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Personal Finance (Blog or Resources)

How Can I Get the Most Out of My Tax Return?

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If you haven’t already filed your 2019 taxes, you don’t have much more time. The deadline to file your federal taxes this year has been extended to July 15, 2020, due to the COVID-19 pandemic. So if you still need to file this year, or if you’re looking for ways to maximize your tax return for the future, here are some important things to keep in mind.

 

By Kat Tretina

 

Tax Implications of Student Loans 

If you have student loans that you have been making payments on, there is a major benefit you may be able to take advantage of.

 

Student Loan Interest Deduction

Each year you pay back your student loans, you may be eligible to deduct up to $2,500 in interest costs off your taxable income. Here are the important things to know about the deduction:

  • The deduction is only for the interest portion of your loan payment. Your monthly loan payment consists of paying back the principal of the loan and interest, so you will not be able to deduct your entire loan payment. 
  • You can take advantage of the deduction whether you have private student loans or federal student loans. 
  • You do not need to itemize your tax return to take advantage of this deduction. This can be taken in conjunction with the standard deduction on your return. This deduction will lower your income, thereby lowering your tax liability. 
  • You have to meet income requirements. You are eligible for the deduction if your Modified Adjusted Gross Income (MAGI) was below $70,000 ($140,000 for married couples filing jointly) the previous tax year. You may be eligible to deduct a reduced amount if your income is higher, however, the deduction does not apply once your MAGI is over $85,000 or $170,000 for joint filers. 
  • You cannot claim this deduction if someone else claims you as a dependent on their tax return. 
  • The loan must have been taken out for a qualified education expense for you, your spouse, or a person who was a dependent when you borrowed the loan. 

 

How The Tax Deduction Works

A deduction is taken to reduce your income that taxes are assessed on, unlike a credit that reduces your taxes owed. For a simple example of how this works, if your income is $50,000 and you paid $1,000 in student loan interest, you can deduct the full $1,000 and your income would be reduced to $49,000 and taxes would be assessed on that amount. Whereas if you claimed any credits, discussed below, the amount of the credit would be taken off of your taxes owed. If you owe $1,500 in taxes and the credit is $500 you now owe $1,000 in taxes.  

 

It’s important to obtain the tax information from your loan servicer when you are ready to file your return. If you have paid more than $600 in interest, your servicer will most likely automatically provide you the 1098-E form. The form will show the total amount of interest you have paid for the year.  

 

If seeing the amount of interest you have paid gives you a shock, you may want to look into refinancing your student loans. Refinancing is when you obtain a new loan to pay off current student loans and can be a simple process that results in savings. Refinancing may help you obtain a lower interest rate, thereby saving you in interest costs. It can also help you lower your monthly payment. Use our Student Loan Refinance Calculator to see how much you may be able to save.*    

 

Other Ways to Maximize Your Return

If you are looking for other ways to get the most out of your return, check to see if any of these could apply to you:

 

Education Tax Credits 

If you are still in school paying for tuition, you may be eligible to take a tax credit, even if you used student loans to pay the expenses. Here are the two available for 2019 taxes.

 

American Opportunity Tax Credit

This allows you to take a credit of up to $2,500 per year for four tax years. You must be enrolled in school at least half time and be working towards a degree. Parents who are paying for the college tuition of their dependents can take this credit or the student themselves can take the credit. Make sure to obtain Form 1098-T from the school to show how much tuition has been paid. This credit is not available for graduate students. In addition, there are income requirements to meet.  

 

Lifetime Learning Credit

If you are working towards a college degree or enrolled in courses to help with your career, you may be eligible to take a credit of up to $2,000 per tax year for tuition, fees, books, and supplies. There is no limit on how many years this credit can be taken. There are income requirements to meet for this credit as well.  

 

Save More and Reduce Taxes

If you have an IRA or a Health Savings Account and you did not contribute the maximum amount allowed for the year, the deadline is extended to allow contributions until July 15. The money saved in an IRA and HSA is not subject to federal income taxes. So you are able to save more in these accounts and avoid federal income taxes on your savings.   

 

Hopefully, you can take advantage of some of these savings to get the most out of your tax return. As with any tax advice, make sure to use a reputable program or speak with an experienced tax preparer for your specific situation. The most important thing to remember is to file and pay your federal income taxes by the deadline, July 15, 2020. 

 


 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

The 6 Financial Lessons That COVID-19 Has Taught Us

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Since March, the nation has been reeling from the impact of the COVID-19 pandemic. Millions of people lost their jobs, had their hours cut, or experienced drops in their income. Many families’ finances have been significantly affected by the coronavirus outbreak and are still struggling to recover.

 

By Kat Tretina

 

As the nation starts to rebuild — and businesses begin to reopen — here are six lessons we learned during the pandemic that we should all keep in mind going forward. 

 

1. You need a larger emergency fund

Before the pandemic, many financial experts said that an emergency fund of $1,000 was sufficient for most individuals. Others said that saving three months’ worth of expenses was enough. 

 

If you followed that advice, you may have realized that the guidance left you unprepared to deal with such a serious catastrophe. If you lost your entire income overnight, you quickly exhausted your savings and were unable to pay your bills. 

 

If the pandemic drained your savings account or if you never had an emergency fund in the first place, focus on building one from scratch once you’re steadily employed again. Aim to save at least six months’ worth of living expenses. That may sound impossible right now, but the important thing is to start saving and tuck money away consistently. Over time, you can achieve your goal. 

 

2. Understand your loan protections

As we found out during the past few months, not all creditors are equal. While some creditors were willing to work with people struggling with their finances during the pandemic, others were not. 

 

Federal student loans were eligible for the CARES Act, including 0% interest and automatic payment suspensions. Unfortunately, private student loans did not qualify for those benefits. 

 

Some private student loan lenders workers with borrowers and allowed them to postpone their payments, but not all lenders were willing to do so. 

 

The experience highlights how important it is to shop around and choose a lender that offers hardship programs and forbearance options. With ELFI, you may be eligible for up to 12 months of forbearance if you experience a financial hardship, such as a job loss or medical emergency. 

 

3. Avoid the lifestyle creep

Before the pandemic hit, the economy was strong. Unemployment numbers were very low and credit was easy to get, so many people were inflating their lifestyle. Even high-earners were living paycheck to paycheck to live more lavish lifestyles than they could really afford. When things went south, people were left scrambling to make ends meet. 

 

Living well within your means protects you from a recession and a bad economy. When you spend less than you make, you have more breathing room in your budget, and can weather bad times until things improve. 

 

To avoid lifestyle inflation, create a budget and stick to it. When you get a raise, automatically deposit the difference in your paycheck into your savings account or make extra payments toward your student loans. That way, you won’t notice the extra money, but you’ll improve your net worth. Learn how to avoid the lifestyle creep here.

 

4. It’s wise to have multiple income streams

Many people lost their jobs, were furloughed, or had their hours reduced during the pandemic. With unemployment rates skyrocketing and many businesses shutting down, having multiple income streams is more important than ever. 

 

When you have more than one source of income, you’re better able to handle emergencies. Even if you lose your job, you’ll at least have some money coming in to cover your most important bills. Having a side hustle can also help diversify your skill-set, making it easier to find another full-time job later on. 

 

If you can, look for another source of income. You can pick up a side hustle, such as delivering groceries, pet-sitting, or renting out extra space. You can also offer freelancing or consulting services in your field. 

 

5. Don’t try and time the market

When the pandemic occurred, the stock market plummeted. Many people panicked and sold their investments or raided their retirement plans. It turned out to be a costly mistake, as the stock market rebounded. It’s a key lesson: Don’t try and time the market.

 

The stock market has natural ebbs and flows, and will experience sharp periods of growth and recessions. Don’t panic and sell during those declines, and don’t try to buy only when you think it’s at its lowest. 

 

Instead, keep your investments where they are, and continue making consistent contributions if you can. Over time, your money will steadily grow, and your patience will pay off. If you’re new to investing, you may want to check out these apps to get started.. 

 

6. Pay down high-interest debt

Having high-interest debt can be one of the biggest stressors when the economy is in decline. When your job is at risk and money is tight, your student loans and credit cards are the last thing you want to worry about when you need to pay rent and groceries. 

 

To eliminate that stress, focus on paying down high-interest debt when things are relatively good. By paying off your debt, you’ll save money over time, and you’ll reduce your monthly expenses.

 

If you want to accelerate your student loan repayment, consider student loan refinancing. Especially if you have private student loans, refinancing your loans can help you get a lower interest rate and save money over time.

 

Use the student loan refinance calculator to find out how much you can save over the life of your repayment term.*

 


 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

7 Healthy Ways to Deal With Financial Stress

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Do you have debt? If so, you are not alone. More than 74% of Americans have debt of some kind. We know how stressful dealing with debt can be. It can often feel like there is no end to debt payments in sight and can consume your thoughts more than it should. But there are healthy ways to deal with financial stress that can help you pay down debt faster. Read on for some innovative ways to curb financial stress and crush your debt.  

 

According to a Northwestern Mutual 2020 Planning & Progress Study, the average debt for Americans in 2020, just before the COVID-19 impact, was $26,621 per person carrying debt. The debt consists mainly of credit card debt and mortgages, followed by personal student loans and car loans. It should come as no surprise that millennials are feeling the strain of debt as well, with the average debt for millennials being $27,900 in 2019, excluding mortgage debt. Millennials cite credit cards and student loans as their major debt sources. Among all those with debt, 67% have a specific plan to pay it off. While that’s great, that means that three in 10 debt holders have no plan for how they’ll pay off their debt. A plan is a great way to feel more in control and stress less about your debt. With a little bit of strategic planning, it can also help you pay down your debt faster.

 

Healthy Ways to Deal With Financial Stress

If you have been reading about debt tackling strategies, you have probably heard of the debt snowball and debt avalanche methods. Those are great strategies, but if you are looking for new and creative (and possibly even fun) ways to deal with financial stress here are some ideas to try out: 

 

Side Hustle

In 2019, 45% of Americans reported having a side hustle. A side hustle is a great way to earn extra money outside of your day job. The money earned can be extremely helpful to make extra payments on your debt and pay off your debt faster. A side hustle could be a driver for ride sharing, grocery shopping for others, selling items on eBay, tutoring, or dog walking, among many other options. Your side hustle might even be an enjoyable hobby you can start making money from like photography or writing a blog. Doing an activity you enjoy and making money on the side is sure to help ease some stress.  

 

Dollar for Dollar

For every dollar you spend on non-essential purchases, you spend the same amount on an extra debt payment. Think you want new wireless headphones? Take the same amount you will spend and make an extra debt payment. This method may also help you curb some spending on wants versus needs.  

 

Sign-Up Bonuses

Looking for a new checking or savings account? Take advantage of banks with sign-up bonuses for opening a new account and use the bonus money to fund your next financial goal. 

 

Save with Apps

If you like paying with plastic, there are some apps that you can use to help you save for specific financial goals. Some will round up your purchase price to the nearest dollar and deposit the difference into a savings account, one example is the app Acorns. Another app, Qoins, will take the difference and make a debt payment on your behalf. Or use the app, Digit, that will monitor your income and spending habits to determine if there is extra money that can be moved from your checking account into your Digit account. These little amounts can add up quickly to help you meet a savings goal. 

 

Found Money

According to a 2019 report, 92% of millennials use coupons, whether paper coupons or digital coupons on their phone or online. These coupon savings can then be turned into extra debt payments. Found a coupon that saves you $10 on a purchase you were already going to make? Put that money aside to make an extra payment on your debt. You might also find money from your credit card cash back programs. If you are not carrying any credit card debt, using credit cards to earn cash back is a great way to earn money for purchases you were already making. Instead of using the cash back on a frivolous purchase, turn it into an extra debt payment or the beginning of an emergency fund. If you are shopping online, use a cash back shopping site to earn additional money that can be turned into another debt payment.  

 

Color Away

Looking to calm your anxiety and see the light at the end of the debt tunnel? Try debt repayment coloring pages. A study in the journal Art Therapy found coloring can reduce anxiety and improve mindfulness. A debt repayment coloring sheet allows you to color a section of the page for each new debt milestone met. They can be a great visual reminder of how far you have come in your debt paying journey and great motivation to make little extra payments when you can. A quick search will show you free ready made pages to start coloring.

 

No Spend Challenge

Make a commitment to not spend any unnecessary money for a certain length of time. You could start with a couple of weeks and work your way up to a month long challenge. Set the rules of what you can spend on, but remember it’s supposed to be a challenge. For example you could decide to only spend money on rent or mortgage, utilities, transportation, and food from grocery stores. Any other expenses outside of those categories you don’t spend for two weeks. All the extra money you would normally spend on unnecessary items goes straight to debt payments, emergency fund or any other financial goal you have.   

 

If student loans are one source of financial stress, check to see if student loan refinancing is a good fit for you.* For many people, refinancing is a beneficial way to cut expenses and save in interest costs.  

 

Conclusion

Debt may be a part of your finances right now, but won’t always be. Make a plan and try to incorporate some of these methods to help make the debt payoff journey easier. Before you know it, you will have your next debt payoff milestone met and will be on your way to a debt-free life. Good luck!

 


 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

The 7 Best Financial Tips Our Fathers Taught Us

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Your parents have an enormous influence on your life, even when it comes to your finances. In a study published by the Journal of Economic Psychology, researchers found that parental mentoring leads to lower credit card debt and great financial responsibility among college students. While we hate to admit it, the science proves it: dads really do know best — except when it comes to dad jokes. 

 

In honor of father’s day, here are some of the top financial tips we’ve learned from our dads. 

 

1. Don’t spend what you don’t have

When you want to make a big purchase but don’t have enough cash, there are plenty of options to finish the transaction. You can use a credit card, take out a personal loan, and many retailers now offer buy-now-pay-later financing when you make a purchase online. While those options allow you to get what you want right now, resist the temptation to use them. 

 

According to fatherly advice, paying interest on purchases — especially when they are “wants” and not strict necessities — is a costly mistake. Interest charges can cause you to pay much more than the purchase initially cost, and lead you into debt. 

 

Instead, only use your credit card when you can afford to pay off the balance in full each month. Otherwise, save up money in a separate savings account, so you pay for what you want in cash. 

 

2. Treat your own finances like a business

One of the best pieces of fatherly financial advice is to treat your household finances like a business. 

 

Many people don’t really have a clear picture of their finances. Without knowing how much money is coming in or what their goals are, it’s difficult to come up with a financial plan or evaluate whether or not they’re on track. 

 

By treating it as a business, you know exactly what’s going on and have a detailed plan for the future. To get started, follow these steps: 

  • Create a monthly budget: Figure out how much money you earn each month and how much you spend. Track your finances with software like Mint® or You Need a Budget
  • List your current obligations: Make a list of your existing debt, including student loans, credit cards, and car loans. Write down the interest rate, minimum monthly payment, and expected payoff date for each debt. Create a debt repayment plan, so you know when you’ll be debt-free. 
  • Set goals: Establish financial goals, like building a three-month emergency fund or paying off your student loans, and project when you’ll achieve them
  • Cut costs: Identify cost-saving measures, like student loan refinancing. By refinancing your loans, you may qualify for a lower interest rate. Over time, you could save thousands of dollars and pay off your student loans earlier. To find out how much you can save, use the student loan refinance calculator.* 

 

3. Make savings automatic

One way to trick yourself into saving money is to automate the process. By setting up automatic deposits, your money is automatically transferred into your savings account before you can spend it. The money is transferred before you even notice the money, so you can’t mentally prepare to spend it. Over time, automatic deposits can help you build a large emergency fund and save for future goals, like buying a home.

 

4. Treat debt like an emergency

Whether you have student loan debt or credit card debt, interest rates can cause you to pay thousands more than you originally borrowed. Especially when you’re just starting out, paying interest charges is an unnecessary drain on your finances.

 

Follow fatherly advice and treat your debt like an emergency. Keep your expenses low, avoid lifestyle inflation, and throw your extra money toward your debt to pay it off as quickly as possible. If money is tight, look for expenses you can cut and consider picking up a part-time job or side hustle to earn additional income. 

 

Depending on your personality, you may find that using either the debt snowball or debt avalanche method is the best way to accelerate your debt repayment. 

 

5. Start investing while you’re young

The earlier you can start investing, the better. You can take advantage of compound interest, and give your money more time to work for you. 

 

If your employer offers a 401(k) or 404(b) retirement plan and matches employee contributions, make sure you contribute enough to the plan to get the full matching contribution. Otherwise, you’re losing out on free money, which is part of your employee compensation. 

 

If your employer doesn’t offer a retirement plan, you can open up an Individual Retirement Account (IRA) on your own and make your own contributions. 

 

6. Protect your credit

Your credit is an essential part of your financial record. It plays a big role in your life, affecting the rates you’ll get on your mortgage and car loans.

 

Make sure you protect it, maintain it, and work to improve it. Review your credit report regularly. You can review your credit report from each of the three major bureaus — Equifax, Experian, and TransUnion — for free once a year at AnnualCreditReport.com

 

7. At the end of the day, no one wishes they spent more time at the office

While most fatherly financial advice is about building wealth, one of the most impactful tips is about remembering what’s important in life. Although your career and your finances are a big part of your life, your friends, family, and loved ones are much more significant. 

 

When someone nears the end of their lives, they never wish they spent more time at the office; they do wish they spent more time with the people who matter most to them. Take that lesson to heart and make sure you prioritize the people you love and maintain a proper work-life balance.

 


 

*Subject to credit approval. Terms and conditions apply. 

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Will Adding a Cosigner Save You Money When Refinancing Student Loans?

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Student loan refinancing is the process of consolidating student loans into a new loan taken out with a private lender, often with a lower interest rate and new loan terms. If you’re planning to refinance your student loans, you are likely looking to qualify for the lowest interest rate possible, save money over the life of your loan, make repayment more manageable, or pay off your loans faster. As you perform your research about which lender to apply with, calculate how much you could save, and the requirements to qualify, you also may have come across information about the pros and cons of adding a cosigner to your loan and wonder whether adding a cosigner could help save you money. Here are some situations where adding a cosigner can help you, whether it’s to simply qualify to refinance or to save you money. 

 

Adding a Cosigner to Qualify for Refinancing

Student loan refinancing lenders typically have similar requirements to qualify to refinance student loans, but the specifics can vary by lender. These requirements can include things such as:

  • Minimum credit score
  • Minimum debt-to-income ratio
  • Employment history
  • Minimum loan amount
  • Minimum credit history
  • Degree requirements
  • Required documents, such as W-2s and pay stubs

 

Check out ELFI’s full eligibility requirements here.*

 

If you are in strong standing in all of these categories, you can likely qualify with any student loan refinance lender that you choose. However, if you don’t meet the minimum requirements to refinance, adding a cosigner who has a stronger credit score or credit history may be the solution to helping you qualify. Before adding a cosigner, make sure that they are aware of the responsibilities of cosigning a loan.

 

Adding a Cosigner to Qualify with the Right Lender

For many individuals who are looking to refinance student loan debt, they face the issue of meeting the requirements of certain lenders but not others. For example, some lenders require a minimum credit score above 650, and some require a credit score of 680. If you don’t meet the requirements of certain lenders, you may feel obligated to choose a lender that has less strict requirements (keep in mind that this typically comes along with a higher interest rate).

 

By adding a cosigner who meets the requirements of any lender, you’ll be able to choose the lender that offers a lower interest rate, thus saving you money over the life of your loan. 

 

Adding a Cosigner to Save Money When Refinancing

Now that we’ve covered two common situations in which adding a cosigner may help you, whether it’s to simply qualify for refinancing or qualify with the right lender, let’s discuss a third scenario in which you already qualify for refinancing with the lender of your choice. It’s important to note that just because you meet the lender’s requirements doesn’t mean you’ll qualify for the lowest interest rate you see on their website. Lenders determine your interest rate based on many of the eligibility factors listed above, such as credit score, credit history, debt-to-income ratio, and employment history. Lenders typically offer a range of rates for specific term lengths, and those with better credit standing and debt-to-income ratios typically receive the lower-end interest rates. 

 

If you’re unsure whether you’ll receive the lowest interest rate a lender offers, prequalifying to receive an estimated rate may be the next step to take.* Prequalification is the process of submitting some basic information to the lender and allowing them to conduct a soft credit pull to determine an estimated rate. If you prequalify and aren’t happy with your rate, adding a cosigner who has a stronger credit score, credit history, debt-to-income ratio, or employment history may give you the ability to obtain the rate you want. Unless the cosigner carries these characteristics and thus appears to be a more qualified borrower to the lender, adding a cosigner alone will not lower your interest rate. If you have questions about whether you think adding a cosigner could help, reach out to your lender for more information. 

 

How Much Money Could Adding a Cosigner Save You?

So, how much money could adding a cosigner save you when refinancing your student loans? It all depends on your specific circumstances, but let’s review a hypothetical scenario:

  • Let’s say you currently have $50,000 in student loans with 15 years left on your repayment term at 7.25% APR. Your monthly payment is $456 per month and you’ll pay $82,080 over the life of your loan if you made all payments on time.
  • You are looking to refinance $50,000 in student loan debt to a 15-year term. The lender that you plan to prequalify with offers rates ranging from 4-6% APR for 15-year terms. After prequalifying, the lender offers you an estimated rate of 6% APR. 
  • At 6% APR on $50,000 in student loans over a 15-year term, your monthly payments would be roughly $422 per month, and you would pay approximately $75,960 over the 15-year term if you made all payments on time. You’re already saving $34 per month and $6,120 over your loan term by refinancing.
  • You decide to add a cosigner who has a stronger credit profile, debt-to-income ratio, or employment history, and the lender then prequalifies you at the lower-end interest rate of 4% APR.
  • At 4% APR on $50,000 in student loans over a 15-year term, your monthly payments would be roughly $370 per month, and you would pay approximately $66,600 over the 15-year term if you made all payments on time.
  • By adding a cosigner to qualify for the lower interest rate, you would save $52 per month and save $9,360 over the life of your loan. 
  • By refinancing and adding your cosigner, you’ve now saved $86 per month and will save $15,480 over your loan term compared to your original loan. 

While this scenario is hypothetical, it does show that adding a cosigner who has stronger borrowing credentials to lower your interest rate could provide you with significant savings both on a monthly basis and over the life of your loan. The potential monthly savings may even make you consider switching to a shorter loan term to lower your interest rate and pay off your loans faster.

 

To wrap things up, you can essentially consider adding a cosigner when refinancing student loans as a “lifeline” to either meet minimum requirements to refinance, meet the requirements of a particular lender, or lower your interest rate and save money over the life of your loan. If you’re interested in refinancing your student loans, check out our Student Loan Refinancing Calculator to see what you could potentially save, then prequalify with ELFI in just minutes, without affecting your credit score.* ELFI offers some of the lowest student loan refinancing rates available and assigns every customer a Personal Loan Advisor to assist them through every step of the process and answer any questions they have – such as whether adding a cosigner will be beneficial. 

 

 Related >> Cosigners and Cosigner Release: What to Know

 


 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

How HENRYs Can Achieve Debt-Life Balance

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If you are a HENRY (High Earner, Not Rich Yet), you may feel the struggle of wanting it all while still having to contend with paying off debt. You earn a good salary and deserve to reward yourself for your hard work, but you can’t forget about your debt. Paying down debt doesn’t have to take over your life! In fact, it’s completely possible to pay down debt faster while still maintaining the type of lifestyle you enjoy. Keep reading for ways to balance your debt payoff journey without sacrificing fun. 

 

By Caroline Farhat

 

Ways to Achieve Debt-Life Balance

Many people that are considered HENRYs are facing debt, most likely from student loans. The average student loan debt for HENRYs is $80,000. But HENRYs, like millennials, enjoy living for the present. Money spent on experiences and travel is a high priority. So how much should be allocated to paying off debt while balancing the lifestyle you enjoy? There are different budget methods that can help achieve this balance. 

 

50-30-20 Rule

With the 50-30-20 budgeting method, your take-home pay is allocated in three major categories. 

    • Fifty percent is for paying for all basic needs, including housing costs, car or transportation costs, food, utilities, and minimum payments on your debts. 
    • Thirty percent of your take-home income goes to your wants. With this amount you can continue to live the lifestyle you like within your means. 
    • The last 20% goes towards savings and debt payment. Part of it can be used to start and build an emergency and the other towards making additional payments towards debt. The additional debt payments will save you money in interest over the lifetime of the loan.

 

Debt Snowball

With this budgeting method, you order your debt balances from smallest to largest. You pay the minimum on all debt payments and any extra money you have for debt payments goes towards the debt with the smallest balance. Once the smallest debt is paid off, the minimum payment and the extra amount that was being paid towards that debt now goes to pay the second smallest balance. With this method, you get fast wins by paying the smallest debt balance first. You also can still allocate money for wants and entertainment, knowing that all your debts are being paid. This method is good for people who are motivated by seeing continual progress.

 

Debt Avalanche

This budgeting method is similar to the snowball method, however, instead of ranking the debts by balance, they are ranked by their interest rate. The balance with the highest interest rate is the first focus, so any extra money you have for debt repayment is put towards the highest interest rate loan. Paying debts off with this method allows you to save money in interest costs, but takes longer to knock out balances. Just like all the other methods you can still budget for entertainment costs but still make progress on all debt balances. This method is good for people who prioritize saving money on interest.

 

Zero-Based Budget

To create a zero-based budget you subtract all your expenses, savings included, from your income to equal zero. Start with subtracting all the necessary basic expenses, including minimum payments on all debts. Then you can subtract savings, lifestyle expenses, and extra debt payments. If you run out of money while creating this budget before you set aside money for additional debt payments, take a look at your other categories to see if you can reduce any unnecessary expenses. On the flip side, you may find that you have money left over that you don’t know what you did with. That extra money can be put to paying down debts faster, enabling you to save money and be debt-free sooner.

                                                        

Pay Debt Off Faster

Looking to pay your debt off faster without sacrificing your lifestyle? Here are some strategies to try:

 

Refinance Student Loans

Student loan refinancing is extremely beneficial for many people with student loan debt because it can save you money on your monthly payment and save you in interest costs over the life of the loan. The savings can go towards debt balances to pay them off quicker. Refinancing is an easy process where you obtain a new student loan, presumably at a lower interest rate than your current one, to pay off your old loan(s). To find out how much money you may be able, to save check out our Student Loan Refinance Calculator.* 

   

Side Hustle

Earning extra money outside of your day job could be a great way to make extra debt payments. Afraid your side hustle could cramp your lifestyle? Try turning your hobbies into some extra cash. If you love photography, try selling your photos or offering photography services. Like finding a good deal? Use that to find items you can resell for a profit.     

 

Found Money

Do you shop online using a cashback site or earn cashback rewards from credit cards? When you receive that found money, put it towards your debts. Although they may be small checks you receive, when paying off debt, every little bit can help cut down on interest costs and pay the loan off quicker. 

 

Bonuses

If you receive bonuses from work, commit to putting at least half towards extra debt payments. This allows you to still use some of the money for fun items or experiences you are saving for, but helps you move towards a better financial future as well. 

 

Sell Unused Items

Have items around your house that you no longer want or need? Turn them into extra cash. Take a couple of days to declutter your house and you may find items you realize you haven’t used in a while. Try selling them through an app, Facebook Marketplace, or consignment stores if you have designer clothing you no longer want. 

 

Conclusion

If you have debt, you can still live the lifestyle you enjoy while paying it off. With a plan on how to tackle the debt, you will find that you can still balance your wants and entertainment in your life while making progress on paying down the loans. And if you are ready to knock out debts even quicker, try some of these strategies to help you reach your goal. Good luck!

 


 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Is Social Media Ruining Your Finances?

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Due to the coronavirus pandemic and shelter-in-place restrictions, people are spending more time on social media than ever. 

 

By Kat Tretina

Kat Tretina is a writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.

 

While social media can be a fun way to pass the time, it can have a negative impact on your finances. According to Schwab’s 2019 Modern Wealth Index Survey, more than a third of Americans said their spending habits were influenced by images and experiences shared on social media. Regularly using social media could cause you to overspend and put your financial goals at risk. 

 

If your social media use is damaging your finances, here’s how to take back control. 

 

Signs your finances are getting derailed by social media 

Using Snapchat, Instagram, or TikTok isn’t necessarily a bad thing. It’s all about moderation. But there are some tell-tale signs that your social media use is hurting your bank account: 

 

1. Falling for FOMO

Seeing friends and old classmates’ vacation photos can give you a severe case of FOMO— fear of missing out. Those glamorous photos can cause you to want to book your own expensive trip. 

 

However, you should know that few people can really afford those exotic vacations. According to BankRate, the average person spends less than $2,000 per year on vacations. The Federal Reserve reported that 40% of Americans can’t cover a $400 emergency expense, so a pricey vacation — or even a weekend trip to the beach — is out of reach for many. 

 

While some people may save for months or years to pay for their vacations, many more turn to credit cards to finance their trips. Chasing their lifestyles could damage your bank account. 

 

2. Believing in the fantasy

With so many people posting beautiful photos of lavish purchases, it’s easy to believe that everyone is living a more luxurious life than you. But what you see on social media isn’t always real life. 

 

You have no idea how people are paying for those luxuries. They could be well off, or they could be in extraordinary debt. 

 

One well-known influencer racked up $10,000 in credit card debt to keep up her Instagram persona, filling her feed with pictures of dinners out, new outfits, and online purchases. And companies exist that allow users to hold fake private jet photo shoots

 

Take the photos you see with a grain of salt and don’t compare yourself to others.

 

3. Purchasing on impulse

Social media ads are incredibly targeted; they’re based on your search history and likes, so you’ll likely see ads for products that will appeal to you. In fact, a 2019 survey from VidMob found that one-third of Instagram bought an item directly from an Instagram ad.  

 

With one-click purchases and saved credit card information, it’s easy to make a purchase in an instant before you can really think it through. 

 

If you find yourself making purchases while scrolling through your social media feeds, you may be wasting money. 

 

How to stay on track

If your social media use is compromising your finances, use these five tips to get back on track: 

 

1. Limit your screen time

While it may seem difficult during shelter-in-place orders, set limits on how much time you spend on social media. You can use your phone’s screen time settings to see how much time you currently spend on your phone. Use apps like Moment, Freedom, and SelfControl to limit your social media access. 

 

2. Keep visual representations of your goals in front of you

To combat visuals of vacations and other purchases, keep visuals of your goals handy. For example, if you’re paying down student loan debt, keep a visual graph of your progress on your phone or saved to your computer desktop. 

 

(Hint: Need help paying down your debt? Consider student loan refinancing. Our customers have reported that they are saving an average of $272 every month and should see an average of $13,940 in total savings after refinancing their student loans with Education Loan Finance. You can get a rate quote without affecting your credit score.*)

 

If you plan on buying a home or a car, keep a picture of your dream purchase saved. You can also create a Pinterest vision board of what your goals are to help keep you focused. 

 

After all, taking control of your finances can help you live lavishly once your debt is repaid. 

 

3. Set a waiting period before making any purchases

Institute a waiting period before making any purchases to curb impulse buys. Make yourself wait 72 hours before making a purchase. 

 

If you see an item you want, save it. If you still want the product three days later, you can give yourself permission to buy it. 

 

You may find that you completely forget about it, or that it’s less appealing after a few days. By making yourself wait, you can ensure that your purchases are things you really want and need. 

 

4. Curate your feeds

Social media can be fun, but it can also make you feel bad about yourself and your life. To combat those problems, spend some time eliminating feeds and unfollowing accounts that make you feel inadequate, and only follow accounts that make you happy. 

 

Feeds that feature cute dogs? Follow! Home decor feeds with throw blankets and lamps that cost more than your rent? Unfollow. 

 

5. Practice gratitude

Researchers have found that focusing on things that you are thankful for is proven to make you happier. Every day or at least once a week, set aside some time to jot down things you are grateful for that happened during the week. 

 

They don’t have to be big things. Cooking an especially tasty dinner, being able to spend time binging Netflix with a friend or partner, walking your dog, or still having a paycheck during a difficult economic period are all things to be thankful for right now. 

 

By focusing on the good things that are already in your life, you’re less likely to be affected by FOMO and social media’s influence. 

 

Managing your money

Using social media can be a great way to connect with friends and family and pass the time, but it can negatively impact your finances. But by using these tips, you can combat its effects and manage your money. 

 


 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Forget the Joneses: Why a Modified HENRY Lifestyle May Be Better

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If you have ever been tempted to get the latest phone or newest trendy clothing, you may be familiar with the feeling of needing to keep up with the Joneses. Now, some millennials are feeling the pressure to live up to a new standard. As opposed to the proverbial Joneses, it’s the HENRYs. Although HENRYs have their downfalls, just like the Joneses, with some financial tweaks you can set yourself up for a bright financial future and avoid the pitfalls of being a HENRY.  

 

By Caroline Farhat

 

What Is a HENRY?   

HENRY is an acronym that stands for “High Earner, Not Rich Yet.” First used in a Fortune magazine article in 2003, it’s a term that describes millennials who typically earn over $100,000 but feel broke. According to financial experts that help HENRYs with their financial goals, the typical HENRY is: 

  • Earning more than $100,000 a year as an individual or $150,000 as a couple
  • A millennial, with the average age being 32 years old 
  • Working in any industry, including software engineering, digital marketing, journalism, law, medicine and finance 
  • Usually living in high cost of living areas with the higher-paying jobs, like California, New York and Washington D.C., but can live anywhere 
  • Saving money, but not enough. The typical HENRY may have between $15,000 and $20,000 saved. Although this may seem like a lot compared to the 58% of millennials that have a savings account balance under $5,000, based on the percentage of income earned, the savings are minimal.  

 

Problems HENRYs Face

Many millennials who are considered a HENRY feel like they are living paycheck to paycheck, however, they make it a priority to pay for expensive gym memberships and dream trips. Here are some problems HENRYs face and how to fix them: 

 

Lifestyle Creep

Lifestyle creep refers to the phenomenon in which spending on discretionary items increases when income increases. It can be dangerous to increase spending each time your income increases because it can derail future financial plans. HENRYs often give into lifestyle creep because they have the mentality that they deserve the luxuries they have become accustomed to.

 

The Fix: To fight lifestyle creep, prepare a budget with the goal of trying to save at least 10% of your income a month or 20% or more if you do not have any debt. Keep your budget the same even if your income increases and be sure to save the difference in income. If you are able to lower your expenses, save that difference too. It’s recommended that the savings go to a retirement account and building an emergency fund.  

 

 

Student Loan Debt

 

Student loan debt is a major strain for many HENRYs. According to one financial expert, 40% of her clients who are considered HENRYs have student loan debt. HENRYs owe an average of $80,000 in student loans, much higher than the average $33,000 for millennials in 2019. However, for many HENRYs, student loans helped them achieve the education they needed to obtain the high wages. The best way to deal with the student loan debt is to see if you’re missing out on ways you could be saving money on your loans and create a plan to pay them off quickly.

 

The Fix: Student loan refinancing can be extremely beneficial for many student loan borrowers.* Refinancing student loans can save you money on your monthly payment and in interest costs over the life of the loan. This will allow you to build more wealth faster and feel less strapped for cash. So how much can you save?

  

Let’s say you had $35,000 in student loan debt at 7% interest with a 10-year repayment term. By the end of your repayment term, you’d pay a total of $48,766. Interest charges would cause you to pay back $13,766 more than you originally borrowed. 

 

 If you refinanced your student loans and qualified for a 10-year loan at just 5% interest, you’d repay $44,548. Refinancing your debt would help you save $4,218. 

  

Use our student loan refinancing calculator to find out what your potential savings could look like.*

 

 

Living for the Now

 

HENRYs like to focus on the now, and although it is good to live in the present and appreciate what you have, that may not be the best mindset for your finances. HENRYs have to accept that the future will come and they have to prepare for it. But preparing for the future doesn’t mean you have to make a ton of sacrifices! It’s completely possible to enjoy worldly adventures and designer brands now and still save for the future. 

 

The Fix: Decide 2-3 future goals you’d like to achieve and examine the type of financial situation you’ll need to make them happen. Do you want to save for a down payment on a house? Plan to start a family soon? Or are you looking to retire early? Once you have your goals, set up automatic transfers to a special savings account so that you’re not tempted to touch the money.

 

Cost of Living 

HENRYs face a higher cost of living because income increases have not kept up with the rising cost of housing and medical expenses. Many also face the added stress of living in high-cost metropolitan areas.

 

The Fix: Try to cut your living expenses by choosing to live in the suburbs where housing costs may be lower. If cutting your living expenses is not an option, decide what discretionary expenses you can lower. For example, if you are used to getting takeout multiple times a week, try swapping easy home-cooked meals for at least half of the time.

 

Conclusion

If you realize you are a HENRY, this doesn’t mean financial doom for you. Making these small tweaks can help you continue to live the lifestyle you enjoy while working towards a richer future.

 


 

*Subject to credit approval. Terms and conditions apply. 

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Are Student Loans Impacting Your Credit Score?

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Even if you only have a basic knowledge of how credit scores are calculated, you may be aware of the fact that taking on debt and then paying it off in a timely and consistent manner is generally considered one of the best ways to build good credit, while late and missed payments can show up as black marks on your credit history.  What you might not know is that different types of debt can have different ramifications where your credit is concerned.

 

For example, the balances carried on credit cards are considered to be a form of revolving credit, according to Investopedia.  Lines of credit also fall into this category.  This type of debt includes a maximum limit and accounts are considered “open-ended”, which is to say, you still have access to agreed-upon funds even after you’ve borrowed and paid back up to the maximum.

 

Then there are installment credit accounts, including loans for houses, cars, and college tuition, just for example, which Investopedia characterizes as separate from revolving credit in that there are terms attached which specify the duration for payments, the number and amount of payments, and an end date for the loan.  Further, once payments are made, the money cannot be borrowed again.

 

These types of debt affect your credit score in different ways.  Revolving debt is potentially more damaging, as carrying high balances on credit cards could have an enormous impact on your credit score.  Revolving credit determines 30% of your score, according to MyFICO, although there are certainly other factors involved, including:

  • What is owed on all accounts
  • What is owed on different types of accounts
  • The number of accounts with balances
  • The percentage of revolving credit in use (credit utilization ratio)
  • The amount still owed on installment loans

 

Of course, if you find that revolving credit is severely impacting your credit score, Investopedia suggests that paying it down also has the potential to deliver significant improvements, and some people even utilize installment credit (personal loans) to pay off revolving credit as a means of lowering interest rates and shifting to a less impactful form of debt.

Although revolving credit accounts for a major portion of your credit score, installment loans can also have an impact in both positive and negative ways, according to an article from Student Loan Hero.  Here’s what you need to know about how student loans can impact your credit score.

 

How Can Student Loans Help Credit?

Because installment loans aren’t weighted as heavily as revolving credit when determining credit score, they may have less potential to damage your rating.  In fact, FICO statistics show that approximately 38% of consumers with student loan debt totaling over $50,000 fall enjoy a FICO score of over 700, which is considered the average score for American consumers, according to a recent article by Fox Business.  Those in the 740-799 range are considered to have very good credit, while a score of 800 or higher is considered exceptional.  By comparison, about 28% of consumers with student loan debt over $50,000 have scores under 599, which is considered a poor credit rating.

 

What does this mean?  It’s difficult to say, because credit ratings are based on so many different factors aside from student loan debt.  However, when managed appropriately, student loans, like any type of installment loans, could certainly improve a credit rating.

 

While revolving credit accounts for 30% of a credit rating, payment history is actually more important, delivering a whopping 35% of your credit score.  If you pay your monthly student loan bills on time and in full, you should be able to steadily build good credit over time, especially when you take the same care with all your other financial obligations.  Of course, this can be a double-edged sword, as well.

 

How Can Student Loans Hurt Credit?

While student loans don’t necessarily have the same major detractors as revolving credit, they still have the potential to harm your score if you don’t manage them appropriately, and even a single slip could cost you.

 

Even if you’re a responsible adult and you’re diligently paying down debt, it can be hard to juggle the many student loan payments associated with years of schooling (and taking out new federal student loans each year).  Something could slip through the cracks.  When this happens, it could have a negative impact on your credit score.

 

Even worse, the better your credit score, the more a late or missed payment could impact you, according to MyFICO.  This is because a higher score reflects less risk.  While a consumer with a lower FICO score is known to have some credit issues and is therefore somewhat less impacted by future problems like late or missed payments, someone with a stellar credit rating may fall further for similar infractions because the risk was not anticipated.  It doesn’t seem fair, but when paying down student loan debt, it’s important to understand the potential impact.

 

Why Does the Impact of Student Loans Matter?

Your credit score is used to determine whether you are approved for future loans and to calculate the interest rate and terms you are eligible for, according to Student Loan Hero.  While a single late or missed payment isn’t going to tank your score, and you can always speak with lenders about removing black marks on your credit report once you’ve rectified a mistake, you naturally want to maintain a high score if at all possible so as to improve your odds for loan approval and the best terms down the road.

 

How Can I Improve My Credit Score While Paying Off Student Loans?

Even if you’ve had smooth sailing so far, you may be interested in the benefits to be gained when you refinance student loans.*  If you currently juggle several student loans and you’re worried about the possibility of missing a payment somewhere along the line, you could refinance and consolidate student loans into one convenient payment.

 

In some cases, you might even save money when you refinance student loans by lowering interest rates or transferring variable interest loans to fixed interest options.  It depends on your situation, but it’s something to consider when it comes to controlling how student loans impact your credit score.

 

ELFI Credit Series: 5 Habits for Good Credit Hygiene

 


 

 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Tax Deadline Extended Until July: How This Affects You

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The deadline to file your taxes rolls around every year on or about April 15. If you fall into the group of individuals who wait until the deadline to file, you may be relieved to hear that the tax deadline has been extended this year. Read on to see when the new deadline is and how this extension affects you, whether you like to file early or later. 

 

By Caroline Farhat

 

Tax Deadline Extended

Due to the COVID-19 pandemic currently affecting the United States, the tax deadline to file and pay your 2019 federal income taxes is extended to July 15, 2020. It’s important to note that this is for both filing and paying. Originally the IRS announced the deadline extension was only for payments due, but now it includes filing. This is an extra three months to file federal taxes only. The extension until July 15 is automatic and you do not need to file anything to take advantage of it. If you will owe money you will not incur any interest or penalties until after the July 15 deadline. 

 

If you live in a state with state income tax you will need to verify the deadline for state income tax returns with your state. A majority of the states have extended their deadlines to match the federal deadline, however some are sooner. Check with your state’s Department of Revenue to verify the deadline. 

 

How the Tax Deadline Extension Affects You 

Longer Time to File

Are you a healthcare worker who is spending extra hours at work and you do not have the time to focus on filing taxes? Or maybe you are working from home and juggling homeschooling your children during this pandemic. Now that the deadline has been extended you have extra time to gather all the documents you need to file your taxes and take the time to complete the filing. Tip: To make gathering documents less of a pain next year, label a folder Taxes and the year and stick any receipts and tax documents you receive throughout the year in it.  

 

The extension is also beneficial for many people who use tax services to complete their returns. It’s estimated that 37% of filers use a tax preparer to file their taxes. If you are not able to leave your home, it may not be possible at this time to meet with a tax preparer to complete your return. This extension will allow you to meet with a tax preparer at a more appropriate time.  

 

Longer Time to Pay

If you think you will owe taxes, you will have a longer time to pay. For people that may be unemployed at this time or receiving reduced income, this is a major benefit. But if you expect to receive a refund, try to file earlier so you can collect the money you are owed. If you file electronically you can expect your refund within 3 weeks. Note: Any tax refund owed to you is different from the government stimulus check eligible individuals are expected to receive in 2020. 

 

Extension Still Allowed

In any given tax year you can file for an extension to file your taxes later. This still applies in 2020 for the 2019 tax year even though the tax deadline has been extended. You must file for an extension by July 15, 2020 and then you would be able to file your tax return by October 15, 2020. However, this does not give you additional time to pay. In order to get the extension, you must estimate any amount of taxes you owe and pay them by July 15. Failing to pay the estimated taxes could result in penalties.

 

Extra Time to Save

IRA and Health Savings Accounts have maximum contribution amounts each year. The deadline to have contributions count for the previous year is normally April 15. However, since the tax deadline has been extended, the deadline to save in these accounts has been extended as well to July 15. So if you have the goal to max out your account each year, but did not quite make it for 2019 the extension allows you to use the extra time to save up to the maximum amount. 

 

For example, the 2019 contribution limits for IRAs is $6,000 if you are under 50 years of age and $7,000 if you are over 50 years old. If you are under the age of 50 and have only saved $5,000 in your IRA in 2019, you can contribute an extra $1,000 by July 15 and add it as a contribution for 2019. This would allow you to still add up to the maximum amount for 2020 in your IRA as well. Note: Just make sure when you are making a contribution for 2019 that it is marked as a contribution for that year. You can do this through an online portal or by calling your plan administrator. 

 

Self-Employment Taxes

If you are self-employed or have a side hustle as a freelancer you should be used to paying estimated quarterly taxes. This is when you send tax payments in quarterly for income that does not have taxes withheld. It may come as a nice benefit this year that the deadline for estimated quarterly taxes has also been extended. The deadline for the first quarter, normally due on April 15 is now extended to July 15, 2020. The deadline for the second quarter, normally due on June 15 is also extended to July 15.

 

Bottom Line

Although the deadline to file federal income taxes has been extended, if you are expecting a refund it may be more advantageous to file earlier so you can receive the money that is due to you. The sooner you get the money, the sooner you can use it to pay down your student loan debt or pad your emergency fund. No matter when you decide to file, just remember you must file a return or request for extension by July 15, 2020!

 


 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.