Choosing a life insurance policy

This was originally published on Monday, June 26, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I am buying life insurance for the first time and, quite frankly, I’m confused by the different types of life insurance policies. Could you clarify the policies to help me decide?

Answer: First off, I commend you for thinking about your future and the expenses you will save your family when the time comes. Not all policies are created equally. Here are a few of the types of life insurance most companies offer.

Term life insurance: Term life insurance is typically the most affordable and simplest life insurance. It offers protection for a specific number of years. The policy is set for a limited time, usually 30 years. Premiums usually are a lot lower than other policies, making it affordable for most. The annual premium remains the same throughout the life of the policy.

Whole life insurance: Whole life insurance is permanent for the entire life of the insured as long as you make the premium payments. Unlike a term life insurance, whole life insurance has a guaranteed premium rate and guaranteed cash value accumulation, which means you pay the same every year no matter how long you have had the policy.

Your premium payments are divided among the insurance, administrative fees, death benefits and the investment or dividends that your policy incurs. Withdrawals that you make toward your policy are tax-free up to the amount of premiums you paid minus the dividends paid out and previous withdrawals. You can use the dividends and cash buildup to pay the premiums of the policy.

These policies have a higher premium payment because they are permanent and provide not just death benefits, but cash.

Universal life insurance: Universal life insurance also is known as flexible life insurance. Like the whole life insurance policy, this policy is permanent and provides cash value. The premiums, level of protection, and the cash value can be adjusted as needed. The amount of cash values can be guaranteed to earn a specific minimum. The cash value also is tax-deferred just like the whole life insurance.

Life insurance is a great way to have peace of mind that your loved ones will be protected when you pass. Just like any other insurance policy it should be reviewed annually and you should take the time to understand exactly what’s covered.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

How to cut your electricity costs

This was originally published on Monday, June 19, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Electricity cost increases are in the news again, prompting some households to take a fresh look at energy consumption. The good news is there’s plenty you can do to lower your bills by changing how and when you use energy.

  • Light bulbs: Technology has revolutionized light bulbs. Have you ever stood next to a lamp with a conventional light bulb? You can feel the heat radiating from it. Newer light bulbs give off much less heat. Although the traditional light bulbs are not as expensive, they use more power and do not last as long.

CFL (compact fluorescent lamp) and LED (light emitting diodes) are more expensive, but use less power and last much longer. In the kid’s rooms and bathrooms, I installed light switches that automatically turn off after a set period of time.

  • Reduce the heat in the kitchen: Avoid using the oven in summer — try salads, smoothies or barbecue. You’ll reduce the heat in your home and save on your home cooling costs.
  • Laundry: Use the washer with a full load of clothes. Save even more power by switching from hot to cold water. The dryer uses more power than your washer. You can use the sun to help dry your clothes. Add a clean dry towel to your dryer to help absorb the wetness. If the clothes dry quicker the dryer will not need to run as long.
  • Prevent cold air loss: Add caulking or weather-stripping around doors and windows. It is costly to cool the air in your house. During the summer, be sure the kids do not constantly go in and out of the house.

Air conditioners are costly, so why let cool air escape between windows and door cracks? Installing weather stripping can keep your house cooler and lower your power bill.

  • Ceiling fans: These are a great way to circulate air in a room and keep you comfortable. A ceiling fan can save you about $15 a year per fan.
  • Paint: A great summer project to do before the rainy season is upon us again is to paint your house a color that is light and will not absorb heat. Concrete retains heat and will warm up a home. Your roof gets the most direct sun and can keep heat trapped in your house. Paint your roof with reflecting paint. This may cost a bit more than your typical white paint, but you will be able to feel the difference immediately.
  • Insulation: If your house has a drop ceiling, consider using insulation between the ceiling and the drop ceiling.
  • New appliances: If you are purchasing new appliances, look for Energy Star products. These products have specifications set by the Environmental Protection Agency or the Department of Energy. Many notable name brands carry models that fall under the guidelines of energy efficiency.

If purchasing a new air conditioner look for the Seasonal Energy Efficiency Ratio, SEER. The higher the unit’s SEER rating the more energy efficient it is. I recently replaced all major appliances and received a rebate from GPA. GPA may still offer energy efficient rebates for new energy efficient appliances.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him atmoneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Tips to save on your power bills

This was originally published on Monday, June 12, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

It’s summer time and the kids are home from school. It might be time for video games, hours on the computer and time in front of the television. Multiple trips to the fridge to get a drink or something to eat with the air conditioner running all day are typical.

When the kids are on vacation during the hottest days of the year, our power bill increases. Here are a few ways to get your power bill under control:

  • Hot water heater. Hot water heaters are one of the largest consumers of energy. Check your thermostat. Set it to a lower but comfortable temperature. Turn on your hot water heater 20 minutes before your morning shower. Turn it off when you are ready to leave the house. You can buy a timer to turn the heater off or on at times convenient for you.

You can purchase a hot water heater blanket that is fiberglass-filled for insulation to wrap around your heater. They can reduce energy loss by 25 percent to 45 percent.

You may also consider changing out your water heater to a tank-less heater. These heaters turn on only when hot water is being used. Another upgrade of your hot water heater is a solar heater. This heater is stored usually on top of your home to get direct sunlight and solar panels heat the water.

  • Air conditioners. Split and window air conditioners use less energy than central air conditioning. This is because you do not have to cool larger, unused areas. Instead, you can choose to cool the rooms being used. Also, set your air conditioner to a temperature that is comfortable. You also could use a fan to help circulate the air, creating a feeling of the room being a few degrees cooler.

Regularly clean air filters so that air flows effortlessly in and out of the air conditioner. With the kids home during the summer, ask them to keep the room to a comfortable setting and not on Niseko-in-the-winter cold.

  • Shade. Use storm shutters to block the sun from heating windows while you are at work.
  • Phantom/vampire loads. Electronics you have plugged in can draw electricity even when you are not using them — cellphone chargers, DVD/VCR players, gaming consoles, etc. By unplugging these items that use electricity without being “on,” you can reduce consumption equivalent to that of a 75-watt to 100-watt light bulb running continuously.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him atmoneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

 

Start your financial journey right

This was originally published on Monday, June 5, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question:  I am a recent college graduate and was lucky enough to be hired just before graduation.  I will be moving out of my parents’ home next month and will be moving into a rented apartment. Although I feel my financial health is good, I want to ensure it stays that way.  Do you have any tips for a new graduate?

Answer:  Congratulations on your college graduation!  When you are moving out of your parents’ home, entering the workforce and becoming responsible for more financial obligations, you may start to question your financial priorities. It is important to start off on the right foot.  The habits you create now can have a huge influence on how you manage your finances later in life.

Keep your frugal student lifestyle: Although your new income is exciting, it is very easy to get caught up on spending. Consider ways to keep your living costs low, such as living with roommates, driving your car a couple of years longer and limiting unnecessary spending.

Take full advantage of employee benefits: As you start your new career, retirement seems far away.  Even though retirement is not in your near future, it is important to start planning.  It will take many years to build a nest egg that will make retirement comfortable.  If your employer offers matching contributions to a tax-advantaged retirement account, take full advantage of it. By not contributing enough to earn the full match, you are basically turning down free money. Besides retirement, also take advantage of other benefits offered like health insurance, short- and/or long-term disability insurance or life insurance at attractive group rates.

Create and stick to a budget: This is a habit that will benefit you for years to come. Even small unplanned purchases can hinder your financial goals.  Be sure to set money aside for savings and other big purchases like a car or even a home.  Download a user-friendly app for your smartphone to help you track your expenses.

Emergency budget:  Plan for the unexpected such as an unforeseen car repair, a medical issue, or home repair.  This account is strictly for rainy days.

Work on your credit score: The best way to improve your credit score is to pay all your bills on time, every time. Another way is keeping your credit spending in check. Do not over extend your credit limit by taking out more loans.  Keep your existing credit cards open. It proves the length of your credit history which also affects your score.  Know what your credit score is by obtaining your three free credit scores annually.

Protect your personal information: Personal identity theft continues to grow especially as we rely more and more on technology for banking, shopping and other online financial transactions.  Once your identity is stolen, it takes a long time to repair and rebuild it.  Cross-shred all documents with your personal information.  Change your passwords often and keep PIN numbers safe.

Pay off higher-interest debt first: Like most recent graduates your student loans make most of your debt. You may also have some credit card debt. Putting as much as you can toward the higher-interest debt first will save you money and allow you to pay it off quicker, giving you more money to put toward your student loans.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Summer jobs teach teens to manage money

This was originally published on Monday, May 30, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Summer is just around the corner. You may have a teen eager to try out the work force. Summer jobs teach teens how to manage money and what is expected of them once they are ready to start a career.

There are many advantages to working a summer job. Help them understand that there is temptation to buy the latest gadget, game or clothes and that treating yourself every now and then is OK.

But give them the true gift of understanding the value of money.

  • Savings account. Find a good starter account, one that does not have many penalties, especially for maintaining a balance below a certain minimum. Many banks offer bank accounts for kids of all ages. Usually credit unions charge a lower fee and pay more interest.
  • Basic money management skills. Technology has made it easier to keep up with your budget. There are apps that kids can download right onto their smartphones.
  • Investing. Get kids interested in different ways to invest their hard-earned money. There are stock market games that kids can play, using real-time information on what is happening in the stock market. Kids invest game money and use it to compete with each other.  Once they see the potential of investing their money, and potentially making money, they may be interested in actually investing some of their summer earnings.
  • Retirement. Many kids still in high school haven’t even thought about retirement. This is a great time to teach the concept of compound interest and how it can work for you. Starting a retirement fund at 16 verses 35 can create a nice nest egg with the possibility of early retirement. Besides the lure of a larger retirement fund and early retirement, there are other benefits to a teen Roth account. If money is used to purchase a first home, the money can be withdrawn free of taxes and penalties. Also, the Roth account cannot be used as income when applying for financial aid for college.
  • College. If your child is considering college, it doesn’t hurt to have them pay for a portion of it. After all, if they understand how much hard work went into paying for college, they might understand how much time and energy you have put into covering the rest. Cost of tuition, books, fees, living quarters and just the basic college necessities keep rising every year.
  • Down payment. Once a child gets their driver’s license, they want a vehicle to go with it. As much as we would all love to wave our wand and see a car magically appear in the driveway, we know that paying for another vehicle could cause us to go over budget. By working summers, they can save up for a down payment, pay for fuel and even help with the insurance.

Besides the financial aspects, summer jobs help foster confidence, time management, opportunity to learn more about themselves, networking and experience — and may even open up a door to a career they never thought about.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

Plan to fund your family vacation

This was originally published on Monday, May 22, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Next week is Memorial Day and that officially kicks off the summer travel season. Planning and budgeting the cost of your vacation can vary wildly depending if you are taking a week-long trip to Saipan or flying to Orlando for the whole month.

Once you know approximately how much you are going to spend, the challenge then becomes funding for all that fun.

Sacrifice today for fun tomorrow. Reduce how often you eat out to once a week or once a month. Pack your lunches to work and school. You will be surprised how much you spend on dining out. Cut back on how often you get your hair cut or instead of going to the movie theater wait till you can rent it and watch it at home.

Get everyone involved. Encouraging the kids to help by babysitting for friends or family, washing cars or cutting lawns for the neighbors is a great way for children to earn some extra money to help toward the family’s vacation goal.

 

Holiday spending. There is one time of year that could potentially harm your vacation budget and that is the upcoming holiday season. Talk to your family and remind them of what you want to do. Create a slimmed down version and agree to stay within a certain amount.

Do the same for birthdays and other occasions. For extended family or friends, be creative and make homemade gifts or offer your talents or services instead of material goods.

Tax refund check. If you received a refund you can use it toward saving for your vacation. You don’t have to save it all for the vacation. You can divide the check up many ways.

Extra income. This is a great way to increase your savings for that dream vacation. Extra income does not have to be a formal second job. It could be selling your talents. If you can bake, sell your baked goods to friends or during the holidays. If you are a good seamstress, offer to alter clothing for your friends. Maybe you’re a skilled mechanic and can help with oil changes.

Let others know. Let your friends and family know what you are planning. You may inform them that this year you would prefer money instead of a gift. There are several websites that you can use to ask friends and family to donate. Your friends and family can make a gift or donation to your cause directly online.

Don’t forget to keep track of who helped. While on your trip you can pick up little thank you gifts or create a thank you collage of all the wonderful places you visited.

Stay motivated. There will be days when you are tired of eating that same sandwich you packed for work three days in a row. But before you go out and regret spending the money you are saving, find ways to motivate yourself to keep on going. Put pictures of your dream vacation on your fridge, on your screen saver or even in your wallet next to your credit cards and money.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

Tips for saving for your vacation

This was originally published on Monday, May 15, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Another summer is just around the corner. Vacations should be fun and memorable. You wait all year for it to come around.

But going on vacation, especially if you plan to travel to far off locations, can put a good dent on your wallet. You may not be ready to fly off to your dream location this summer, but by saving a little here and there you can start getting closer to it.

Here are some tips on how to save money for that dream vacation.

  • Create a vacation account. This is just for vacation purposes. Just like buying a car or any other high-end purchase, you should always start saving money. The account should be separate from the account that you use regularly. Consider opening the account at a different financial institution from your regular checking account so it isn’t easily accessible or tempting to use.

Read terms carefully. You wouldn’t want to spend vacation money paying fees. If possible, have an allotment or payment directly from your paycheck to the vacation account. That way you aren’t tempted to use that money for anything else. Your vacation account can also be used during your trip as an easy way to track your spending while traveling.

  • Examine your budget. Is there something you can cut out or reduce? Maybe you can reduce your cable bill by removing premium packages, or cut your entertainment expenses. Create a special category in your budget just for your vacation.
  • The spare-change jar. This may sound a little old fashioned, but you will be surprised how much money you can save. How much change do you have around the house? After you purchase something, what do you do with your change? If you put just $2 in change in the jar every day, you will have $730 by the end of the year. Imagine what your total will be if everyone in the family participated.
  • Liquidate. We all have things we no longer need — an old game console, desktop computer or VHS player collecting dust. It can be earning you money instead. Place them on eBay or Craig’s List. There are even websites that will offer you money for your old cellphones. You can have a yard sale or take your stuff to a flea market. Get the kids involved by having them collect their outgrown clothes or toys to sell. Make it a game to see who can sell the most.
  • Pantry meals. One of our biggest expenses is food. How much do you spend on groceries in a week? Most of us never completely empty our pantry of canned or boxed goods. To help save some money, take a week out of the month and use only what is in pantry and fridge. This could save you hundreds of dollars and clean out old cans and food you may have forgotten about.