Step-by-Step Guide for Buying a Motorcycle

If you’re ready to purchase your first motorcycle, you’re likely thrilled — and more than a little overwhelmed. There are so many factors to consider and dozens of choices you’ll need to make before you pull the clutch. It can all get confusing, fast!

No worries; Advantage One Credit Union is here to help. We’ve compiled a step-by-step guide for buying a motorcycle, complete with useful tips to help you make a purchase you’ll enjoy for years to come. 

Secure financing

A motorcycle can run you anywhere from $2,000 to $16,000, and it’s always best to have the financial details of a large purchase squared away before entering the market so you’ll avoid disappointment later. You can save up for your bike, charge it to a low-interest credit card or take out an unsecured loan from Advantage One Credit Union, where you’ll enjoy affordable interest rates and payback terms to fit your budget. 

Brush up on your motorcycle safety

Before you shop for a bike, it’s a good idea to complete a Motorcycle Safety Foundation (MSF) course. The course is similar to driver’s training and will help ensure you can ride your bike with increased safety. Depending on your state, you may need to obtain a special motorcycle license as well. 

Procure insurance

In some states, motorcycle insurance is required by law, but even if your state does not mandate it, consider purchasing coverage anyway. Insurance will protect you from liability for property damage or personal injuries caused through your vehicle, help cover medical bills in case of an accident, and cover theft and damage to your bike as well. As is the case with auto insurance, you’ll have the freedom to choose how much coverage you’d like to purchase, with more robust coverage directly increasing the cost of your policy. 

Choose between a new and used bike

You’ve got the important stuff taken care of and you’re itching to try out bikes, but before you do, decide if you’re going to purchase a new or used motorcycle. Let’s take a quick look at the pros and cons of each option. 

A used motorcycle can cost thousands less than a new bike and won’t depreciate nearly as much, but finding a used motorcycle in decent condition can be challenging. If you decide to go this route, stay away from bikes that show signs of excessive wear, have mileage exceeding 20,000 miles, and/or have difficulty starting up, running or stopping. It’s also a good idea to get a VIN (Vehicle Identification Number) to check on your potential new bike, have it professionally inspected, and take it for a spin before finalizing the deal. 

A new bike will be blessedly free of mechanical breakdowns in the near future and will look nice and shiny. Of course, you’ll pay for these privileges, so be sure to run the numbers before setting your heart on a particular motorcycle. It’s also important to note that, while you might save on repairs and maintenance, insurance on a new bike will likely be a lot more expensive than coverage for a used one.

Choose a motorcycle type

You’re ready to choose your type of ride. Here are the most popular choices:

  • Sport bikes- equipped with a leaning design that makes them ideal for riding at high speeds, these bikes also have higher foot-pegs and handlebars that are more out of reach than most other bikes. A sport bike can be a good choice for thrill-seekers, but an uncomfortable option for riders planning to take long trips on their bikes. Insurance can also be expensive. 
  • Standard bikes-an upright riding posture and lack of accessories make these a great all-purpose motorcycle. Perfect for beginners and the budget-conscious, but not the best choice for off-road and long-distance riders. 
  • Cruisers-the Harley Davidson standard, cruisers offer a relaxed riding position, comfortable suspension and a V-twin engine. They also tend to be heavy, making them difficult for new or small riders to handle, but an excellent choice for tall riders and those seeking a stylish ride. 
  • Touring bikes-built for long rides, these motorcycles are fully loaded with extra features, including fairings that block the wind, saddlebags to accommodate luggage and large fuel tanks for long trips. A touring bike can be ideal for riders who take lots of road trips, but they can be an expensive choice for city riders. 
  • Dual sport bikes-lightweight and built with high-travel suspension and aggressive tires, these bikes are a great choice for off-road riding. Their tall seat height makes them difficult for short riders to handle.

Once you’ve chosen your ride type, research models from popular brands, including Yamaha, Harley Davidson, Suzuki, Kawasaki, Honda and Triumph. Be sure to check out ratings and reviews from current owners. Once you’ve narrowed down your choice, you’re ready to visit dealerships and private sellers.

Important features to consider

A motorcycle’s seat, handlebars and foot-pegs are not adjustable, so it’s important to choose one that fits comfortably. Take a seat on any bike you are considering. See how it feels, and make sure you can easily reach the handlebars and pedals. If possible, go for a ride around town to get a real feel for it. 

You’ll also want to consider the weight of your bike since a heavier bike can be difficult to maneuver. 

Finally, if you’re a new rider, don’t go overboard on power. It’s best to start with a bike that has a 500cc engine and then trade- in for something more powerful later on, if necessary. 

Choose your bike and finalize your purchase

You’re ready to buy your bike! Be sure to choose carefully and do lots of research so you’ll enjoy your motorcycle for many happy miles. 

Your Turn: Have you recently purchased a motorcycle? Share your tips and advice with us in the comments. 

Get the Hell Out of Debt

Title: Get the Hell Out of Debt: The Proven 3-Phase Method That Will Radically Shift Your Relationship to Money

Author: Erin Skye Kelly

Paperback: 320 pages

Publisher: Post Hill Press

Publishing date: July 20, 2021

Who is this book for? 

  • Anyone who is fed up with living in debt. 
  • People seeking to get rid of credit card debt without paying a fortune in interest.
  • Readers who want to improve their money management and find most personal finance books boring.

What’s inside this book?

  • An honest, incisive and often humorous guide for paying off debt.
  • An outline for the three phases of getting rid of debt.
  • The two most important tools of money management.
  • Kelly’s own journey toward a debt-free life.

3 lessons you’ll learn from this book: 

  1. How to pay off a large amount of consumer debt.
  2. How to create and maintain wealth. 
  3. How to change your money mindset so you’ll stay debt-free.

5 questions this book will answer for you: 

  1. Why do people tell me to consolidate and refinance my way out of debt when this advice only takes me deeper into debt?
  2. Is it possible to kick my debt for good?
  3. What practical steps do I need to take to get rid of my debt?
  4. Is financial stress an inevitable part of life?
  5. How can I find true financial freedom?

What people are saying about this book: 

  • “Erin has a brilliant way of explaining, step-by-step, how to radically shift your finances for the better.”  — Peter Mallouk
  • “Erin understands that wealth is about so much more than money. It is about creating, living, and leaving a legacy of love and happiness.”  — W. Brett Wilson
  • “With a welcomed irreverence and absolutely no judgment, Erin shows us all of the nuanced, messy, and dysfunctional ways we stumble and fall into debt. But then! Then she shows us how to get up and stand tall before we kick, claw, and fight our way out of it. It’s you against your debt. Read this book if you’re ready for your gloves to come off.”  — Jesse Mecham

Your Turn: What did you think of Get the Hell Out of Debt? Share your opinion in the comments. 

Should I Buy a House Now?

Q: I’ve been saving up for a down payment with plans to buy a house and feel ready. But, with the real estate market hotter than ever right now, I’m wondering if I should go ahead with my purchase or push it off until the market settles down. Should I buy a house now?

A: The real estate market has been hit particularly hard by the coronavirus pandemic. Coupled with several factors, like falling interest rates, moratoriums on foreclosures or evictions and an increase in demand, prices have driven upward across the country. 

According to a Zillow report published in April 2021, as many as 11% of Americans have moved since the pandemic’s outbreak, with more planning to move in the coming year. With remote work now possible in dozens of industries and the long months spent locked down in cramped apartments giving new meaning to “cabin fever,” Americans are seeking greener pastures. States that boast of a low or no property tax and an allegedly higher quality of life, like Texas and Florida, have been flooded by an influx of newcomers, as have suburbs all over the country and vacation hotspots. Homes are in such high demand, Zillow reports, that nearly half the homes up for sale in the U.S. during the month of May 2021 have sold in under a week. 

Naturally, this increase in demand has led to skyrocketing prices, and many homebuyers are delaying their purchase in hopes that the market will eventually cool off. However, under certain circumstances, it can still be an excellent time to buy a house.

Let’s take a look at some reasons to buy a house now. 

Interest rates are still historically low

While rates have risen since their all-time lows at the height of the pandemic, they continue to linger at record lows. On July 26, 2021, Bankrate placed the average APR* for a 30-year fixed mortgage at just 3.25%, and the average APR for a 15-year fixed mortgage at 2.62%. Many experts predict a sharp increase in rates over the next year and advise house hunters to take advantage of low rates while they last — even an increase of just 1% can translate into tens of thousands of dollars over a 30-year loan. 

There are more homes on the market than you may think

While it is a seller’s market and bidding wars are the norm right now, more homeowners are putting their houses up for sale. According to Realtor.com, home sales are up by 44% compared to a year ago. Also, now that the federal moratorium on foreclosures has ended, more homes are likely to enter the market in the next few weeks and months. Finally, new construction homes, which were put on hold for months during the pandemic, are beginning to fill the market again, offering more choices for homebuyers everywhere. 

It is generally the better financial choice to buy

While you’ll need to make sure you can actually afford to buy a house right now, owning a home is usually the better financial choice. Homeownership provides long-lasting equity, significant tax benefits and more stability than renting. Instead of throwing money at your landlord each month, every mortgage payment you make toward your home builds your own equity. 

Before you start house hunting, make sure you are financially prepared for homeownership. Mortgage eligibility requirements can be stricter than usual now, so it’s important to bring your credit score up to 720 or higher, work on paying down debt and to save up a sufficient amount of money before you start your search so you can comfortably cover the down payment and closing costs on your new home.

* APR = Annual Percentage Rate

Your Turn: Have you recently bought a house? Tell us about it in the comments. 

Making Your Home Safe for Older Residents

Whether an older relative is moving in with you, or you’re planning on aging in your own home, it may be time to check out how safe and accessible your home is.

Stairways and bathrooms can be risky places for able-bodied people, but throw mobility or cognitive issues into the mix and those areas of the home can create life-threatening mishaps.

Let’s take a look at how to make your place safer from the outside in:

Walkways and entryways

Illuminated and flat walkways will provide safety for an older relative who may use a walker or wheelchair. Take a look at yours, and repair cracked or uneven sidewalks, add anti-skid strips and consider motion-sensor lights for extra protection.

Install rails on both sides of stairways and use color-contrasting treads for added visibility. Create a no-rise entryway with a ramp. Eliminate thresholds in the entryway into the home, as well as throughout the home, since they are known to be trip-and-fall hazards.

Bathroom

Do not skimp when it comes to creating a safe bathroom. Make sure bathmats are non-slip, and install non-slip strips in the bath and shower. Get some extra protection with non-slip rug tape.

Installing grab bars in the shower or bath and near the toilet will help prevent falls. Seniorliving.com advises using vertical or U-shaped grab bars, as opposed to diagonal bars, which are conducive to slipping. The walls also need to be reinforced to support the weight of the person using the bars.

Extra lighting in the shower, as well as a height adjustable hand-held shower sprayer and shower seats or benches will also help.

An elevated toilet with ample space for maneuvering a walker or getting into a wheelchair are recommended for those with mobility issues. Ageinplace.org also suggests installing a lower sink with knee clearance.

Bedroom

Make sure there is enough space to maneuver a wheelchair or walker. Lighting should be ample and reachable from the bed. Rocker light switches near the headboard are recommended. Create closet space with a doorway that can accommodate mobility equipment and lower shelves for easy access.

Kitchen

To keep things safe in the kitchen, the name of the game is preventing bending or crouching, especially when hot food and appliances are involved.

Appliances should be well-lit with easily readable dials and buttons. Seniorliving.com recommends wall ovens and microwave drawers to avoid lifting heavy and hot items over the appliance door.

Make pantry items accessible with lower shelves, and place frequently used items front and center. Lazy susans and roll-out shelves are ideal.

Make sure the water pressure is well adjusted and the water heater is set at 120 degrees F to avoid burns.

With these safety measures in place, both you and your loved ones can have peace of mind.

Your turn: How have you made your home safer for older occupants?

Beware Back to School Scams

As the store aisles fill up with pencils and crayons and the frantic back-to-school shopping season begins, scammers are ready to strike. Whether you’re a college student preparing for the fall semester, a high school student ready to make the most of the coming school year or the parent of a student of any age, beware of these trending back-to-school scams.

The student tax scam

In this scam, a crook posing as the IRS calls a college-bound student informing them that they have failed to pay the student tax. If it is not paid up immediately, the “agent” says, the student will not be allowed to attend school and may even face jail time.

IRS scams like this one can happen at any time of year, but are especially common before the start of a new school year. Here are three things to know to help you avoid this scam: 

  • The “student tax” does not exist. 
  • The IRS will never initiate contact with a taxpayer through a phone call.
  • The IRS will never demand payment through a prepaid debit card or wire transfer.

Scholarship scams

Another school-related scam that can be more prevalent this time of year, the scholarship scam cons students and their parents into paying money for government student loans or financial aid, or promises a scholarship for a fee. Follow these rules to avoid falling for scholarship scams: 

  • Never pay to apply for a government student loan or financial aid. There is no fee for applying for government aid and there is help available for filling out the Free Application for Federal Student Aid (FAFSA) forms at fafsa.gov
  • There’s no way to guarantee a scholarship or grant. If you’re targeted by a company promising to get you approved for either one by paying a small fee, you’re being targeted by a scam. 
  • There is generally no fee necessary to receive a scholarship. If you are offered a scholarship for a fee, opt out. 

School supply giveaways and freebies

Between backpacks, new clothing and loads of supplies, back-to-school shopping can cost a lot. Messages promising a free back-to-school shopping spree can be most welcome, if they’re legit. Unfortunately, they too often are not.

Back-to-school giveaway scams will ask the victim to visit a website and provide their email address to claim their prize. The victim will then be rewarded with an endless stream of emails, texts, robocalls and more from the company that now has their information and other companies they’ve sold this information to, with no true rewards or prizes in sight. 

In some cases, the scam is a lot more nefarious, and the “company’s” website will infect the victim’s device with malware. Or, the scammer may demand a “processing fee” before the victim can claim their supposed prize. 

Protecting yourself from a giveaway scam is easy when you remember this simple rule: If it sounds too good to be true, it probably is. Also, legitimate contests will rarely select a winner at random; you’ll have to enter it first by providing your email address or another way the company can contact you if you win. They are also not likely to make you jump through hoops or provide all sorts of information before claiming your prize. Finally, there is generally no payment necessary for claiming an authentically won prize. 

Social media scams

In these scams, victims are targeted through their social media platforms and offered incredible deals or offers on school supply shopping. This can be presented in the form of deeply discounted gift cards at favored stores, expensive technology at bargain prices and more. Of course, these deals are bogus and if the victim clicks on the embedded link, their device will be infected with malware. 

Here, too, stay alert and remember that if it sounds too good to be true, it’s almost certainly a scam. No, you won’t be scoring an iPad for just $19.99 and you can’t buy a $1000 gift certificate to Abercrombie for just $250. Ignore all ads like these and, if you can, opt out of receiving them in the future. 

It’s back to school season, and the scammers are at it again. Follow the tips outlined above and stay safe!

Your Turn: Have you been targeted by a back-to-school scam? Share your experience with us in the comments.

7 Tips for a Budget-Friendly Road Trip

With many indoor attractions still closed or operating only at a limited capacity, there’s never been a better time to pack up the car, RV or camper van and set out on the road trip of a lifetime. However, without careful planning, a road trip can get pricey, especially with soaring gas prices and the rising costs of food. For this reason, we’ve put together seven solid tips for a budget-friendly road trip. This should help you hit the road in style without breaking your budget.

1. Save on food costs 

Food can quickly turn into the biggest expense of your trip unless you plan ahead. And no, this doesn’t mean dining only on canned baked beans or instant soups for the duration of your trip. Here’s how to save on food costs during your road trip: 

  • Stock up on staples while at home. Shop your local stores for basics before setting out. Once you’re on the road, you won’t have as many choices for food shopping, which may stimulate overspending. 
  • Get your “kitchen” into gear. Unless you’re road-tripping in an RV or camper van that comes with a fully equipped kitchen, you’ll need to gear up for basic food prep on your trip. A good knife, cutting board and small cooking appliances, like a portable grill, panini maker and plug-in burner, can be great starting points. 
  • Plan a mix of meal types. You likely want to eat some meals out during your trip, but overdoing the dining out will quickly kill your budget. Instead, mix it up, alternating between home-cooked meals, dining out on fine cuisine and tasting local street foods. 
  • Only eat out at places you don’t have at home. For further savings, save the dining out for delicacies that are unique to your current location. Think fresh seafood on the Oregon coast, authentic Korean food in K-Town of Los Angeles or Cajun food in New Orleans.

2. Camp out instead of sleeping in hotels

Sleeping under the stars whenever possible will add another layer of awesome to your trip. Check out recreation.gov, where you can book accomodations at 3,600 facilities and 103,000 individual sites across the country. Lots of camping spots will run just $20 a night.

3. Find free attractions

Who says you need to pay for your fun or it doesn’t count? Most tourist hotspots will have a wide selection of free activities and sights to see at no cost, like the Smithsonian in Washington, D.C. and city street art in Pittsburgh, PA. Check out local websites or ask around on the street to find the best-kept secrets at each location. 

4. Map out your route for greater savings

Instead of blowing money on gas, create a detailed schedule of all your stops before setting out, choosing the most efficient and inexpensive route. Look up local attractions in the areas you plan to stop at to book reservations in advance when possible. In many places, you can save a tidy bundle of cash just by pre-booking. Also, keep in mind that many attractions still require reservations as a COVID-19 precaution, so be sure to plan accordingly. 

5. Download GasBuddy

With gas prices hitting $4 a gallon in some parts of the country, your car’s tank can take a huge chunk out of your road trip budget. Download the Gas Buddy app before hitting the road to find the stations selling the cheapest gas throughout your journey. You can save hundreds of dollars on gas costs by leveraging this game-changing app.

6. Check in on a Sunday

For those nights when you must have a hot shower and comfortable bed, you’ll likely be checking into a hotel. If you can swing it, check in on a Sunday. According to a study conducted by the travel app Kayak, hotel reservations are at their lowest rates on Sundays. 

7. Explore more and drive less

Hit the brakes and get out of the car! Spend some time covering miles on foot by hiking through local trails or even backpacking through city streets. You’ll enjoy an enriching experience and save on gas costs at the same time. 

Your Turn: Do you have more tips for budget-friendly road trips? Share them with us in the comments. 

Should I Sell My House Now?

Q: Is 2021 a good time to sell my home?

A: While it appears to be a seller’s market, and the perfect time to put your home up for sale, there are many variables to consider before going forward. Below, we’ve outlined important points to know about today’s market so you can make an informed decision about selling your home in 2021. 

Is it a seller’s market now?

According to Realtor.com, the current supply of homes on the market is at an all-time low, the likes of which hasn’t been seen in more than two decades. This can be attributed to the federal moratorium on foreclosures, as well as the months-long halt on new construction.

At the same time, demand for homes is up, as many millennials are entering their peak homebuying years, mortgage rates hit record lows and more people are working from home than ever before. In fact, in 2020, more homes were sold than in any year since 2006, according to data from the National Association of Realtors.

Naturally, when demand exceeds supply, prices will go up. Let’s take a look at some of the current trends driving this market, as shared by Realtor.com and Redfin.com:

  • Home sales are up by 44% from a year ago. 
  • The median home price for all listings increased by 12.2% over last year for the week ending June 19, 2021.
  • The national median home price for all housing types in May 2021 was $380,000.
  • Homes are on the market for 33 fewer days than last year. 
  • In May 2021, the average home sold in just 16 days.
  • 54% of homes sold in May 2021, sold above their list price

Clearly, it is a seller’s market.

Will the market conditions last throughout 2021?

Most experts are doubtful that the current seller’s market will remain through the rest of the year. They cite several reasons for their prediction. 

First, while demand for homes is currently strong, the rising prices of homes across the country are driving many buyers out of the market, thereby slowly decreasing demand. At the same time, more sellers are putting their homes up for sale to take advantage of favorable market conditions, increasing supply. Also, with the federal moratorium on foreclosures and evictions ending on July 31, more homes are expected to enter the market. Finally, mortgage rates have already started to climb upward: according to Bankrate’s most recent survey of the nation’s largest mortgage lenders. As of June 27, the average 30-year fixed mortgage rate is 3.10%, up two basis points from the previous week. All of these factors combine for a likely market cooldown over the next few months, with demand for new homes decreasing as supply increases, until the two are a lot closer than they are now. 

If you do want to sell your home this year, it’s best to act as soon as possible to take advantage of favorable market conditions. 

Why might it be a bad idea to sell my home now?

Under certain conditions, it may not be in your best interest to sell your home now. 

First, a real estate market that favors sellers works both ways: You will be on the wrong side of the aisle when buying a new home. If you are upsizing, you will likely need to pay a lot more for your new home than you would when the market settles down. With moving costs, home repairs and improvements you may need to make when putting your home on the market, and the realtor’s commission, you can end up losing money from the sale, even with the higher price you may get for your old home. 

Also, with the demand for new homes currently outpacing supply, you’ll have slim pickings when searching for a new home. You may need to settle for a home that doesn’t meet your wants, or even your needs, simply due to the lack of a better choice. 

However, if you are downsizing or moving to an area that is not as in-demand as your current neighborhood, this can be a great time to get top dollar for your home and walk away with a nice profit. Before you put your home on the market, though, it’s a good idea to do some research to ensure you can find and easily afford a new place to live. 

It’s a seller’s market right now, but that doesn’t mean you should rush to put your house on the market. Research the current market conditions carefully and read the points outlined above so you can make an informed and responsible decision. 

Your Turn: Have you decided to sell your home in 2021? Tell us about your decision in the comments. 

Scam Free Summer

Hello, summer! It’s the season of flip-flops and ice pops, of sun-drenched afternoons and lazy days at the beach. And, unfortunately, summertime is also prime time for scammers. People are more relaxed, schedules are looser and vacationers are traveling in unfamiliar locations. All of this can lead people to let their guard down during the summer, and the scammers know it. 

Don’t get scammed this summer! Follow these tips to stay safe. 

1. Never pay for a “prize” vacation

So you won an all-expense-paid trip to Aruba? Or a vacay in a remote French chalet? Sounds like a dream come true, but if you follow through, you’ll be caught up in a nightmare.  If you’re asked to pay even a small fee to claim a free vacation prize, you’re looking at a scam. A legitimate company will never ask winners to pay a fee for a prize.

2. Use a credit card when traveling

A credit card will offer you the most protection in case something goes wrong. You’ll be able to dispute unauthorized charges, and in most cases, reclaim your lost funds.

3. Ignore celebrity messages

Celebrities might have a direct line with the public through their social media platforms, but don’t believe a private message appearing to be from your favorite movie star, singer or athlete. A direct message from a celeb asking for money for a charity, or claiming you’ve won a prize, but need to pay a processing fee, is a scam.

4. Check for skimmers at the pump

If you’ll be spending a lot of time on the road this summer, and pumping gas in unfamiliar places, it’s a good idea to check the card reader for skimmers before going ahead with your transaction. A card skimmer will read your credit or debit card information, enabling a scammer to empty your accounts. Here’s how to check for a skimmer on a card reader:

  • Try to wiggle the card reader; this should dislodge a skimmer if there is one. 
  • Check the keypad to see if it looks newer than the rest of the card reader.
  • Touch the surface of the keypad to see if it’s raised.

5. Research vacation rentals carefully before booking

With so many vacationers now booking stays at private homes instead of hotels, scamming travelers is easy. All it takes is a few fake photos, a bogus address, and you’ve got yourself a fake vacation rental. In other vacation rental scams, scammers will falsely advertise a rental as a beachfront property when it’s not, claim that it’s larger or more up-to-date than it is or promise amenities that are missing when you arrive. 

Don’t get scammed! Before booking a vacation rental, read the reviews left by previous guests. If there aren’t any, or they don’t sound authentic, you’re likely looking at a scam. You can also look up the address of the rental to see if it in fact exists and if the location matches the description in the listing. As another precaution, you can ask the owner for more details about the property just to see their reaction; if they sound vague or uneasy, it’s likely a scam. Finally, as mentioned above, use a credit card to pay for the stay so you can dispute the charges if it ends up being a scam.

6. Vet potential contractors well

Contractors who go from door-to-door looking for work are a fairly common summertime sight. Unfortunately, though, some of these “contractors” are actually scammers who are only looking to con innocent homeowners out of their money. They’ll deliver shoddy work at an inflated price, go AWOL once a down payment on the job’s been made or do more harm than good with their “home improvement” work.

It’s best to only hire contractors whom you’ve personally reached out to instead of waiting for one to come knocking on your door. Also, before hiring, thoroughly research a potential contractor, asking for contact info of previous clients, checking out their online presence and looking up the business on the BBB website. Finally, it’s best not to agree to pay more than a third of the total cost of a job before the work commences. Even then, only pay when you see the materials arrive. 

Don’t let summertime turn into scam-time. Stay alert, follow the tips outlined above, and stay safe!

Your Turn: What are your tips for a scam-free summer? Share them with us in the comments. 

Q&A: Why Are Prices So High Now?

Q: I’m trying to heal financially as life returns to pre-pandemic norms, but the rising cost of many commodities, like groceries and gasoline, is making a financial rebound a challenge. Why are prices skyrocketing right now?

A: The jump in prices of many goods is proving to be a formidable challenge to millions of Americans who are attempting to recover from the pandemic. There are several compounding factors triggering the rise in prices across multiple industries, and the upward trend is likely to continue for a while. Here’s what you need to know about the sky-high prices dominating the post-pandemic economy.

How much more do groceries cost compared to a year ago?

A trip to the grocery in 2021 doesn’t come cheap. According to new data from NielsenIQ, all 52 tracked food categories are more expensive now than they were a year ago. The cost of fresh meat, for example, jumped by 8.6% from May 2020 to May 2021, while processed meats are up by 9.2% and the cost of eggs has seen a nationwide increase of 8.2%.

What is causing the increase in grocery prices?

A confluence of factors is causing grocery prices to rise.

For one, the pandemic has caused a shortage in many materials due to a prolonged disruption in the labor force and supply chain, which has increased demand, and the prices of these goods, to rise. Grocery items, in particular, also saw a surge in demand due to the many Americans cooking at home while on lockdown during the pandemic. Many industries are still suffering from these shortages and don’t expect to recover for a while. In fact, the Bloomberg Commodity Spot Index, which tracks 23 raw materials, is at the highest level it’s been in nearly a decade.

Second, there is a shortage in the labor market now, which can likely be attributed to the inflated and extended pandemic unemployment insurance, which made many laborers reluctant to return to work. Employers are forced to offer more pay for attracting workers, and they pass this extra cost on to consumers.

Finally, the increase in prices can be linked to the rise in transportation costs as gas prices continue to rise, which we’ll explore more in a moment. Again, this increased expense is passed on to the shopper through higher prices on consumer goods.

Why are gas prices so high?

It’s sticker shock at the gas pump these days, with prices as high as $4 per gallon in some parts of the country.

There are many factors contributing to the rise and fall in gas prices, of which the fluctuating price of crude oil is most prominent. According to the U.S. Energy Information Administration (EIA), approximately 60% of the money we pay for a gallon of gas goes to cover the costs of the crude oil that went into making it. Another 25% pays for the costs of refining, distributing and marketing the gas, while the rest pays for federal taxes, and state taxes in some states as well.

Crude oil prices, in turn, rise and fall in direct correlation of multiple factors. Most recently, here’s what’s causing the price of crude oil to peak:

  • Basic rules of supply and demand. The last few months saw a loosening of COVID-19 restrictions around the globe. This led to an increase in the demand for gas, and in turn, for crude oil. In contrast, at the height of the pandemic, demand for crude oil fell sharply — and so did its price tag.
  • The presidential election. Crude oil prices have spiked by an average of $0.75 per gallon since Nov. 3, 2020. The oil markets evidently see the current administration as one that will inhibit U.S. oil production, which leads to a tightening on the global oil market. Traders responded by driving up the price of crude oil.
    Seasonal market changes. The price of crude oil tends to rise and fall with the seasons, where prices generally rise in the spring and summer months as more motorists hit the road, thereby increasing demand. The changeover to summer gasoline blends also leads to a jump in gas prices at this time of year
  • Change in the value of the dollar. Oil is priced in U.S. dollars within the world market. When the dollar is strong, relative to other currencies, crude oil is cheaper for Americans and more expensive for the global market. When the dollar is weak, as it is now, oil becomes more expensive for Americans.
  • Strong discipline among the OPEC+ nations. When the nations which are part of OPEC+ stick to their agreement to cut back on oil production, prices increase.

What can I, as a consumer, do about the rising cost of goods?

Unfortunately, as a private consumer, there’s not much you can do to bring down the costs of common goods. However, there are steps you can take to help you manage these costs in a financially responsible manner.

First, you’ll likely need to make some changes to your monthly budget to accommodate the higher costs of groceries and gas. Shuffle your spending categories by trimming discretionary expenses until you have enough money to cover the costs of food and transportation.

Next, incorporate cost-saving techniques you may not have needed to use until now to help you manage these increased expenses. Think couponing, shopping the seasons and the sales, buying items you always use in bulk, and cutting back on pricey grocery items you can do without. To save on gas costs, consider walking to work or to do your errands, carpooling when possible, or using public transportation more often.

Rising prices might be hard on the wallet, but with some proactive steps, you can still stay on top of your finances and help bring your financial health back to pre-pandemic norms.

Your Turn: How are you budgeting for the rise in the cost of groceries and gas? Share your tips with us in the comments.

Is Plaid Safe?

Q: When using peer-to-peer payment apps, banking apps and free-trading apps, I’m often redirected to the Plaid network, where I’m asked to input personal information. Can I feel safe using Plaid?

A: The instinct to be wary of any service that’s asking you to share sensitive information is appropriate and commendable. Most financial apps will ask you to share your banking information, and some will even ask you to share your Social Security number. But it begs the important question; Should you be sharing this information?

While the safety and security of each financial app is individual, apps that are powered by Plaid are safe to use. Plaid is a reputable company that uses encryption and industry-standard security measures to protect your sensitive information.

Here’s what you need to know about Plaid.

What is Plaid? 

Plaid is a financial technology company that serves as an intermediary between financial services and their users. Apps like Venmo, You Need a Budget and Robinhood use Plaid to securely link their users’ financial accounts to their own platforms. This way, the financial apps do not have access to their users’ information; they instead rely on Plaid to supply it for them.

Plaid works by using a universal Application Programming Interface (API) to share users’ data with other applications. APIs are software intermediaries that allow two different applications to communicate. Plaid has developed an API that can be used by any financial institution or application, making it simpler and safer for users to share their financial information digitally.

How does Plaid work?

When you sign up for any of the 3,000+ financial applications currently powered by Plaid, you’ll be asked to choose your financial institution from a list that’s provided by Plaid. Next, you’ll enter your banking login info and password. Some apps will have you create a new password at this point. Once you’ve logged in, Plaid securely shares the information you’ve chosen to link, such as your checking account number, with the app you’re using.

It’s important to note that Plaid itself does not move money around. The technology merely enables other financial apps and their users to send funds from one account to another. Plaid holds onto your encrypted password information without touching your money, while the linked financial app can move your money, but cannot access or know your login credentials.

Is Plaid safe?

Sharing personal information with an app can be unsettling — and it should be. However, you can rest easy, knowing that Plaid uses the highest levels of security possible. When you link your checking account with a financial application by using Plaid, the company instantly encrypts the sensitive data and then shares it with the application using a secure connection.

According to the Plaid website, the company uses these measures to keep your information secure:

  • End-to-end data encryption. Plaid uses a combination of the Advanced Encryption Standard (AES-256) and Transport Layer Security (TLS) to keep your personal information completely safe.
  • Multi-factor authentication.  An extra login step adds another layer of security.
  • Cloud infrastructure. Plaid uses secure cloud infrastructure technologies to enable quick and safe connection.
  • Robust monitoring. The Plaid API and all related components are continuously monitored by a security team.
  • Third-party security reviews. Security researchers and financial institutions regularly audit Plaid’s API and security controls.

When using an application that is powered through Plaid, practice standard online safety measures. Check the URL to ensure you have the correct site, look for the lock icon and the “s” following the “http” in the address. Also, make sure the security settings on your device are updated and set to their strongest levels. Finally, if you need to choose a new password for the app, be sure to choose a strong, unique code and not to share it with anyone.

In a world that is increasingly mobile, Plaid safely connects users to thousands of financial apps and 11,000 financial institutions across the country. Follow basic online safety protocol, keep your login info private, and you can use Plaid knowing your information is secure.

Your Turn: What steps do you take to keep your data safe? Tell us about it in the comments.

Learn More:
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