Cut utilities costs during the summer

This was originally published on Monday, June 18, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

During the summer months, the temperature seems to be much warmer. With the kids home from school and utility bills on the rise, you may be in need of making some changes to help you save money on utilities.

Fans. This is a wonderful way to circulate air and keep the room cooler. Ceiling fans can cool the warm air that rises to the top of a room. They also use less energy than an air conditioner.

Window treatments. Blinds and curtains are an inexpensive way to keep direct sunlight from warming a room. If you are willing to pay a little more, look for curtains that block out sunlight and harmful UV rays, which also can discolor furniture.

Air conditioners. Keep your air conditioner to the highest temperature that you feel is comfortable. When you are not home, turn it off. You should clean your air conditioner filters at least once a month. Have a professional technician clean your unit at least once a year to certify it is running properly.

If you are in the market for a new unit, do your research on the unit’s SEER (seasonal energy efficiency ratio), which measures the ratio of cooling capacity to power input. The higher the rating, the more efficient it is. The SEER will vary by manufacturer and size. Ask your installation company for a rebate that you can use as credit toward your power bill.

Light bulbs. Traditional light bulbs create heat and burn more power. Look into replacing them with compact florescent or light-emitting diode bulbs. A 13-watt CLF or 9-watt LED bulb will burn 25 percent less energy than a 60-watt traditional bulb. Using natural light will reduce how much power you consume. Remember to turn off lights when you’re not in the room.

Turn it off. Devices such as computers, TVs and gaming consoles eat up power. They also generate heat. Remind kids to turn them off when not in use.

Laundry. Wash only full loads of clothing and at the coldest recommended temperature. Hang clothes to dry. Just before they completely dry, stick them in the dyer for five minutes if you don’t like that stiff feeling of clothes dried on the line.

Water. Turn off the water when brushing your teeth and washing dishes. If you have water running, and no one is using it, you may have a leak that needs to be fixed. Leaking pipes, faucets or toilets can waste a lot of water and will cause a high water bill. Install water-saving shower heads and low-flow faucet aerators.

Water heater. On-demand water heaters are a fantastic way to lower your power bill. You should invest in a water softener as well. The hard chemicals in the water could cause calcification, which will harm the on-demand heater. Use a timer for traditional heaters to turn on when you use it the mos and off when you aren’t home.

Yard. Water your yard only when needed. The best time is during the coolest part of the day, just as the sun rises and sets. Sprinklers use a lot of water. Set a timer to remind you to turn them off. Place sprinklers in an area that waters the grass and not the sidewalk or pavement. Use large buckets to capture rain water for watering plants. Add mulch around trees and plants to keep moisture from evaporating.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 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 http://www.moneymattersguam.wordpress.com.

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How your family can save money this summer

This was originally published on Monday, June 11, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

Summer is here. All the summer temptations come at a price. Summer doesn’t have to be expensive. In fact, with a little will power, the summer can be quite frugal. Here are some summer saving tips:

Summer cleaning. Now that the kids are out of school, have them clean out their rooms and look for outdated toys and clothes that no longer fit. Think about donating them to your local thrift store or have a yard sale and use the money earned to enjoy summer activities.

Thrift stores. Not only can you donate, but you can discover some awesome finds there as well. Are the kids in need of summer play clothes or a gently used book to read? Maybe you are looking for the perfect wall décor to spruce up your bedroom. You will be pleasantly surprised what you will find and at a price that doesn’t break the bank.

Carpool. Gas prices usually go up during the summer months. Consider sharing a ride with a co-worker or two, especially if you no longer have to take or pick up kids from school.

Summer sales. Stores are usually clearing out inventory to get ready for the upcoming holiday season. There also are holiday sales.

Buy in bulk. With the kids out of school there will be demands for snacks. Stay away from individually packages items. They may be more convenient, but they cost more.

Pack meals. Running errands and the kids are hungry? Think about pre-packing lunches and snacks. Stop by the local beach or park and enjoy a picnic.

Free activities. Keep watch of the newspapers, social media and listen to the radio for free activities. The beach, library, parks and hiking trails are fun ways to share family time away from home.

Leave the credit card. Enjoying summer activities can lead to extra spending. Leave your debit or credit cards at home and only use a predetermined amount of cash to fund your fun.

Oven/stove use. Oven and stoves can heat up your house. If your range is electric, it also will increase your power bill. Try using a slow cooker; they don’t use as much power as a range or give off much heat. Look online for recipes. Barbecuing is another way to keep the power bill down and the house cool.

Movies. Summer and blockbuster movies are synonymous. Movies have become quite expensive when you tally up the price of the tickets and the bill at the concession stand. Take in a matinee, which is usually cheaper, and eat before.

Movie nights. Why pay to watch a movie when you can watch one in the convenience of your home? Rent a video or watch on demand and enjoy homemade popcorn and hot dogs.

Staycation. Traveling off island can be quite expensive, especially if you have a large family. Stay at home and play tourist. Go for a picnic or go to the beach. It is far more relaxing than flying and navigating through an unfamiliar city.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 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.

Many options to pay for college

This was originally published on Monday, May 21, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

Many students enrolled in college are using some form of financial aid — from a relative or a scholarship or grant. Many different entities, including the federal government, local government, schools and private nonprofit organizations offer scholarships or grants.

Scholarships often are awarded based on one’s accomplishments, merit and need. Grants tend to be based on financial needs.

  • Pell Grant. Depending on financial needs and school costs, undergraduate students may receive up to $6,095 for the 2018-2019 award year. You don’t need to pay back the Pell Grant and it can only be used to earn your first bachelor’s degree. Part-time students can utilize the Pell Grant, but they receive less than full-time students.
  • Federal Supplemental Educational Opportunity Grant.This grant is given to undergraduates with exceptional financial needs, the award ranges from $100 to $4,000 per year. This campus-based aid is administered by a college’s financial aid office, but isn’t offered at all schools.
  • Teacher Education Assistance for College and Higher Education Grants. This program provides grants of up to $4,000 a year to students studying to become teachers. Recipients of this grant must agree to teach certain classes, such as math, science, special education, foreign language or bilingual education, at a school that serves low-income families for a designated period of time.

Educational savings accounts

Other ways of paying for college are educational savings accounts. They differ from regular interest-earning savings accounts because they usually aren’t taxed.

  • Coverdell Education Savings Accounts.Formerly called an education IRA, this account allows families to set aside $2,000 per child each year to be used tax-free for educational purposes.
  • 529 plans. These allow you to choose from a selection of investment options, including mutual funds, stocks or fund portfolios, and earn interest on these investments tax-free.
  • Brokerage accounts. Brokerage accounts allow you to purchase and sell investments, including stocks, bonds and mutual funds, through a brokerage firm. You can take money out for educational expenses, but you’re taxed on any investment profits.

Student loans to help meet financial gap

Sometimes scholarships, grants and savings may not cover your complete costs. Taking out a student loan may help meet the financial gap.

  • Federal student loans.These loans are backed by the federal government and offer a low, fixed interest rate. Federal loans provide protection for borrowers, such as the ability to postpone or reduce payments during periods of financial hardship. A Free Application for Federal Student Aid form must be completed.
  • The William D. Ford Federal Direct Loan Program. This loan is funded by U.S. Department of Education and is one of the largest federal student loan programs. Loans may be subsidized — the government pays the loan interest while you attend school — or unsubsidized, in which the loan interest is deferred while you’re enrolled in school and later added to your loan balance. There is a PLUS loan that is awarded to graduate and doctoral students, or parents of undergraduates, to pay for college costs not covered by other financial aid.
  • Federal Perkins Loan Program.Not all schools participate in this loan because the school is the lender. Your payments are made to your school or their loan servicer.
  • Private student loans. These are offered through banks, credit unions, financial institutions, state agencies or schools. They’re a good way to pay for educational expenses not covered by other means. The interest rates depend on the borrower’s credit score and usually come with a higher interest rate.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 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 bolster your 401(k) retirement plan

This was originally published on Monday, April 9, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

No matter if you are 20 years away from retirement or five, having something set aside for your golden years is important.

There’s good news for those who are investing their retirement funds in a 401(k) account. In 2018, your contributions limits are rising. By avoiding certain fees and penalties you can ensure to maximize your 401(k).

Here are a few ideas on how to maximize your plan:

  • Tax breaks. Saving for your retirement can qualify you for several different types of tax breaks. Some will let you defer, or postpone, paying income tax on your retirement savings and others help you avoid taxes on the investment gains.

In 2018, the amount in which an employee can contribute from his or her paycheck increased by $500. The maximum yearly contribution for 2018 is $18,500. A worker who falls in the 25 percent tax bracket who maximizes the contribution could reduce his or her tax bill by $4,625.

Let’s say you are 30 years old in 2018 and earn 7 percent on invested funds. By the time you turn 65, that extra $500 a year will have a value of $5,338. The taxes on the contributed money won’t be taxed until the money is withdrawn from the account.

Workers who earn less than $31,000 ($63,000 for couples) in 2018 may qualify for a saver’s credit. That credit could be between 10 percent and 50 percent of their 401(k) contributions up to $2,000 ($4,000 for couples).

  • Take advantage. If you have been previously contributing the maximum amount into your 401(k), reset your contribution by an additional $41 a month to take advantage of the new increase. For those who want to start maximizing their contributions, it will require contributing about $1,542 a month, $2,041 for those 50 years and older.
  • Catch-up contributions. Catch-up contributions are made in addition to the maximum limit of $18,500. Employees age 50 and older are allowed to make catch-up contributions of an additional $6,000, for total contribution of $24,500. An employee in the 25 percent tax bracket who contributes the maximum catch-up limit could reduce his or her tax bill by $6,125.
  • Max your match. Even if you can’t afford to maximize your contributions, be sure to at least match your employer’s maximum contribution. This will at least double your contributions. Be sure to read the conditions of the plan carefully, in order to receive your employer’s maximum contribution, you may have to be with that company for a required amount of time.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 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 to increase Social Security benefits

This was originally published on Monday, April 2, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

There are ways to increase your monthly Social Security benefits. The most notable is determining how old you will be when you start receiving benefits. There are other factors you can do to increase that amount as well.

Work for 35 years. Your Social Security is based on the 35 years in which you earn the most. If you do not work for 35 years, those missing years will be calculated as zero and will decrease your benefits.

Keep on working. You can work until your full retirement age. For most that is between 66 to 67 years of age. To calculate your full retirement age go to https://www.ssa.gov/planners/retire/ageincrease.html. If you start your payments before full retirement, you decrease your payout significantly.

Increase your income. The more you make, the more you pay into your Social Security account. Increasing your income with a raise or a second job will increase your retirement pay as well. Be sure that your second job is not “under the table.” Only taxed income will be counted.

Your health. What is your health at the time you are start receiving your Social Security benefits? Does your family have a long life span or a short one? Review your family history. There are online surveys that you can take to give you a projected feasible lifespan. If you are married, do the same for your spouse.

Be patient. Unless you are in dire need of your benefits, try to hold out till the age of 70. You can start receiving your Social Security benefits at 62. Most people who are about ready to retire have a full retirement age of 66 and can put off claiming till 70.

If you start claiming your benefits at 62 you will lose about 25 percent of your full benefits for the rest of your life. If you wait until 66, you will receive 100 percent of your benefits. If you wait, you can add 32 percent to your full benefits. That is because for each year after 66, an additional 8 percent is added to your full benefits.

Your spouse. Spouses can claim benefits based on their income. Spouses can earn their benefits or up to 50 percent of the higher paid spouse, depending on which is greater. You can also claim Social Security benefits on your ex-spouse as long as you were married for at least 10 years.

Family dynamics. How old your children are when you start claiming your Social Security benefits may determine if they are eligible for benefits. Dependent children under 19 years of age may be eligible for up to half of your retirement benefits. If they are 19 and still in high school, a waiver can be made until they graduate or two months after turning 19, whichever comes first. A child could be biological, adopted or a dependent stepchild.

How much you make during retirement. For this year, beneficiaries who are younger than their full retirement age and earn more than $17,040 annually will have $1 held for every $2 they earn. In the year you reach full retirement age, the deduction is $1 in benefits for every $3 you earn above a different limit, which in 2018, is $45,360 annually.

Social Security taxes. If the sum of your annual income, nontaxable interest and 50 percent of your Social Security benefits are more than $32,000 for couples ($25,000 for singles) you could be taxed up to 50 percent of your Social Security benefits. If your total annual income surpasses $44,000 for couples ($34,000 for singles) you can be taxed as much as 85 percent on your Social Security benefits.

Survivor benefits. Although it is not pleasant to think about, a surviving spouse can inherit the deceased spouses Social Security benefits if the deceased spouse’s benefit payment is higher. The amount can be more if the deceased spouse delays claiming their Social Security benefits.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 25 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 calculate your Social Security benefits

 This was originally published on Monday, March 26, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

Question: I am turning 60 this year. I started working directly after graduating from college and I have been contributing to Social Security since I started working. I am curious to know how exactly my Social Security benefits are calculated.

Answer: Social Security came into law in 1935 and has been around for decades to help the working class save for retirement. The program allows workers paying into the system the opportunity to contribute a small percentage of their income into a cumulative account. Once retired, they can withdraw money out of that account to assist them with monthly living costs.

Throughout the years the federal government has made changes to the program. These changes have included the retirement age, percentages of benefits, cost-of-living and inflation adjustments, and spousal and disabilities benefits. According to finance.yahoo.com, “the average monthly Social Security check in 2018 is $1,375.29.”

The Social Security Administration reports that 62 percent of seniors rely on their monthly stipend to account for at least half of their income. At least 34 percent will lean on Social Security for 90 percent to 100 percent of their monthly income. This is why an additional retirement income such as a 401(k) is so important. Many cannot survive off the average monthly check.

Average Index Monthly Earnings

The first step in calculating your Social Security benefit is figuring out your Average Index Monthly Earnings, or AIME, which is calculated by looking at all the years you worked. Social Security takes the top 35 highest earning years and adds them up. That number is then divided by the number of months within those years. That figure is your AIME. If you have not worked for some of the 35 years, those years you were unemployed will be given a zero dollar value, which will bring your average down.

Primary Insurance Amount

After you have calculated your AIME, you then have to find what your Primary Insurance Amount, or PIA, is. It’s the baseline on which your Social Security benefits are calculated. Your full retirement age is the age you receive 100 percent of your PIA.

Not everyone has the same retirement age. It depends on what year you are born. To find your full retirement age, go to https://www.ssa.gov/planners/retire/ageincrease.html. If you were born in 1958 and you are turning 60 this year, your full retirement ages is 66 years and 8 months.

The earliest a person can start receiving Social Security retirement benefits is age 62. If you start receiving retirement benefits at age 62, you will get 71.7 percent of the monthly benefit. At age 65, you will get 88.9 percent of the monthly benefit.

Making adjustments to the AIME

The second step in determining monthly retirement benefits is calculated by making adjustments to the AIME. The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.

You can find out what your benefits are by going to www.ssa.gov and creating an account. Your account will contain your Social Security statement plus your estimated Medicare benefits. The website also has Social Security calculators you can use to help calculate your benefits without doing all the hard math.

 

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 25 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.

Make tax filing easier; be organized

This was originally published on Monday, February 19, 2018, in the Pacific Daily News. Click here to subscribe to the PDN.

 April is around the corner and that means tax season will be here soon. By now you should have received all of your tax documents. It all can seem overwhelming, but getting a head start on your taxes will eliminate a lot of the stress.

Filing taxes does not have to be a big ordeal. By being organized, you will cut back on a lot of the frustration and become more efficient.

According to the Internal Revenue Service, we have until April 17 to file for 2017 and pay any taxes due. The filing tax deadline is later this year because the usual April 15 deadline falls on a Sunday. Usually that would normally give taxpayers until at least the following Monday. However, Emancipation Day, a Washington, D.C., holiday, is observed on April 16. This gives taxpayers nationwide an additional day to file. By law, Washington holidays impact tax deadlines for everyone in the same way federal holidays do. For those taxpayers requesting for an extension, you will have until Oct. 15 to file.

Identification numbers. Remember to include all your dependents’ Social Security or tax ID numbers. This includes infants and elderly parents you may be claiming. If your kids don’t have an identifying number, contact the Social Security office as soon as possible. You will also need the tax identification number of the person or business that takes care of your children during the work day if you are filing for the child care credit. If you use an accountant, be sure they have all this information as well. A missing Social Security or tax ID number could cause a delay in the processing of your filing.

Form W-2. By the end of January, you should have received your Form W-2 from your employer. Your W-2 shows how much you earned and how much of that income was taxed. It also breaks down what taxes were withheld from your pay. If you work more than one job, you should receive a Form W-2 from each employer. If you are self-employed, gather all your business-related receipts and documentation. This includes office supplies and mileage for work-related trips.

Other income. Your income you receive from work isn’t the only earnings the IRS taxes. Interest earned on most savings accounts is taxable. Just like your W-2, you should receive statements from each of the financial intuitions with which you have accounts that earn interest. Interest earnings are typically documented on Form 1099-INT. If you invest in stocks or mutual funds, you should get Form 1099-DIV for each stock, mutual fund or money market account. If you use a broker, reports on your transactions will be sent to you on Form 1099-B.

Child support payments are neither deductible by the payer nor taxable to the recipient. When you calculate your gross income return, don’t include child support payments received. According to the IRS website, “Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is deductible by the payer spouse, and the recipient spouse must include it as income.” There are some requirements that must be met, you can find them on the IRS website, www.irs.gov.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 25 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.