Brexit: What Does It All Mean?

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Elizabeth S. Pierson, CFA

On June 23rd, the citizens of the United Kingdom voted to exit from the European Union (EU) with a 52% to 48% in favor vote.  Breaking down the vote, Scotland, Northern Ireland and London proper voted overwhelmingly in favor of staying in the EU, while rural areas of the United Kingdom voted to leave the EU.  This vote was essentially about immigration and trade. Similar to other nations, the rural areas have experienced more disruption by globalization as the world economy continues to be sluggish resulting in economic hardship for those further away from the cities.  This has led to an increase in nationalistic and protectionist movement.

Although it is no surprise that the markets reacted negatively to the news, they were very orderly with no major disruptions in trading and liquidity.  There was shock and disappointment by the financial markets, leading to an emotional response and a potential overreaction in the equity markets.  A flight to quality was spurred, moving the dollar higher versus other currencies and sending U.S. treasury yields to lows not seen since 2012.  As the news settled in, these markets rebounded slightly but still left investors with a sense of concern.

What does this mean for the future of the global economy and investing?  Following are key points regarding the long-term impact on portfolios.

  1. Two years for implementation – The effects of today’s vote will not be felt immediately. The United Kingdom’s exit from the E.U. will be a gradual process.   Once the UK has triggered Article 50 (the article that states the wish to exit the EU), there is a two year time frame for full implementation.  The process of negotiating with the EU may be challenging as the EU does not want other member countries to think it is easy to break away from the Union.  This is likely to cause more volatility in the market.
  2. Slower growth – The United Kingdom’s rate of economic growth may slow, potentially leading to a recession.  The British pound has weakened and may continue to weaken leading to several positive outcomes including cheaper exports and lower interest rates. European economic growth may be negatively impacted but the U.S. economy should not.  The United Kingdom is only 4% of the World’s GDP and because full implementation will span two years, it provides time for transition and adjustment.
  3. Low interest rates – Interest rates will continue to be suppressed.  The Bank of England has pledged to provide liquidity and will potentially lower rates.  A rate cut is being priced into the market as of this morning.  The disruption in the markets and the potential impact of this change likely allows the Federal Reserve to maintain rates at current levels for a longer period of time and move future rate hikes to later this year or early next year.
  4. Volatility = long-term opportunity – Market volatility provides opportunities to long-term investors.  We expect increased volatility in currency and equity markets due to this recent decision but believe that the U.S. economy will continue on its slow growth trajectory, providing growth for long-term investors.

This action creates risks to the political and economic landscape.  Despite the increased volatility, we believe the rewards outweigh the risks for long-term market investors.  We will be closely monitoring this situation.   If needed, we will make appropriate adjustments to our portfolio.  As it stands today, we do not believe changes are warranted as a result of this vote.

Elizabeth S. Pierson, CFA, is SVP, Chief Investment Officer at Alpine Trust & Investment Group. She’s a Chartered Financial Analyst and has more than 31 years of experience.

Investment and insurance products are: not FDIC insured; not guaranteed; and, may be subject to investment risk, including possible loss of principal.

Six Small Ways to Save Big Money

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Instead of focusing a lot of effort on making many changes to your spending habits, these six areas of your financial life can yield big savings and earnings with just a few small tweaks.

  1. Insurance

Many insurance carriers offer a bundling discount if you purchase multiple insurance plans through them. If you have two cars, insure both with the same firm, and consider using that firm for your rental or home owners insurance too. Ask your broker for other discounts you might be eligible for. Another great way to save on auto insurance is to increase your deductible to lower your monthly premiums.

  1. Your home

If you’re currently looking for a new home, try to purchase one that costs less than what you think you can afford, and don’t forget to factor in association fees, taxes, homeowners insurance and other costs that come with owning a home. If you already own a home, consider refinancing to potentially save hundreds each month. Finally, making your home safer (by installing a smoke detector, for example) can decrease your home owners insurance premiums.

  1. Debt payment

If you can, pay off your credit card bills in full each month so you won’t ever have to pay interest. To prevent having to put large amounts of money on a credit card with a high interest rate, save up an emergency fund for unexpected expenses. If you’ve already charged a sizable debt, develop a debt repayment plan and work it into your budget so you can pay off your cards as soon as possible and pay less interest in the long run. If you’re in good standing, it’s worth it to contact your credit card company to request a lower interest rate.

  1. Spending plan

Think of your budget as a way to organize your spending, not necessarily limit it. You can automate your finances to make sure your savings and investing goals are always met and your bills are always paid on time. This will save you money by avoiding late fees and penalties. By having a budget, you’re less likely to waste money on purchases you’ll later regret.

  1. Taxes

Make sure you’re taking advantage of applicable deductions and credits. To lower your taxable income, contribute money to a 401(k), IRA or 529 plan. To minimize your capital gains tax, consider selling some of your investments at a loss—but make sure you’re not using taxes as your main motivation for selling. Another easy way to get a tax deduction is to make a charitable contribution. Finally, a Health Savings Account is a tax-free way to save money for health expenses. The money goes into the account tax-free and is exempt from taxes upon distribution.

  1. Investing

The best way to get a return on your investment is to start early. Open a retirement plan and begin contributing as soon as possible so your money can experience the “magic of compounding” that only happens over time. Keep in mind that frequent trading and investing small amounts over time may cost more in commission and fees. Research the fees associated with your investments to make more strategic decisions or consider switching to a lower cost plan.

Sometimes the smartest financial moves (such as investing or buying insurance) can quickly eat away at your budget. By making small changes in these six areas, you can save significant amounts of money without significant effort.

Investment and insurance products are: not Alpine Bank products; not FDIC insured; not guaranteed; and, may be subject to investment risk, including possible loss of principal.

Time Can Be a Strong Ally in Saving for Retirement

ABANK_16_Facebook_v4Father Time doesn’t always have a good reputation, particularly when it comes to birthdays. But when it comes to saving for retirement, time might be one of your strongest allies. Why? When time teams up with the growth potential of compounding, the results can be powerful.

Time and money can work together

The premise behind compounding is fairly simple. Your invested dollars may earn returns from those investments, then those returns may earn returns themselves–and so on. That’s compounding.

Compounding in action

To see the process at work, consider the following hypothetical example: Say you invest $1,000 and earn a return of 7%–or $70–in one year. You now have $1,070 in your account. In year two, that $1,070 earns another 7%, and this time the amount earned is $74.90, bringing the total value of your account to $1,144.90. Over time, if your account continues to earn positive returns, the process can gather steam and add up.

Now consider how compounding might work in your retirement plan. Say $120 is automatically contributed to your plan account on a biweekly basis. Assuming you earn a 7% rate of return each year, after 10 years, you would have invested $31,200 and your account would be worth $45,100. That’s not too bad. If you kept investing the same amount, after 20 years, you’d have invested $62,400 and your account would be worth $135,835. And after just 10 more years–for a total investment time of 30 years and a total invested amount of $93,600–you’d have $318,381. That’s the power of compounding at work.

Keep in mind that these examples are hypothetical, for illustrative purposes only, and do not represent the performance of any actual investment. Returns are likely to be different each year, and are not guaranteed.

Investment and insurance products are: not FDIC insured; not guaranteed; and, may be subject to investment risk, including possible loss of principal.

How to Create your Emergency Fund and Know When to Use It

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Creating a structured savings plan is one thing that can set apart the financial dreamers from the financial doers! By setting strict guidelines and ensuring the correct follow-through with a backed up savings plan, you can be certain you’ll be properly prepared for the unexpected. One of the biggest obstacles individuals will face is often the unforeseen, fortunately there is a way to manage even that. Using a well-rounded emergency fund can ensure that you don’t dip into saved funds for unexpected costs such as auto repairs, or medical emergencies. Want to get started setting up your emergency fund today? Follow these simple steps and you’ll be on your way to financial success!

  1. Open a dedicated savings account.
  2. Deposit Funds each month without withdrawing anything.
  3. Start by saving $1000.

- Next save 3 months’ worth of income and expenses.

- Finally maintain 6 months’ worth of income and expenses.

The reason you have this fund is simple, to prepare for the unexpected. Whether it’s an unanticipated job loss, a costly home repair, or other unplanned expenses, your emergency fund can help you stay afloat when the waters get rough.

The main objective of this account is to have it work for you and your needs. By specifically determining what you do define as an emergency (job loss, vet bills, auto repairs) and what doesn’t (last minute birthday gift, broken TV, new clothes) you can generate a structured list to know when you feel safe using those funds, and when perhaps its best to leave them untouched. The idea of the emergency fund is to have it when you need it, so don’t spend in on anything unnecessary.

By generating your own emergency fund you can continue to save for milestones and pay bills, without worrying about the “what ifs” that are bound to come along down the road. Get started with your emergency account today at Alpine Bank, we’ll help you get to your next savings goal!

Retirement Plan Considerations at Different Stages of Life

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Throughout your career, retirement planning will likely be one of the most important components of your overall financial plan. Whether you have just graduated and taken your first job, are starting a family, or are enjoying your peak earning years, your employer-sponsored retirement plan can play a key role in your financial strategies.

Just starting out

If you are a young adult just starting your first job, chances are you face a number of different challenges. College loans, rent, and car payments are competing for your entry-level paycheck. The decades ahead of you can be your greatest advantage for your retirement fund. Through the power of compounding, you can put time to work for you. Compounding happens when your plan contribution dollars earn returns that are then reinvested back into your account, earning returns themselves. Time offers an additional benefit–the potential to withstand stronger short-term losses in order to pursue higher long-term gains. That means you may be able to invest more aggressively.

Getting married and starting a family

You will likely face even more obligations when you marry and start a family. Mortgage payments, higher grocery and gas bills, child-care, family vacations, college savings contributions, and home repairs and maintenance all compete for your money. Although it can be tempting to cut your retirement savings plan contributions to make ends meet, do your best to resist temptation and stay diligent. Your retirement needs to be a high priority. While you’re still approximately 20 to 30 years away from retirement, you have decades to ride out market swings. That means you may still be able to invest relatively aggressively in your plan.

Reaching your peak earning years

The latter stage of your career can bring a wide variety of challenges and opportunities. Older children typically come with bigger expenses. You may find yourself having to take time off unexpectedly to care for aging parents. On the other hand you could be reaping the benefits of the highest salary you’ve ever earned. With more income at your disposal, now may be an ideal time to increase your contributions. If you’re age 50 or older, you may be able to take advantage of catch-up contributions, which allow you to contribute up to $24,000 to your employer-sponsored plan in 2016, versus a maximum of $18,000 for most everyone else.

 

Investment and insurance products are: not FDIC insured; not guaranteed; and, may be subject to investment risk, including possible loss of principal.

Investment Planning: The Basics

ABANK_24_Facebook_v3Why do so many people never obtain the financial independence that they desire? Besides procrastination, other excuses people make are that investing is too risky, too complicated, too time consuming, and only for the rich. The fact is, there’s nothing complicated about common investing techniques, and it usually doesn’t take much time to understand the basics. One of the biggest risks you face is not educating yourself about which investments may be able to help you pursue your financial goals and how to approach the investing process.

Saving versus investing

Both saving and investing have a place in your
finances. Saving is the process of setting aside money to be used for a financial goal, whether that is done as part of a workplace retirement savings plan, an individual retirement account, a bank savings account, or some other savings vehicle. Investing is the process of deciding what you do with those savings. Some investments are designed to help protect your principal–the initial amount you’ve set aside–but may provide relatively little or no return. Other investments can go up or down in value and may or may not pay interest or dividends. Stocks, bonds, cash alternatives, precious metals, and real estate all represent investments.

Why invest?

You invest for the future, and the future is expensive. Because people are living longer, retirement costs are often higher than people expect. Though all investing involves the possibility of loss, including the loss of principal, investing is one way to try to prepare for that future. You have to take responsibility for your own finances. Government programs such as Social Security will probably play a less significant role for you than they did for previous generations. The better you manage your dollars, the more likely it is that you’ll have the money to make the future what you want it to be. Because everyone has different goals and expectations, everyone has different reasons for investing. Understanding how to match those reasons with your investments is simply one aspect of managing your money to provide a comfortable life and financial security for you and your family.

What is the best way to invest?

  • Get in the habit of saving. Set aside a portion of your income regularly.
  • Invest so that your money at least keeps pace with inflation over time.
  • Don’t put all your eggs in one basket.
  • Focus on long-term potential rather than short-term price fluctuations.
  • Ask questions and become educated before making any investment.
  • Avoid the urge to invest based on how you feel about an investment.

Before you start

Organize your finances to help manage your money more efficiently. Make sure you have an adequate emergency fund, sufficient insurance coverage, and a realistic budget. Also, take full advantage of benefits and retirement plans that your employer offers.

Understand the impact of time

Take advantage of the power of compounding. Compounding is the earning of interest on interest, or the reinvestment of income. For instance, if you invest $1,000 and get a return of 8 percent, you will earn $80. By reinvesting the earnings and assuming the same rate of return, the following year you will earn $86.40 on your $1,080 investment. The following year, $1,166.40 will earn $93.31. (This hypothetical example is intended as an illustration and does not reflect the performance of a specific investment).

Consider whether you need expert help

If you have the time and energy to educate yourself about investing, you may not feel you need assistance. However, for many people it may be worth getting expert help in creating a financial plan that integrates long-term financial goals such as retirement with other, more short-term needs. However, be aware that all investment involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful.

Investment and insurance products are: not FDIC insured; not guaranteed; and, may be subject to investment risk, including possible loss of principal.

7 Ways to Decrease Your Gardening Costs this Season

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Gardening season is upon us! Whether you’ve been gardening for decades or are flexing your green thumbs for the first time, save some green as you grow it this spring with these helpful tips from Alpine Bank:

  1. Study the sun. You can burn hundreds of dollars by accidentally placing plants in areas that receive too much or too little sunlight. Take time before planting to make notes on the sun’s path across your yard, scoping out key sunny and shady spots along the way.
  2. Invest in mulch. A layer of fresh mulch aids inprotecting against soil erosion while cutting the costs of weed killer.
  3. Reuse newspapers. Before you lay down protective mulch, spread layers of old newspapers directly onto the soil to block weeds and lock in moisture. Eventually the newspaper decomposes while saving on water costs in the long-run.
  4. Try natural bug protection. Instead of buying pricey pesticides and bug zappers, place fabric softener sheets next to outdoor light fixtures to deter flying insects.
  5. Make your own weed killer. Eco-friendly and inexpensive, you can create your own weed killer by mixing 1 gallon of white vinegar with 1 ounce of liquid dish soap. Put this mixture in a spray bottle and directly apply to weeds for the maximum effect.
  6. Start composting. Create nature’s best fertilizer in your own backyard by forming a small compost pile of kitchen and yard waste. Not only do you reduce your footprint by saving space in a landfill, but your homemade compost saves you money and increases the yield of your plants.
  7. Plant the pricier edibles. To save money, time, and precious garden real estate, invest in planting herbs and vegetables that would normally cost you a bundle at the grocery store. Grow pricier crops such as raspberries, shallots, and basil yourself and buy cheaper produce like lettuce, carrots, and parsley at your local farmers markets.

At Alpine Bank, it’s always growing season when it comes to building your wealth. If you’re looking to prosper you financial gains stop by and give us a call at 815-398-6500 today!

The Top 10 Things to Add Value to Your Home

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Just like purchasing your home, selling it is a journey all its own. Whether you’re aiming to sell your home in one year or five, you can make a number of small changes that offer a big return on your home’s value. Try these key improvements and see the effect on your next home assessment.

  1. An eye-catching entrance. As the gateway into your home, your front door will set the tone for what’s within. Update your door bell, paint the front door, and hang a spring wreath to tie it all together.
  2. Energy-efficient updates: Updating appliances, windows, and fixtures, to their more green counterparts can set your home apart with the attractive promise of future savings.
  3. Low-maintenance landscaping: While flowers are eye-catching, shrubs and drought-resistant greenery make great visual impact with the promise of less hassle.
  4. A thorough clean. A deep clean of carpets, curtains, and corners will make your home sparkle and create a positive first impression. Hiring a professional cleaning service may also help to remove hard-to-clean grime and overlooked areas.
  5. De-cluttered rooms. A tidy house doesn’t always feel open. Heavy curtains, overstuffed couches, and rooms devoid of sunlight can make buyers cautious of square footage. Rid the room of nothing but bare essentials and simplistic furniture to maximize the area of the space.
  6. Extra mirrors. To double the feel of any room, strategically place mirrors to create an illusion of extra space.
  7. Small updates to big places. Kitchens and bathrooms are focal points in the selling process. Without the time and cost of a major remodel, small updates like new lighting, fresh paint, or modern accessories can add value to your home on a budget.
  8. Revamped flooring: Thin or threadbare carpets can raise alarms for buyers as they visualize the daunting need to replace the tired flooring. As your budget allows, replace your home’s carpet beginning high-traffic areas and working outwards.
  9. Modern lighting.Updating light fixtures to a timeless and simple feel, help to elevate a home’s design and gives the potential buyer a blank canvas to imagine life in their new home.
  10. A professional opinion. In under an hour, a trained interior designer can provide suggestions for small tweaks, such as furniture arrangement or paint color adjustments, which can increase your home’s value with limited investment.

While improvements are not a guarantee of improved value, they can make all the difference when drawing in interested buyers. If some of your home-improvement projects require a bigger investment than your budget expected, our lending officers at Alpine Bank can work to help you secure the HELOC you need.

How-To Give Your Children a Financial Education with Their Allowance

Financial LiteracyAllowance, when treated as an educational opportunity, gives your child hands-on experience in budgeting, saving, spending, investing, earning, negotiating, and tracking their money. With these tactics, you and your child can make the most of their allowance while growing their financial literacy.

  • Shy away from weekly allowance. A bi-weekly or monthly allowance better reflects a real-world payment schedule than a weekly handout. Additionally, staggered money instead of a steady cash flow opens opportunities to practice budgeting for both spending and savings goals.
  • Open a savings account. It’s never too early to start saving. Open a savings account with your child and explain the power of compound interest. Establish that they pull 10% of their total monthly allowance to funnel into savings, enabling them to budget the remaining 90% while teaching the discipline and value of saving.
  • Show them the options for their funds. Teach your children the potential their money has by creating four labeled jars for spending, saving, giving, investing. Each time your kids are given money via chores or other revenue sources, have them choose which jar to put the funds in. The spending jar can be used on small purchases like candy bars or little toys, and the saving jar can be put towards larger items that take more time to save.
  • Don’t offer advances. Although children will often try to negotiate getting their allowance early in order to buy the toy that they can’t quite afford yet, don’t give in. In the long run, your kid will benefit more from understanding the necessities of budgeting. That being said, the occasional unsolicited “bonus” for good behavior, or going the extra mile, doesn’t hurt either. After all, there’s very little more motivating than hearing your boss tell you you’re doing a great job – keep it up.

With each dollar your children learn to save, they are propelling their education forward. If you’d like to get your little one’s financial education off to the right start, stop by Alpine Bank today and enroll them in their very own checking account.

Doetch Farms

Spring Planting Season

Jeremy Doetch

Jeremy Doetch, VP, Ag & Commercial Services

As spring starts to erase the remnants of winter, I can’t help but get anxious and excited for this season.  It’s the time of year that I make a checklist for the next 90 days. The reasons I do this is because I’m part of an elite group that consists of 2% of the United States population. This group is working feverishly to get everything ready.  We check and double check equipment, technology items, seed, and fertilizer, and then we count down the days until it all begins. Every member of this group has their own way of preparing for the spring.

For me, this checklist revolves around smells. It may sound funny, but it’s something that has been sown deep into my roots. I can’t wait to smell the exhaust from a tractor just starting up. I can’t wait to smell fresh tilled dirt. The mixture of seed and graphite, along with the occasional smell of grease.  The way the smell of the dirt changes from May to April to June – And then, the satisfaction of a carefully executed plan coming to fruition when I see the first sign of corn and soybeans sprouting above the ground. The smell of freshly cut hay and yes, even the smell of fertilizer.  These smells keep me grounded, keep me focused, and keep me on track.

These checkpoints help me understand and appreciate a farmer’s perspective. When I’m sitting across the desk from a farmer wanting to do business with me, I never forget my roots and I know that this farmer understands my appreciation of these smells in a way that the other 98% of the population does not. We’re farmers. We’re part of an elite group.

Our agriculture lending team has very deep roots in this industry.  When we take the banker hat off at the end of the day, we are putting the farmer hat on.  We strive to help farmers grow their business, protect their legacy, and transition to the next generation.  If your banking relationship is broken and needs repairs, we have the tools to fix it and get you back to enjoying the smells that you love, worry free.

So to my fellow elitists, I wish you all a prosperous and safe spring planting season.  I hope at some point this season, as you are filling your planter at sunset, you take in a deep breath and think to yourself, “It doesn’t get any better than this.”

Jeremy Doetch, Vice President, Ag & Commercial Services, has more than 14 years of experience in commercial and agricultural lending. From the Poplar Grove area, Doetch plays an active role in his family’s grain, hog and trucking operation.