Have You Had Your Fiscal Physical Yet? Why End of Year Works Just as Well for Your Financial Wellness.

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How did we get here? By “here” we mean almost at the end of the year. If it seems like this year flew by, you’re not alone. And if there are still a few things on your to-do list from January to check off, know that you’re not alone there either.

For some of us, our goals going into the year were about careers, health and wellness, travel, or maybe even purchasing a house. Others of us may have made plans to get our financial houses in order. If you still haven’t tackled that one, we’ve got good news. It’s never too late to start… so, how about right now?

Just like your annual trip to the doctor (we can pause here if you need to schedule that one too), a fiscal checkup should be on your yearly list of to-dos. Making this a habit makes it easier to track progress and identify issues before things go off the rails.

So what should be included in your annual fiscal physical?

Here are 5 areas to focus on (plus one bonus entry) to ensure you are on track. Go ahead and grab a pencil and some paper; the doctor will see you now.

Budget Beats

Oh boy, this probably feels like a biggie, and in many ways it is, but it doesn’t have to be so daunting. In fact, budgets are built to be broken down into smaller bits to allow for decisions to be made on all different levels.

Your budget is your financial plan for the year or more. Amazon.com has over 1000 books on budgeting, so if you don’t have a system set up, now is a great time to do just that. Here’s an example of how to create one that might be easy to adopt and stick with.

Assuming you have a budget in place, taking a look at where you are in that budget year-over-year is a key part of your fiscal physical.  Ask yourself these questions:

  1. In what areas was I under budget?
  2. In what areas was I over budget?
  3. Were there changes in income (up or down)?

Taking the time to answer these questions thoroughly and thoughtfully can provide incredible insights that will help you plan for next year and the years after that. If there was one more question we’d add to that list it would be, “What didn’t I budget for?” which brings us to the next part of our check-up.

Having an incorrect "estimate" of your spending is one of the most common ways a budget can be thrown off. Keep a close account of how much you've spent to make sure you're only spending money you can afford.

Review Your Emergency Fund

Your emergency fund helps take the sting out of unexpected expenses. By having money set aside for the “unknown unknowns”, we are better prepared to weather literal and proverbial storms. According to NerdWallet.com, the rule of thumb for how much should be in your emergency fund is “at least three to six months’s worth of expenses.”

Building an emergency fund can take time, with most folks choosing to set aside funds on a consistent basis over months and even years to build up their account. Be sure to bake this into your budget and hold yourself accountable. If the day comes when you need it, your future self will thank you for your diligence.

During your check-up is a great time to look to see if and how you had to use any of these funds over the course of the year and to make plans to replenish funds that were deployed.  Also, look to see if new items need to be added to your budget if it becomes apparent that these “emergency” expenses will occur more frequently.

Check Your Debt

77% of Americans have some sort of debt, so odds are you are in this category. Do you know what your debt is at this moment? Do you know your plan for repayment? These are questions you can and should ask yourself as part of your fiscal physical.

To be clear, debt isn’t bad (or good), but not having an awareness can be problematic. Taking the time to dig into your debt is time well spent.

Shift next to your plans for repayment. There are two popular strategies, “snowball” and “avalanche.”.

Debt Snowball is when you prioritize balances, paying off the smallest debts first, then moving on to the bigger ones next. This method builds motivation by settling debts faster.

Debt Avalanche is when you prioritize interest rates, paying off the highest interest rate debt first, then moving on to the next highest after that, and so on. Over time, you will pay less interest.

Whichever method you choose, having a plan in place and sticking to it is a great way to stay on top of your own money mountain.

Bonus materials: We believe this topic is an important one and we’ve written several informative articles over the years. Be sure to check out our entire library of posts, especially “9 Tips For Paying Off Your Credit Card Debt“ and “How To Get Out of Debt In The New Year.”

The Avalanche method of paying off debt will save you money in the long run, but many people like the psychological aspect of seeing debts disappearing quicker. The best method is the one you will stick with.

Retirement Readiness

Who doesn’t dream about the day they can call it a career and retire? In fact, 4.1 million Americans reach retirement age each year. Being ready for the changes that come when we walk away from the working world is incredibly important, which is why assessing your retirement readiness is a key aspect of your fiscal physical.

Do you have a 401(k) plan or other retirement account(s)? Great! Here are a few questions to ask yourself to determine if changes are necessary.

  1. How much are you contributing?
  2. Are you contributing enough to meet your goals? (Try this online calculator, or better yet, consider tapping F&M Bank’s Wealth Management resources, learn more, and schedule a meeting today.)
  3. Are you taking advantage of potential matches from your employer?
  4. Are you maxing out your contributions?
  5. If you are maxed out, should you open a traditional or Roth IRA?

Touch Up Your Taxes

We hate to be the bearers of bad news, but tax time is coming like clockwork. The end of the year is the ideal time to take a quick look at your situation and make necessary corrections before they can cause headaches.

Here’s what to look for:

  1. Are your tax withholdings correct? (Here’s a calculator courtesy of the IRS to help estimate your withholdings.)
  2. If you are self-employed or receive income that doesn’t have taxes withheld, make sure you’re making the correct quarterly estimated tax payments. This helps in two ways: you can avoid a large bill come April and the possibility of underpayment penalties.

Consider accelerating deductions at the end of the year - making an additional charitable contribution is a great way to do this while also participating in Giving Tuesday.

Bonus: Consider College Expenses

The average cost of a 4-year college education is now over $100,000, so saving and planning ahead makes a lot of sense. A savings plan such as a 529 plan can be a powerful tool to save for education expenses and is often combined with other deposit products including our Coverdell Education Savings Account and CDs.

If covering or contributing towards college costs is on your radar we encourage you to read our article on helping your student pay for college. Working with a member of our wealth management team can be a real benefit too, putting you and your loved ones in a position to succeed.

Breathing Easier

Just like seeing your doctor regularly is an investment in your health, performing an annual check-up on your finances can pay off in the long run.

At F&M Bank, we strive to be your trusted resource for financial planning and advice. Reach out to us today or visit your local branch in the Shenandoah Valley to learn how we can help keep you and your finances in top shape.

Stay Informed and On Top of Your Finances with F&M

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At F&M, we are committed to providing you with actionable information to help you manage your accounts more efficiently. Our goal is to keep you informed and ahead of important financial milestones, ensuring you never miss a beat.

Courtesy Email Reminders for Dealer Loan Payments

Understanding the importance of staying current with your loan payments, we are pleased to introduce courtesy email reminders for upcoming dealer loan payments. These reminders will be sent directly to your email inbox, providing you with a convenient way to keep track of your payment schedule.

If you do not wish to continue receiving these email reminders, simply select “If you do not wish to receive future email, click here” at the bottom of the email and you will be opted out of future communications.

 Example Email Reminder (click to enlarge):

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Text Alerts: Real-Time Updates at Your Fingertips

To enhance your banking experience, we offer convenient text alerts through our online banking platform. These alerts are designed to keep you updated on your account activity in real time, helping you stay on top of your finances. Here are some of the key features of our text alerts:

  • Balance Alerts: Receive notifications when your account balance goes above or below a specified threshold.
  • Transaction Alerts: Get instant updates on transactions made with your account.
  • Payment Reminders: Never miss a due date with timely reminders for upcoming payments.

Activating text alerts is easy. Simply log in to your online banking account, navigate to the alerts section, and customize the notifications to suit your needs.

 

We’re Here for You

Our commitment to delivering actionable information and timely reminders is part of our dedication to providing exceptional service. We believe that by keeping you informed, we can help you achieve your financial goals with greater ease and confidence.

If you have any questions or need assistance with setting up text alerts or managing your loan payments, please do not hesitate to contact our customer service team. We are here to help you every step of the way.

Thank you for being a valued F&M client.

 

What expenses are included in the annual cost of college?

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To most parents, the annual cost of college simply refers to tuition and room and board. To the federal government, however, the annual cost of college means the cost of attendance. Twice per year, the federal government calculates the cost of attendance for each college, adjusts the figure for inflation, and, if your child is applying for financial aid, uses this number to determine your child’s financial need.

Five categories of expenses are used to determine the cost of attendance at a particular college:

  • Tuition and fees: Same for all students at private colleges but can vary at public colleges, depending on whether the student is in-state or out-of-state
  • Room and board: Can vary by student, depending on the meal plan your child selects and whether he or she lives on or off campus
  • Books and supplies: Can vary by student, depending on your child’s courses and his or her requirements
  • Transportation: Can vary greatly by student, depending on where your child lives in relation to the school
  • Personal expenses: Can vary by student (e.g., health insurance, spending money, clothing)

Tuition, fees, room, and board (referred to as “direct costs”) are calculated using the college’s figures. For books, supplies, transportation, and personal expenses (referred to as “indirect costs”), the federal government sets a monetary figure even though the exact expenses incurred will depend on the individual student. Thus, depending on these variables, your child’s actual cost may be slightly higher or lower than the cost used for official purposes like financial aid determinations.

If you’re interested in obtaining the monetary amount allotted to each category for a particular college, contact that college directly.

 

 

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc. 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Can Home Improvements Lower Your Tax Bill? It Depends

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Most home improvements are not tax deductible — with one possible exception. In certain situations, you may be able to deduct improvements deemed necessary for medical reasons (not just beneficial to general health). If you itemize instead of taking the standard deduction, you can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income, so the tax savings could be significant if a costly home improvement pushes your total medical expenses above that threshold. Installing air conditioning to help treat asthma or modifying a home to make it wheelchair accessible are common examples of qualifying expenses.

Here are two more ways that improving your home could potentially reduce your tax burden.

Capital improvements

Projects that add to the value of your home, prolong its life, or adapt it to new uses are considered capital improvements. When you sell your home in the future, you can add the cost of capital improvements to your initial basis (what you paid for it originally), reducing your capital gain and the resulting tax bill.

Some examples of capital improvements include remodeling the kitchen, replacing all your home’s windows, adding a bathroom, or installing a new roof. Repairs that keep your home in good condition (such as repainting, replacing a broken door or window, or fixing a leak) don’t count as capital improvements. However, an entire repair job may be considered an improvement if it’s done as part of an extensive remodel or restoration.

Energy-saving tax credits

The Inflation Reduction Act of 2022 reconfigured two nonrefundable tax credits for home improvements that save energy. Unlike a deduction, which reduces your taxable income, a tax credit lowers your tax bill dollar for dollar. Both credits are available only for the installation of new products that meet specific energy efficiency requirements.

The energy efficient home improvement credit is equal to 30% of qualified expenditures for an existing home (not new construction). A $3,200 maximum annual credit is available through 2032. A $2,000 limit (30% of all costs, including labor) applies to electric or natural gas heat pumps, heat pump water heaters, and biomass stoves and boilers. A separate $1,200 limit applies to home energy audits and building envelope components (such as exterior doors, windows, skylights, and insulation) and energy property (including central air conditioners).

The residential clean energy property credit is a 30% tax credit available for qualifying expenditures for clean energy property (and related labor costs) such as solar panels, solar water heaters, geothermal heat pumps, wind turbines, fuel cells, and battery storage.

Learn more about investment products and schedule a call with Calan today!

 

 

For retirees investing in bonds, don’t assume that individual bonds and bond funds are the same type of investment. Bond funds do not offer the two key characteristics offered by bonds: (1) income from bond funds is not fixed–dividends change depending on the bonds the funds has bought and sold as well as the prevailing interest rate, and (2) a bond fund does not have an obligation to return principal to you when bonds within the fund mature. Additionally, the risk associated with bond funds varies depending on the bonds held within the fund at any given time, whereas the risk associated with individual bonds generally decreases over time as a bond nears its maturity date (assuming the issuer’s financial situation doesn’t deteriorate). Finally, fees and charges associated with bond funds reduce returns. Even so, you may still find bond funds attractive because of their convenience. Just be sure you understand the differences between bond funds and individual bonds before you invest.

This content has been reviewed by FINRA.

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc. 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Investment Planning throughout Retirement

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Investment Planning throughout Retirement

Investment planning during retirement is not the same as investing for retirement and, in many ways, is more complicated.

Your working years are your saving years. With luck, your income increases from year to year as you receive promotions and/or pay raises; those increases offer some protection against rising costs caused by inflation. While you’re working, your retirement objective generally is to grow retirement savings as much as possible, and investments that offer higher potential reward in exchange for greater potential for volatility and/or loss are often the focus for those retirement savings.

When you retire, on the other hand, spending rather than saving becomes your focus. Your sources of income may include Social Security, employer pensions, personal savings and assets, and perhaps some income from working part-time. Typically, a retiree’s objective is to derive sufficient income to maintain a chosen lifestyle and to make assets last as long as necessary.

This can be a tricky balancing act. Uncertainty abounds — you don’t know how long you’ll live or whether rates of return will meet your expectations. If your income is fixed, inflation could erode its purchasing power over time, which may cause you to invade principal to meet day-to-day expenses. Or, your retirement plan may require that you make minimum withdrawals in excess of your needs, depleting your resources and triggering taxes unnecessarily. Further, your ability to tolerate risk is lessened — you have less time to recover from losses, and you may feel less secure about your finances in general.

How, then, should you manage your investments during retirement given the above complications? The answer is different for everyone. You should tailor your plans to your own unique circumstances, and you may want to consult a financial planning professional for advice.

The following discusses two important factors you should consider: (1) withdrawing income from retirement assets, and (2) balancing safety with growth.

Choosing a sustainable withdrawal rate

A key factor that determines whether your assets will last for your entire lifetime is the rate at which you withdraw funds. The more you withdraw, the greater the likelihood you’ll exhaust your resources too soon. On the other hand, if you withdraw too little, you may have to struggle to meet expenses; also, you could end up with assets in your estate, part of which may go to the government in taxes. It is vital that you estimate an appropriate withdrawal rate for your circumstances, and determine whether you should adjust your lifestyle and/or estate plan.

Your withdrawal rate is typically expressed as a percentage of your overall assets, even though withdrawals may represent earnings, principal, or some combination of the two. For example, if you have $700,000 in assets and decide a 4 percent withdrawal rate is appropriate, the portfolio would need to earn $28,000 a year if you intend to withdraw only earnings; alternatively, you might set it up to earn $14,000 in interest and take the remaining $14,000 from the principal. An appropriate and sustainable withdrawal rate depends on many factors including the value of your current assets, your expected rate of return, your life expectancy, your risk tolerance, whether you adjust for inflation, how much your expenses are expected to be, and whether you want some assets left over for your heirs.

Fortunately, you don’t have to make a wild guess. Studies have tackled this issue, resulting in the creation of tables and calculators that can provide you with a range of rates that have some probability of success. However, you’ll probably need some expert help to ensure that this important decision is made carefully.

Withdrawing first from taxable, tax-deferred, or tax-free accounts

Many retirees have assets in various types of accounts: taxable, tax-deferred (e.g., traditional IRAs), and tax-free (e.g., Roth IRAs). Given a choice, which type of account should you withdraw from first? It depends on your specific situation.

Roth IRA earnings are generally free from federal income tax if certain conditions are met, but may not be free from state income tax.

Retirees who will not have an estate

For retirees who do not intend to leave assets to beneficiaries, the answer is simple in theory: Withdraw money from a taxable account first, then a tax-deferred account, and lastly, a tax-free account. This will provide for the greatest growth potential due to the power of compounding.

In practice, however, your choices, to some extent, may be directed by tax rules. Retirement accounts, other than Roth IRAs, have minimum withdrawal requirements. In general, you must begin withdrawing from these accounts by April 1 of the year following the year you turn age 73. Failure to do so can result in a 25 percent excise tax imposed on the amount by which the required minimum distribution exceeds the distribution you actually take. (The tax is reduced to 10% if you take the full required amount and report the tax by the end of the second year after it was due and before the IRS demands payment.)

Retirees who will have an estate

For retirees who intend to leave assets to beneficiaries, the analysis is more complicated. You need to coordinate your retirement plan with your estate plan.

If you have appreciated or rapidly appreciating assets, it may be more advantageous for you to withdraw from tax-deferred and tax-free accounts first. This is because these accounts will not receive a step-up in basis at your death, as many of your other assets will, and your heirs could face a larger than necessary tax liability.

However, this may not always be the best strategy. For example, if you intend to leave your entire estate to your spouse, it may be better to withdraw from taxable accounts first. This is because spouses are given preferential tax treatment with regard to retirement plans. As a beneficiary of a traditional IRA or retirement plan, a surviving spouse can roll over retirement plan funds to his or her own IRA or retirement plan, or, in some cases, may continue the deceased spouse’s plan as his or her own. The funds in the plan continue to grow tax deferred, and distributions need not begin until the spouse’s own required beginning date.

Retirees in this situation should consult a qualified estate planning attorney who has some expertise with regard to retirement plan assets.

Balancing safety and growth

When you retire, you generally stop receiving income from wages, a salary, or other work-related activity and start relying on your assets for income. To ensure a consistent and reliable flow of income for your lifetime, you must provide some safety for your principal. This is why retirees typically shift at least a portion of their investment portfolio to more secure income-producing investments, and this makes a great deal of sense.

Unfortunately, safety comes with a price, which is reduced growth potential and erosion of value due to inflation. Safety at the expense of growth can be a critical mistake for some retirees. On the other hand, if you invest too heavily in growth investments, your risk is heightened, and you may be forced to sell during a downturn in the market should you need more income. Retirees must find a way to strike a reasonable balance between safety and growth.

One solution may be the “two bucket” approach. To implement this, you would determine your sustainable withdrawal rate (see above), and then reallocate a portion of your portfolio to fixed income investments (e.g., certificates of deposit and bonds) that will provide you with sufficient income for a predetermined number of years. You would then reallocate the balance of your portfolio to growth investments (e.g., stocks) that you can use to replenish that income “bucket” over time.

The fixed income portion of your portfolio should be able to provide you with enough income (together with any other income you may receive, such as Social Security and required minimum distributions from retirement plans) to meet your expenses so you won’t have to liquidate investments in the growth portion of your portfolio at a time when they may be down. This can help you ride out fluctuations in the market, and sell only when you think a sale is advantageous.

Be sure that your fixed income investments will provide you with income when you’ll need it. One way to accomplish this is by laddering. For example, if you’re investing in bonds, instead of investing the entire amount in one issue that matures on a certain date, spread your investment over several issues with staggered maturity dates (e.g., one year, two years, three years). As each bond matures, reinvest the principal to maintain the pattern.

As for the growth portion of your investment portfolio, common investing principles still apply:

  • Diversify your holdings
  • Invest on a tax-deferred or tax-free basis if possible
  • Monitor your portfolio and reallocate assets when appropriate

 

Learn more about our investment products and schedule a call with Calan today!

 

For retirees investing in bonds, don’t assume that individual bonds and bond funds are the same type of investment. Bond funds do not offer the two key characteristics offered by bonds: (1) income from bond funds is not fixed–dividends change depending on the bonds the funds has bought and sold as well as the prevailing interest rate, and (2) a bond fund does not have an obligation to return principal to you when bonds within the fund mature. Additionally, the risk associated with bond funds varies depending on the bonds held within the fund at any given time, whereas the risk associated with individual bonds generally decreases over time as a bond nears its maturity date (assuming the issuer’s financial situation doesn’t deteriorate). Finally, fees and charges associated with bond funds reduce returns. Even so, you may still find bond funds attractive because of their convenience. Just be sure you understand the differences between bond funds and individual bonds before you invest.

This content has been reviewed by FINRA.

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc.

Have You Met Calan Jansen, One of Virginia’s Leading Financial Advisors?

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When it comes to managing your wealth and planning for your financial future, having an experienced and knowledgeable advisor by your side is crucial. In the state of Virginia, one name stands out among the rest – Calan Jansen. With over 20 years of wealth experience and Series 66, 63, SIE, 7, and 6 licenses, Calan has established herself as one of the top financial advisors in the region.

Calan’s Background and Expertise

Raised in Shenandoah County, Calan’s roots are deeply embedded in the local community. Her career in finance has been driven by her passion for helping individuals achieve financial security and peace of mind. Calan’s extensive experience in wealth management has equipped her with a unique set of skills and insights, enabling her to navigate the complexities of the financial world with ease.

Impressive Achievements

For the last five years, Calan Jansen has consistently ranked among the top 20 advisors nationally within Osaic Institutions Inc. This exceptional accomplishment is a testament to her dedication, expertise, and unwavering commitment to her clients’ financial success. Furthermore, Calan is also proud to hold the distinction of being the leading female advisor in the state, breaking barriers and paving the way for other women in the industry.

Extensive Wealth Experience

With over 20 years of experience in the financial industry, Calan Jansen brings a wealth of knowledge and expertise to her clients. Throughout her career, she has honed her skills in various aspects of wealth management, including investment strategies, retirement planning, and risk management. Calan’s expertise extends to a wide range of financial instruments, ensuring that her clients receive tailored advice and guidance to meet their unique financial goals.

Thoughtful Approach

What truly sets Calan apart is her thoughtful approach to each client she works with. She understands that every individual has different financial aspirations, circumstances, and risk tolerances. Calan takes the time to listen and understand her clients’ needs, goals, and concerns, allowing her to develop personalized strategies that align with their long-term objectives. Her ability to build strong relationships based on trust and open communication has earned her a loyal client base who appreciate her genuine care and dedication.

 

Calan Jansen’s impressive track record, extensive wealth experience, and thoughtful approach make her the go-to financial advisor in the state of Virginia. Her commitment to her clients’ financial success, coupled with her expertise in wealth management, sets her apart from the rest. Whether you are planning for retirement, seeking investment opportunities, or looking to protect your assets, Calan Jansen is the trusted advisor who will guide you every step of the way.

 

Learn more about our investment products and schedule a call with Calan today!

 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

 

 

Should You Buy Long-Term Care Insurance?

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The longer you live, the greater the chances you’ll need some form of long-term care. If you’re concerned about protecting your assets and maintaining your financial independence in your later years, long-term care insurance (LTCI) may be for you.

Who needs it?

As we age, the odds increase that we’ll need some form of long-term care at some point during our lives. And with life expectancies increasing at a steady rate, the likelihood of needing long-term care can be expected to grow in the years to come.

But won’t the government look out for me?

Medicare pays nothing for nursing home care unless you’ve first been in the hospital for 3 consecutive days. After that, it will pay only if you enter a certified nursing home within 30 days of your discharge from the hospital. For the first 20 days, Medicare pays 100 percent of your nursing home care costs. After that, you’ll pay $204.00 in 2024 per day for your care through day 100, and Medicare will pick up the balance. Beyond day 100 in a nursing home, you’re on your own–Medicare doesn’t pay anything.

If you’re at home, Medicare provides minimal short-term coverage for intermediate care (e.g., intravenous feeding or the treatment of dressings), but only if you’re confined to your home and the treatments are ordered by a doctor. Medicare provides nothing for custodial care, such as help with feeding, bathing, or preparing meals.

Medicaid covers long-term nursing home costs (including both intermediate and custodial care costs) but only for individuals who have low income and few assets (eligibility guidelines vary from state to state). You will have to use up most of your savings before you qualify for Medicaid, and aside from a small personal needs allowance, you will have to use all of your retirement income, including Social Security and pension payments, to pay for your care before Medicaid pays anything. And once you qualify for Medicaid, you’ll have little or no choice regarding where you receive care. Only facilities with Medicaid-approved beds can accept you, and your chances of staying in your own home are slimmer, because currently most states’ Medicaid programs only cover limited home health care services.

Looking out for yourself

If you want to retain your independence, protect your assets, and maintain your standard of living while at the same time guaranteeing your access to a range of long-term care options, you may want to purchase LTCI. This insurance might be right for you if you meet the following criteria:

  • You’re between the ages of 40 and 84
  • You have significant assets that you would want to preserve as an inheritance for others or gift to charity
  • You have an income from employment or investments in addition to Social Security
  • You can afford LTCI premiums (now and in the future) without changing your lifestyle

Once you purchase an LTCI policy, your premiums can go up over time, but the rates can only rise for an entire class of policyholders in your state (i.e., all policyholders who bought a particular policy series, or who were within certain age groups when they bought the policy). Any increase must be justified and approved by your state’s insurance division.

Several factors affect the cost of your long-term care policy. The most significant factors are your age, your health, the amount of benefit, and the benefit period. The younger and healthier you are when you buy LTCI, the less your premium rate will be each year. The greater your daily benefit (choices typically range from $50 to $350) and the longer the benefit period (generally 1 to 6 years, with some policies offering a lifetime benefit), the greater the premium.

 

Connect with an Osaic Institutions Financial Advisor today!

 

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc.

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Clean Up Your Credit Score

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Whether you’re preparing to apply for a loan or reeling after a credit application rejection, if you are looking to improve your credit, you aren’t alone. According to Experian, about 30% of adults have scores of less than 670—the standard minimum for a conventional home loan approval. The good news is that credit scores are always in flux—and that means that your score can change for the better, with just a bit of effort.

In this post, we’ll give our best advice on how to fix bad credit, discussing tried and true credit repair strategies for short-term improvement and long-term gains. Keep reading to learn how you can clean up your credit score!

Understanding Your Credit Score

Firstly, knowing how credit scores work, what factors go into their calculation, and how your financial habits affect your score are all crucial to improving your credit standing.

What is a credit score?

A credit score is a numerical calculation based on your credit report—a history of your credit reported by a variety of creditors. These can include lenders, credit card companies, financial institutions, utility companies, and even healthcare providers. Credit scores take your payment information, as well as details about how long you’ve had accounts and how much debt you hold, and turns it into a number.

Ideally, your credit score is an accurate reflection of your tendency to pay back your debts. When paired with income data, it can help lenders make informed decisions about loan approvals. Major components of credit score calculation include your payment history, the amount of debts you owe/percentage of credit used on cards, and the length of credit history.

While there is more than one provider of credit scores, FICO is the most commonly used scoring system in the US. FICO scores range from 300 to 850, with scores above 800 being considered “excellent.”

Range of credit scores

What is a credit score used for?

Your credit score is used as an aid in determining:

  • Credit card and loan approvals
  • Interest Rates
  • Insurance premiums
  • Rental worthiness for homes and apartments
  • Utility fees

Employers may also check your credit, especially if the job at hand involves financial tasks.

Assessing Your Credit Report and Score

Credit reports are available for free, and reading your own report can help you see where improvement is needed to elevate your score.

Where do you find your credit report and score?

While there are many paid services that offer to provide your credit report, score, and even credit monitoring, it’s not necessary to pay for your report.

At www.annualcreditreport.com you can request your report from each of the three main reporting agencies (Experian, Equifax, and Transunion) once each year.

While they generally contain the same information, there may be discrepancies. Requesting all three at once can give you the most definitive understanding of your credit picture. When rebuilding your credit or tracking your credit growth, you may wish to take an alternative approach. Requesting one report every four months or so can allow you to see changes in your credit history over time.

Credit reports can also be requested by phone or by mail:

1-877-322-8228

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281

When requesting by mail, you’ll need to print and complete the form found on the annualcreditreport.com website. You will receive your reports by mail within 15 days of their receiving your request

Credit scores, on the other hand, are not available for free through this service. So how do you get them without paying?

  • You can use the free version of credit monitoring services, such as Credit Karma, to have a good sense of your score (though it won’t be identical to the one lenders use)—but watch out for fees and upcharges.
  • If you have a credit card, the credit card company may also provide a free version of your score in your online account or on your monthly statement.
  • Lastly, if you apply for a loan or credit card, the company is required to provide you with the score they used to determine your approval. Request it if it is not automatically provided.

Ultimately, however, everything you need to know about improving your credit is available for free on your report.

what to do with your credit report

Strategies for Credit Score Improvement

Now that you know how to obtain your credit report, how your your credit history is used to calculate your score, and how your score can affect different aspects of your life, it’s time to take a look at the methods you can use to improve your credit over time, as well as things you can do that will have the greatest immediate positive impact.

Long-Term Strategies for Good Credit

Good credit is a long-term process that requires constant engagement with responsible financial habits. Here are 5 things you can do to gradually build and maintain excellent credit and increase your chances of getting approved for a loan.

  1. Pay your bills on time:

    Your payment history counts for 35% of your credit score. Do your best to pay all accounts on time or as soon as possible if you miss a payment date—but never skip payments altogether. Bills paid within 30 days of their due date will not be reported, though any late payments may incur fees.

  2. Regularly review your report and address issues:

    Identity and credit card fraud often go unnoticed until an individual spots unusual activity on their credit report. And sometimes companies report issues erroneously. If you see something wrong, dispute the error right away.

  3. Keep accounts open.

    It may be tempting to close that old credit card, but the longer you keep accounts open, the better it is for your score.

  4. Maintain a good mix of credit.

    Having just one kind of credit can have a negative impact on your score. Having both revolving accounts (like credit cards) and installment accounts (like loans) is important, to show you are capable of handling both kinds of debt.

  5. Build a savings cushion.

    Not only will this prevent you from relying on credit in the case of an unforeseen circumstance, it will also show lenders that you have resources to lean on to ensure ongoing financial stability.

How to Boost Your Credit Score Quickly

If you’re hoping to apply for a loan in the near future or just looking to make the biggest immediate impact on your credit score, here are 5 steps you can take to raise your credit score quickly.

  1. No credit? Bad credit? Get a secured credit card.

    Lest you get a rejection in your application, it’s important to apply for a card that you will likely get approved for. A secured credit card from your bank, which uses an existing account for collateral, can be a great place to start with credit score building or rebuilding. But only open one new account at a time!

  2. Become an authorized user.

    An alternative way to build credit is to become an authorized user on a credit card account (a spouse or family member) with a high limit and good history. It’s not even necessary for you to use the account to receive this benefit.

  3. Keep your credit utilization rate down.

    Credit utilization is the amount of credit you used, vs. the amount available to you. For instance, a card with a $10,000 limit and a $2,500 balance would have a 25% utilization rate. Keep rates across accounts below 30%. To do so, either pay down higher balance and maxed out cards, or ask for a higher limit.

  4. Pay off accounts in collections.

    Once you get your credit report, you may see accounts in collections. These will have an outsized impact on your score. Getting accounts out of collections as quickly as possible will minimize their impact.

  5. Start paying your bills on time.

    Your most recent payment history matters more for your credit score calculation than your distant payment history. Start paying bills ontime if you have a pre-existing pattern of late payments.

A credit builder loan can be useful if you have no credit history

Professional Credit Building Resources

Struggling to untangle credit problems? Not sure where to start? There are numerous national and local resources that can help you with your credit score repair. They include:

You may also want to consider using services like Experian Boost which can allow you to get credit for bills you pay on time that haven’t already been reported.

(Re)Build Your Credit with F&M Bank

At F&M Bank of Virginia, we want our customers to have the best chances to achieve their financial goals, whether it’s getting a good interest rate on a personal loan or buying their own home. And we know that good credit is integral to long-term financial success.

 

From low-interest credit cards to help you build your credit history to financial tools to protect your finances and prepare for the future. Questions about credit? We’re only a phone call or short drive away. Reach out to us at one of our branch locations throughout the Shenandoah Valley today.

F&M Bank to Host VBA Bank Day Student Scholarship Program in March

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F&M Bank is excited to partner again with the Virginia Bankers Association Education Foundation (VBA) to offer your seniors a unique scholarship opportunity on March 19, 2024 called Bank Day.

What is Bank Day?

The third Tuesday in March was declared Bank Day by the Virginia General Assembly in 1991.  Through this program, high school seniors learn about banking, financial services, career opportunities within the banking industry, and the vital role banks play in their communities.  From their experience, the students are required to write essays on their experiences. Thirteen scholarships will be awarded based on the essays.

Students will have access to a VBA-created Bank Day resource webpage during the month of March. This resource page will house relevant information that students will need to research to complete their essays for a chance to win college scholarships. F&M Bank will also be hosting students in-person, 9:00am-1:00pm on Tuesday, March 19, for an opportunity to learn more about our bank, the banking industry in Virginia, how we support our community, and financial career opportunities. More information about this gathering will be shared with students upon registration.

How much scholarship money is available?

A total of $26,000 will be awarded to twelve students across the Commonwealth.

  • Six honorable mention winners, each winning a $1,000 scholarship.
  • Six regional winners, each winning a $2,500 scholarship.
  • One of the regional winners will also be named the statewide winner, earning an extra $5,000 scholarship for a total of $7,500 in college scholarships!

How can your students participate?

To participate, students must be currently enrolled as seniors in a Virginia high school with cumulative GPAs of 3.0 or higher. Interested students must register online by March 3rd through the VBA using the following link: VBA Bank Day Scholarship Program – 2024 Student Registration Form (formpl.us).

Contact marketing@fmbankva.com for more information!

Tax Considerations When Buying and Selling Real Estate

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Purchasing real estate—whether for your home or other personal use or as an investment—comes with many complex tax implications. From property taxes you’ll need to pay as part of your mortgage payment to understanding strategies to avoid capital gains on investment property, taxes can make a significant impact on your bottom line or monthly budget.
This article offers some introductory insights to keep in mind when buying and selling real estate, with tips that can help optimize your financial position while navigating the complex terrain of property transactions. Keep reading to learn key insights that can potentially save you money and enhance your real estate investment journey!

Types of Real Estate Transactions

Before we delve into real estate tax considerations, let’s take a moment to review the different kinds of real estate purchases. The kind of real estate and purpose of its ownership can make a drastic difference on the types of taxes you’ll need to pay.

Traditional Sale: What most people think of when discussing buying and selling a home, traditional sales involve two parties (homeowner/sell and buyer), and are usually orchestrated by real estate professionals who represent each party. These sales usually have some kind of contingencies built into the offer, including an inspection of the property and financing approval.

As-Is Sale: When a home is sold as is, there is no warranty and no desire to make repairs or changes—though the buyer may choose to have an inspection for their own informational purposes. Homes sold as is usually either need drastic repairs and updates or the owner needs to sell quickly, without waiting for the usual sales timeline. If purchasing an as-is for rental, you may be able to deduct improvements on future tax bills (we’ll talk about this more later).

Short Sale: In a short sale, the property is sold for less than what the current owner still owes. Short sales are often done by the homeowner in an attempt to sell the property before it’s foreclosed upon by their lending company—with all proceeds going to the lender. Short sales are often as-is. When purchasing a short sale, it’s important to make sure there are no tax liens on the property.

Foreclosure: With a foreclosure, lenders seize a property when homeowners fall behind on their loans, selling to buyers–-sometimes below market value. As with short sales, it’s important to work with a title lawyer to ensure there are no tax liens on the property.

Cash Flow Investment: This kind of investment involves purchasing a property for income, leasing it to bring in cash each month.

Turnkey Investment: Some investments, especially homes that are sold “as is”, will require a lot of work to get them ready to rent out. While buyers will often pay a premium for this, a turnkey property is fully functional and ready to go to lease at closing. In fact, it may already have tenants.

Vacant Land Acquisition: Real estate sales of land are a growing form of investment, whether buying a lot to build a home, land for agricultural purposes, commercial development, or to hold onto for later use or resale.

Types of real estate transactions infographic

Tax Benefits of Owning a Home

If you itemize your federal tax deductions (in other words, you don’t simply take the standard deduction) you can deduct:

• Mortgage interest
• Home equity loan interest (if loan is used to make improvements to your residence)
• Property taxes
• Mortgage insurance premiums

Note, for many individuals the standard deduction ($21,900 for married-filing-jointly in 2024) will offer better tax breaks than itemizing, but this will vary from individual to individual.

Additional Tax Benefits of Homeownership

Self-employed and small business owners:  If you are a small business owner (including self-employed individuals) and work out of your home regularly, you can claim a home office deduction for a portion of your home. This is a tax reduction for expenses including your mortgage payment, taxes, insurance, repairs, and utilities.

Capital gains tax exclusion: Ready to sell your home? Rest assured that a portion (and in most cases all) of your profits will be excluded from federal income taxes. In fact, you don’t have to pay taxes on the first $250,000 (single) or $500,000 (married) of profit, as long as you lived in your home as your primary residence for 2 out of the last 5 years.

Energy efficiency tax credits: If you make energy-efficient home improvements to your home, you may also receive tax credits for these.

  • Energy Efficient Home Improvement Credit: Up to $3,200 (or up to 30% of improvement costs) in qualifying credits in 2024.
  • Residential Clean Energy Credit: Credits for up to 30% of the costs of new, qualified clean energy property for your home installed anytime from 2022 through 2032.
  • Additional tax incentives through the Inflation Reduction Act: From upgrading wiring to installing heatpumps, there are additional incentives (rebates and tax credits) available for the electrification and upgrade of your home to increase energy efficiency. Use the calculator on Rewiring America to see what you may qualify for.

Tax depreciation on rental property: Renting out your home? The IRS allows a depreciation rate of 3.636% each year for 27.5 years for most U.S. residential rental property. You can deduct this percentage of your property’s purchase price each year from your taxable income.

Tax credits and deductions can get complicated—especially when it comes to real estate. It’s always best to consult with a tax professional to help you navigate the regulations surrounding these real estate tax benefits to ensure you are documenting and filing your taxes correctly.

Basic Tax Implications of Real Estate Investment

There are many tax benefits associated with home ownership. But there are also a number of taxes associated with owning a home that are important to keep in mind. These can include:

Property taxes: Based on the property’s assessed value (often about ⅔ of the market value), you may have to pay a number of different property taxes, depending on your municipality, including, school, city/township, and county property taxes. If you have a mortgage, your mortgage company will add a portion to your monthly payment each month to cover annual tax bills.

Net investment income tax (NIIT): Some real estate investing will result in investment income, which requires payment of this special tax of 3.8%.

Real estate income tax: If you rent out real estate, that income must be reported and taxed as regular income.

Business income tax: If you use your residence or property for income purposes, for instance as a bed and breakfast, this income is taxable.

As with homeownership tax deductions and credits, it’s important to consult with a tax professional to be sure your taxes are filed correctly—especially if you are claiming business or real estate income.

Basic Tax Implications of Real Estate Investment infographic

Taxes on Investment Property Sales: Capital Gains Tax and 1031 Exchange

While your capital gains on the sale of your residence are often tax free (see above), when you sell an investment property and its sale produces a profit, you will be expected to pay capital gains taxes on the proceeds.

Short-term capital gains (for assets you’ve had less than a year) are taxed as income, and what you pay will depend on your income tax rate.  Standard income tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. If you are flipping a home for sale, your income may fall into this category.

Long-term capital gains (for assets you’ve held for more than a year) are taxed using a different system: 0%, 15%, and 20% (depending on your income level and filing status). As the IRS explains, “The tax rate on most net capital gain is no higher than 15% for most individuals,” unless your income is more thab $459,750 if single; more than $517,200 for married filing jointly in 2024.

A 1031 exchange allows real estate investors to defer their capital gains taxes when selling an investment property by letting them use those funds to reinvest into a like-kind property within a specific time frame, by adhering to the IRS guidelines for 1031 exchanges.This tax-deferred exchange strategy can be used repeatedly, potentially allowing investors to accumulate wealth through real estate without immediate tax obligations.

Reach Your Real Estate Goals with F&M Bank

At F&M Bank, we understand our local Virginia real estate markets, and can work with you to find the right financing to achieve your goals, whether it’s owning your first home or growing your investment portfolio. From purchase loans like Investment Property Loans and traditional Mortgages to Home Equity Loans for those energy efficient renovations, we have an assortment of affordable and flexible financing options to meet your needs.

Our experienced lenders can provide effective real estate tax advice as you weigh your options and choose your loan, partnering with your realtor to help ensure a swift and smooth closing. Reach out to us at one of our bank locations throughout the Shenandoah Valley to get started!