Costs associated with college

This was originally published on Monday, April  , 2019, in the Pacific Daily News.  Click here to subscribe to the PDN.

Paying for college is expensive and many families are feeling the pinch as tuition costs soar. Converting dollars into knowledge isn’t cheap these days and it gets more expensive every year.

College tuition prices are a lot higher today compared with two decades ago. According to U.S. News data, the average cost for tuition and fees among national universities has risen significantly since the late 1990s.

Increases aren’t limited to universities; costs at other four-year institutions and community colleges have also risen.

SAT/ACT: Taking the SAT and the ACT tests cost money. For both tests, you can send your scores to four colleges for free. However, if you are applying to more than four schools, you will need to cover the cost to send the additional scores.

A waitlist fee can also be assessed if you register after the late registration deadline and are seated on the test day. If you change the test date or the location of the test, that too will cost.

Both tests have an optional service that sends you the test questions and the correct answers for a fee. There’s another fee if you need to expedite sending your scores.

Transcripts: You will need to send your high school transcripts to the schools to which you are applying. If you are going directly from high school into college, speak with your guidance counselor to understand the cost and process for doing this.

If you graduated from high school a while ago, you will have to contact your high school. Be aware that there may be a cost for each transcript request. Some colleges may require the transcripts go through a third party that will add extra costs.

Books and supplies: College students pay an average of $607 per year on books and course materials. Some new textbooks can cost more than $100. The cost of the class varies with each term.

To cut costs, utilize gently used books, electronic texts or rent your textbook. You can also sell your books when you are done with your class to recoup the cost of next semester’s book costs.

Application: For each school to which you apply, you’ll likely be responsible for an application fee and maybe a processing fee. According to a study by U.S. News and World Report, the average application fee is about $42.

Room and board: Once you are accepted to the school you wish to attend, you will need to start thinking about where to live. Some universities require out-of-state students to live on campus their first, and sometimes second, year. If you will be living in the dormitories you will likely need to make a deposit to hold your place in student housing.

Some room-and-board costs include a meal plan. Many colleges offer different meal plans to fit your budget. If you are living off campus, you can save money by not opting into the meal plan.

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 atwww.moneymattersguam.wordpress.com.

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Getting married? How to discuss money, finances before the wedding

This was originally published on Monday, February 25, 2019, in the Pacific Daily News.  Click here to subscribe to the PDN. 

When two hearts become one wallet, it’s critical that you understand each other’s values on money. Before walking down the aisle, you and your soon-to-be should have the money talk.

The talk isn’t always an easy conversation to have. However, these talks should be a priority, since poor money communication can lead to unhappiness in a marriage. Merging your finances and your lives may be challenging without a firm foundation. As difficult as the talks may be, each partner needs to bring honesty and realistic goals to the conversation.

Budget. You and your partner need to decide how you want to budget. Include your take-home pay, how much debt you have, how much you have saved, and what you spend monthly. Discuss what each other’s plans are to pay off debt. Discuss your financial goals: whether it be buying a house, going on a vacation, having children, going back to school or when to retire.

Once you create a budget, decide how often you want to go over your expenses. You can also discuss how you are achieving your goals. Talking about money early in the relationship makes it easier as more responsibilities are added to the family budget.

Mine, yours and ours. When entering a relationship, you have three main options for dealing with money:

  • each spouse manages and maintains their own separate accounts and each pays an agreed upon amount per month of household expenses;
  • merging your accounts halfway where each spouse keeps a separate bank account in which their paychecks are deposited. Then there is a joint account that each spouse contributes to which is used for household expenses; or
  • joint checking account in which all paychecks are deposited and from which all expenses are paid from.

Not every couple is the same. What works for your parents may not work for you. It’s important that each person is comfortable with the option that is decided. If after a while it doesn’t work, you can always try a different option.

Prenup. Prenups used to be taboo, but many couples are now deciding to protect their assets before entering a marriage. People are getting married later in life when they have careers, a house and have started contributing to their retirement accounts.

Most lawyers recommend one for both parties, especially if each party is bringing with them a large amount of assets and debt. It is best to use different lawyers to represent each party.

Will. It could be considered an odd time to think about death at a time when you are planning for one of your happiest days. But a will is a vital financial and legal document that each spouse should have.

Create a list of your assets and financial accounts and how you would like them to be divided. If you have children, include who will have custody if the worse should happen. Include in your will who will have custody if something happens to the both of you. The attorney drafting your will may cover all these areas and more.

Insurance. Coming into the marriage, you probably have different insurance companies. As you merge car, home and life insurances, you may want to shop around for different policies and see if they can be bundled to save money. Ask your employer about a two-party or family health insurance policy and how much of a difference it will cost.

If you don’t have life insurance, you may want to consider getting a policy that protects both spouses. It’s best not to wait until you get older since premiums increase.

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.

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.

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.