff at Members 1st Insurance Services at (800) 283-2328, ext. 5245 for your free quote and to learn more!

Insurance Services available to PA and MD residents only. Insurance products are not federally insured and are not obligations of or guaranteed by Members 1st FCU, Members 1st Insurance Services, or any other affiliated entity.
*Member discounts apply to personal lines only.


Practicing Healthy Habits As A Young Adult

university students on a work placement .Making the transformation from being a carefree young person to a financially healthy adult can seem overwhelming and scary.  Most young adults starting out their careers can attest to the challenges of managing an entry-level salary while still striving for the financial stability they desire. But there are ways to create a path to financial independence early in your career.

Though your salary may be minimal now it’s vital to implement a realistic plan designed to save, budget, and maximize your cash flow.  If you find yourself in need of help reaching your financial independence, consider implementing these habits.

Write down what you spend:                                              

Budgeting is the foundation of personal finances at any stage of your life, not just for those starting to “adult”.  So if you’re new to budgeting, the first step is to write down all of what you spend: it could be the coffee you get each morning, the sofa you purchased for your apartment or house, or the monthly charge for the streaming video service you use.

The idea behind a budget is not to limit what you do with your money, but more importantly to maximize the money you work hard for each and every day.   It is a huge eye opener when you start to add up everything. It also becomes clear where you are wasting money and could cut back.  Cutting out even small things, such as that coffee or a pop purchase each day could save you over $100 per month.

Best of all, technology has made it easier to connect you with your finances and spending habits from the comforts of your own mobile phone or tablet. There are a variety of free budgeting apps available to you that will basically do all the tracking of your spending so it’s there each and every day to review as needed.

Create clear financial boundaries:

Ignoring the “Joneses” can be one of the biggest battles when making practical decisions regarding your finances.  You will soon realize that spending outside of what your budget can handle could push you further away from saving money and much further into debt.  “Can I do without this?” is one of the questions you should be asking when making a sizable purchase such as a new automobile, or buying/renting in the new trendy neighborhood. For example, it may be a difficult decision to stick with a used car that is already paid off instead of buying a brand new vehicle after college – but it was a smart one.

One thing you could consider is the “50-20-30 rule.”  Experts state that we should spend 50% of our monthly income on necessities, which would include utilities, food, and rent.   The next 20% would be allotted to savings and debt, such as paying off any loans or student debt.  The last 30% of your income would be for personal purchases, things like your mobile phone plan, internet/cable/streaming services, etc.  Staying within these guidelines can set forth financial boundaries that will cultivate a healthy financial future.  Forget the noise of the Joneses and stay within your means.  Eventually, you’ll build up your finances and leave others in your financial dust.

Paying yourself is priority #1:

When it comes to managing your finances and becoming more independent, you have permission to be a bit selfish.  To clarify, prioritizing paying yourself above and before you pay anything else is highly important when it comes to having a successful financial future.  No one can avoid unexpected expenses or financial emergencies, but like a Boy/Girl Scout, you should “be prepared.”

Having a savings plan will also keep you from accumulating debt with credit cards and loans.  It will help you learn to live and be content on a smaller budget.  A suggestion would be to start putting a small amount into your savings each month.  Maybe you can’t do 10% of your paycheck, but even 5% is better than nothing and it provides you with the opportunity to make saving a financial habit.

Many employers have made it easier for their employees to streamline their savings by offering direct deposit options, where a portion of your paycheck is put into your savings or a money market account each time you get paid.  You can also set up a process to transfer from a core bank account to a long-term savings or investment account so your financial future is automatically being handled.

Keep in mind that as you achieve your savings goals, you can increase the amount based on what you can afford.  It’s also smart to contribute as much as you can to your employer’s 403b or 401k retirement savings plan.  This money can be taken out of your check even before you get paid so it’s likely that you won’t even miss it. You will likely experience long-term tax benefits as well.

Information courtesy of GreenPath financial wellness.

Need additional help? 

We offer our members access to money management and financial education services through GreenPath Financial Wellness.  As a member, you can receive assistance with:

  • Personal and family budgeting
  • Understanding your personal credit report and how to improve your score
  • Personal money management
  • Debt repayment
  • Avoiding bankruptcy, foreclosure, and repossession


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How to get out from under student loans

graduate smallerIf you’re a recent college graduate who took out student loans, you likely owe about $35,000. As eye-popping as that average debt figure is, you’re certainly not the only one wondering how you’ll possibly get out from under your loans. As with any difficult assignment, though, research and a well-thought-out plan will help you tackle even the most challenging of debt situations.

Making use of the following strategies will help you dig your way out of student debt. Here’s a look at where to get started.


First things first: Figure out what your monthly payments should be. To do that, use one of a handful of repayment calculators. These tools let you plug in the total amount that you owe along with your loans’ interest rates and term lengths. You’ll get a better sense of how much you should be paying each month if you want to take care of your debt within a certain amount of time.


Knowing how much money you’ll need to put toward eliminating your student debt each month will help you adjust your budget. That may mean making tough decisions like cutting back on nonessential expenses.

Remember: Every extra dollar you put toward your debt reduces the total amount of interest you’ll end up paying over the life of your loan, so it’s well worth the effort.


To ensure that you make your monthly payments on time, set up automatic deductions from your checking account. The way it works is easy: Your student loan servicer simply subtracts what you owe from your account whenever your payment is due. Your lender may even offer you a discount if you choose this option, which can be much more convenient than writing and sending a check every month. Just be sure that there’s enough money in your checking account so that you aren’t hit with overdraft fees.


If you’re still struggling to put money toward your student debt, consider changing your repayment plan on federal loans, which you can do whenever you want. You may, for example, opt to switch from standard repayments —which have you contributing a set amount each month over a period of about 10 years — to graduated repayment, which is when your payments start out lower and increase over time.

Extended repayments, on the other hand, give you additional time to pay back your loans, sometimes up to 25 years, if your debt is more than $30,000 and you meet certain other requirements. Other plans, aimed at borrowers whose federal student loan debt is high relative to their income and family size, are income-based. If you qualify, the payments you owe are based on how much you earn every year. Although any of these plans can ease your monthly payment, you’ll end up paying more for your loan over time than you would if you had stuck with the standard 10-year plan.

Private lenders typically have stricter policies, but it’s still worth checking to see whether there’s any way to adjust your repayment plan with them.


If you’re a teacher or a public servant, you may qualify for student loan forgiveness. Otherwise, your last resort may be opting for forbearance, which means you can stop or reduce payments for a month or two. However, because interest continues to accrue, this course of action is better avoided.

With all that said, what you definitely don’t want to do is default on your loans. When you do that, the entire unpaid balance of your loan is due immediately, and you also lose the right to defer or change your repayment plan.

Breaking down the repayment process into smaller steps will make your student debt feel less overwhelming. Although it may take several years to wipe it out completely, a carefully crafted plan will set you up for success down the road.

© Copyright 2018 NerdWallet, Inc. All Rights Reserved

Members 1st can help with refinancing your current student loans.

Visit members1st.org or contact out 24-hour call center at (800) 369-4980 with questions or to apply!

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Getting hitched doesn’t need to mean marrying finances

Marriage generally implies that two homes and lives become one. Should it also involvebride & groom a complete merging of earnings, assets and expenses? With money arguments being one of the leading causes of failed marriages, combining finances can be scary. For some couples it’s the right approach, but there are several other options.


Just a few generations ago, one spouse was generally the breadwinner who paid all the bills. Although today most marriages involve two people who work, the traditional approach isn’t entirely obsolete. It can be effective when one partner is a stay at home parent or full-time student, or one spouse earns much more than the other. It’s also appropriate for couples choosing to bank one income to save for shared goals, such as a down payment for a home. Single breadwinner couples may merge assets or maintain separate accounts.

This type of arrangement works best when both partners have similar financial styles so that no one ends up feeling like a child having to ask for spending money or resenting the other for spending too much.


With this option, couples completely merge financial assets and responsibilities. All investments and debts are in both names and bills are typically paid from one joint account. Sharing everything works particularly well for couples that enter marriage with similar incomes and limited assets. As with the traditional approach, it’s vital that spouses have compatible styles to avoid feelings of resentment or deprivation.


Sharing is beautiful but sometimes it’s also nice to have a little something of your own. With this arrangement, both partners contribute equally to a joint checking account used to handle household expenses and joint savings to reach shared goals. Their remaining income is deposited to individual accounts to be saved or spent at each partner’s discretion. This approach makes sense for couples with comparable incomes and debts, or when one partner is much more frugal than the other, since it lets both manage money as they see fit without straining the relationship. In cases where one spouse earns substantially more than the other, couples may want to contribute a percentage of their income as opposed to a fixed monthly amount to the joint accounts.


Some couples may simply be more comfortable maintaining totally separate assets and liabilities. With this approach responsibility for household expenses may be split equally, divided according to ability to pay, or each spouse may pick which bills to cover. Keeping finances separate may make sense if one partner has a much larger income, net worth or debt than the other. When entering into marriage with vastly different financial positions, it’s also a good idea to consider a prenuptial agreement, whether or not separate or joint accounts are maintained.


Whether and how completely to merge finances is ultimately a matter of individual style. With honest communication and trust, any of these vastly different approaches can work, giving those who choose what feels right a good chance at avoiding the bitter money conflicts that plague so many married couples.

© Copyright 2018 NerdWallet, Inc. All Rights Reserved

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