Challenge yourself to make savings

This was originally published on Monday,January 26, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

When people think of savings, budgets or debt, they automatically get a heavy feeling of despair. They start thinking of drastic ways their everyday life is going to change. Yes, making changes of any kind takes some effort. Change is always uncomfortable but it does not have to be. I have gone online and found a few New Year’s challenges that you can try.

• 52-week challenge. This is probably one of the most popular and easiest challenges. There are 52 weeks in a year. At the beginning of each week, deposit the number of dollars that corresponds to that week. For week one, deposit $1; for week two, deposit $2; and so on. By week 52, you would save $1,378! You can deposit the money into a jar or savings account. If you deposit it into a savings account you will earn interest.

I have also read that you can start backwards by depositing $52 the first week and $1 the last week. This is beneficial since most of us need that extra money for the holidays. The hardest part is not spending it.

• Track your expenses. For 30 days, track every expense you make, even that $5 purchase for gum and a bottle of water. By week two, you will get a better understanding of your spending habits. Because you can literally see where your money is going, you may start to change before the 30 days are over.

•  Cash Only. This is another 30-day challenge. For 30 days, leave your credit/debit cards at home and only use cash. Having your cards on you makes it easy to stray off your budget and to lose track of how much you spend. By having a limited amount of money, you will make wiser spending choices. After a while, you will get tired of having to run to the bank to make withdrawals.

•  The morning minute. Take a minute or two before you get started in the morning to view your accounts. Knowing what your balance is at the beginning of the day gives you an idea of how well you are sticking to your budget. Review your spending habits from the past day. Watching your balance get smaller is never fun, but you will think twice before making unnecessary purchases.

• Necessity challenge. For a month, pay only for your necessities (food, rent/mortgage, utilities, insurance, etc.). Do not make any other purchases. Do not eat out, buy clothes or go to a movie. This is difficult, but not having these luxury purchases will give you an appreciation for your hard-earned money.

• Spare change challenge. At the end of the day, throw your spare change into a jar and watch it grow. At the end of the year, take your spare change to the bank. You will be surprised just how much you saved. If you really want a challenge, add all your spare $1 bills in as well. Try not to dip into the jar.

• The de-clutter challenge. Every month, go through your clothes, your children’s clothing and toys, and other parts of the household that you can rid of clutter. Once you have enough items, have a yard sale or go to the flea market. You will not get what you paid for them, but you will earn a little extra cash. Or you can donate them to a thrift store. Ask the thrift store for a tax deductible slip that you can use toward your income taxes in April.

There are many more challenges out there. Get creative and find other ways to save. If you really want to add some fun, get your family, co-workers and even neighbors involved. Create an office pool of who can save the most or have a neighborhood yard sale. Challenges are always much more fun when done with others.

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.

Take control to meet your financial goals

This was originally published on Monday, January 19, 2015, in the Pacific Daily News. Click here to subscribe to the PDN.

When setting financial goals, many of us want to reduce our debt, increase our savings or just break even. That is easier said than done. There are some things, such as the economy, fuel prices or rising utility rates, that are beyond our control. But there are some little things we can control that may help save money.

• Earning interest. How much interest a bank offers is something beyond our control, but you can choose to put your savings in a higher interest rate savings account. Shop around. Some FDIC-insured banks will pay higher interest than others.

• Hidden Fees. Look at your bank statements. Are there hidden fees you were not aware of? If you are not sure what they are, contact your bank.

• Credit cards. Try to use credit cards for emergency uses only, especially those with high interest rates. If you do use your credit card, keep the balance low so that you can pay it off in one or two payments. Keeping your credit card at a high balance accrues interest and affects your credit score.

• Credit Score. Check your credit score for free at annualcreditreport.com. Check for mistakes on your report and correct them as soon as possible. A poor credit report can lead to high interest rates or difficulty in getting a loan.

• Overdraft protection. Some banks offer a protection plan that lets you over withdraw your account; some up to $500. You usually have to pay a monthly fee for this service. Although it sounds like a good idea, it can create a cycle that will be hard to break. The overdraft protection is really a loan. The next time you deposit money into your account, that money will be used to pay off the loan leaving you short on money that you will need later on. Instead, establish an emergency fund for those unforeseen woes.

• Mortgage. Have you reassessed your mortgage rate? Mortgage rates are still a lot lower than they were 10 years ago. If you can refinance your mortgage at a lower rate or shorten your mortgage term you may be able to save a great deal of money. You also can pay a little more every month to help you pay off the mortgage sooner and pay less interest.

• Insurance. Most people do not reevaluate their insurance or pay for coverage that they really don’t need. Maybe you had a major life change and have not updated your policy. Take some time to read your policy and understand exactly what you are paying.

• Retirement fund. Are you maximizing your retirement fund? One of the biggest concerns is being able to retire with enough money to survive. Even when times are hard, adding a little to your fund will help in the long run.

• College. With the rising costs of education, college students should take advantage of financial aid. Many students are getting online degrees or going abroad to lower tuition costs. Avoid creating a large debt that you will be paying for years after you graduate.

• Planning for the worse. Do you have a will, advance directive or a power of attorney that will state what your wishes are in case you become incapacitated or pass away? Having these important documents will eliminate a lot of confusion and stress on your loved ones.

• Now is the time. Don’t wait till you make more money or get a new job. Getting your financial affairs in order as soon as you can pays off in the long run. A little goes a long way.

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 http://www.moneymattersguam.wordpress.com.

Keeping financial resolutions can be easy

This was originally published on Monday, December 12, 2015, in the Pacific Daily News. Click here to subscribe to the PDN.

There is always a buzz and energy around this time of year. People have made their New Year’s resolutions and are determined to be successful. But how many times have we seen these resolutions forgotten by February? When setting goals, even financial goals, you must be ready to make a change, and your goals have to be realistic.

Here are a few tips to help you stay the course:

• Be realistic. If you have $20,000 in debt, most likely you cannot pay that off in a year. You may however pay it off in five years. Think how successful you will feel if you paid your debt off in less than five years and imagine how frustrated you will be if you don’t.

• Be specific. Getting out of debt is not a specific goal. “I will reduce my student loans by $5,000 in a year” is a specific goal.

• Concentrate on one or two goals. Remember quality over quantity. If you create too many goals, you cannot give each goal your full attention and energy. You may become overwhelmed and decide to quit on them all together.

• A plan of action. If a goal is too large or you try to tackle it all at once, it will seem impossible to achieve. Instead, plan out your goal. “I will pay off $400 a month to achieve my goal.”

• Stay positive. Life has its ups and downs. One month you may need new tires and can’t afford to put $400 toward your goal. Don’t get discouraged. You might be able to catch up on another month.

• Celebrate your accomplishments. Don’t wait till next December to celebrate. If you have paid down your debt three months in a row, treat yourself to a little something.

• Have a partner. Having someone who is there to be your support is very crucial. It could be a spouse, a relative or a friend. It really helps if you both work on goals together. Sometimes, you need that someone there to be your voice of reason when temptation is knocking. Some people use their friends on social media like Facebook or Twitter to be their support.

• Know your patterns. Take a look at what behaviors may hinder your goal. Maybe you are an emotional shopper when you are stressed. Create new behaviors that will set you up for success. Instead of shopping when you are stressed, try something else instead.

• Imagine your goal. The tool of visualization is powerful. If you are saving for a car, keep a picture of that car in your wallet or on your computer screen. That way, every time you are tempted to go shopping, you will be reminded of your goal. Come up with reasons why you want to accomplish this goal. Write them down and every time you feel discouraged, read your reasons.

• Be ready. Goals only happen when you are ready to make that change. Once you have decided what your financial goals are, you have to change your mindset. The reason for this change is probably because of past practices. Are you prepared to break those habits?

• Be flexible. Your goals may evolve and change. You, too, will have to be ready to make those changes.

The best tip I can give is that you can’t fail if you are trying. Even if you did not reach your goal of paying off that $5,000 of your student debt in a year, you are still closer than you were at the beginning or the year. The only time you fail is when you don’t try or give up altogether.

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 http://www.moneymattersguam.wordpress.com.

To improve your finances in 2015, start with a budget

This was originally published on Monday, January 5, 2015, in the Pacific Daily News. Click here to subscribe to the PDN.

Question: My New Year’s resolution is to improve my finances this year, but I just don’t know where to start. I feel overwhelmed and frustrated. Do you have any ideas that can help?

Answer: There is a lot to consider when you are planning your personal finances. The new year is always a great time to start making changes. Take advantage of the New Year’s tradition of making resolutions. Many make resolutions to lose weight, stop smoking or to go back to school. Resolutions aren’t only for personal physical changes, but also can be made for your personal finances. After all, resolutions are goals.

Before you make any goals, you need to know where you stand. Research your past spending trends and create a budget. A budget is a spending plan that will help you meet your goals. Start by calculating your monthly income. Your income should include your wages, tips, child support, alimony and any other money that you expect to receive.

Next, determine your monthly expenses. Expenses are usually broken down into fixed or variable expenses.

Fixed expenses are those that do not change and remain the same. Such as rent/mortgage, insurance (car, home, health), loans (student, car, personal) and some utilities. Some of your fixed expenses may be paid bimonthly, quarterly, biannual or even annually. These include income taxes, car registration or real estate taxes. Although you do not pay these monthly, you still need to include them into your monthly budget. Take the yearly total of the expense and divide it by 12. This will be the average monthly expense.

Your variable expenses occur regularly but fluctuate month to month. Variable expenses include utilities, food, gas, clothing, entertainment and hobbies. Because they vary, estimate their yearly total from last year and divide it by 12. The more expenses you list, the more accurate your budget will be.

Take the total of your expenses and subtract it from your income. The total will either be a surplus or deficit. Does this number accurately portray what you are left with at the end of the month? If it doesn’t, you will need to go back and review your budget until it truly reflects your monthly spending. If there is some money left over, you can use it to pay down debt, contribute it to a retirement or emergency fund, or just simply save it. If your budget breaks even or is negative, review where you can cut back on an expense.

It is important to be honest when creating your budget; it is the only way you know where improvement is needed.

People are shocked to see that it is the little expenses that add up. Many people have no idea how much they spend on eating out for lunch every day until they multiply the cost of a lunch by five (work days), then multiply that by four (weeks in a month). They then quickly see that it adds up. The same goes for your daily coffee, soda, bottled water or cigarettes.

The spending plan you created can also be used to predict different outcomes.

Try recalculating your budget by cutting back in areas that really are not needed or increase your income from the raise you are expecting.

Use these projected budgets to help you decide what areas you want to improve and what financial goals you want to achieve.

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 http://www.moneymattersguam.wordpress.com.

Next year, think SMARTER about goals

This was originally published on Monday, December 30, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

As 2013 is coming to an end, take some time to review your journey this past year — including your personal finances.

Are you managing your money to accomplish your individual financial happiness? Personal financial planning allows you to control your financial situation to meet specific needs and goals. By reviewing your personal financial goals, you can develop a financial New Year’s resolution.

• Goals: What would you like to be able to do tomorrow and how will your money help you get there?

Short-term goals are saving for a vacation, paying down credit cards or other small debts that can be attained within the next year.

Goals such as paying off credit cards or school loans, or saving to buy a house are goals that take one to five years to accomplish and are intermediate goals.

Long-term goals involve more than five years to achieve. Retirement and paying for a college education for your children fall under this time frame.

All these plans work in coordination with each other, and the success of one goal leads to the success of the other.

For example, saving for a home is an intermediate goal, which is the foundation of being a homeowner — a long-term goal.

Not all goals are ongoing. Some can be annual such as saving for the holidays or vacation, and others reoccur even less often, such as saving for a car.

• Goal setting: Set goals that are attainable and not too far out of reach, as that will only frustrate you as time goes by and you are consistently failing to meet your goals.

Goal setting is important in that it is a great way to plan, implement and measure your progress. Your goals should be specific. I came across a good way to set and remember your goals — think S.M.A.R.T.E.R.

Specific — know exactly what your goal is so you can create a plan. Ask the W’s: what do I want to accomplish, why I want to accomplish it and who is involved. “I want my children to have money to help with college.”

Measurable — is a specific amount. How much or how many and when? For example, “I will save $12,000 for each of my children to go to college within ten years.”

Action — is how you act on your goal. “I will open a college fund and deposit $250 a month.”

Realistic — is your goal setting you up to succeed or fail? If you have $150 after you pay your monthly expenses, it’s not realistic to deposit $250 a month into a college fund.

Time-oriented — set a reasonable time frame to complete your goal.

Evaluate — take a look at your goals regularly. Do you need to make changes?

Re-evaluate and revise — this enables you to make changes.You can make adjustments to your goal depending on the results of the evaluation.

Your financial goals should not only be attainable but also flexible as they need to change as your life situations and economic conditions change. Your plan should suit you; a plan for a young person just out of college will not help a married couple just about to retire.

As we end the year, I’m so thankful that I have been able to help so many people through this column. I enjoy the feedback, recommendations and questions I receive. I wish everyone a prosperous 2014. Happy New Year, Guam!

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.

Reward your older self by saving for retirement now

A retirement plan is a major stronghold in your personal finance planning. At the least, you create a safety reserve for a time in your life when you’re likely to have a reduced capacity to work. At the most, you can reward yourself for a lifetime of employment.

If you’re new to retirement savings, the idea of putting money away in an account for thirty or forty years can be difficult to stomach. You have pressing needs now, and you want to be able to enjoy the money that you worked hard for.

But starting now will give you valuable time — time that allows your retirement savings to grow. When you take distributions from retirement, it will be at a point in your life when that money is likely to have even more meaning for you.

There are very good reasons why retirement should be a high priority item on your list. Here are a few:

Continued financial independence.

When you put money away, you’re caring for a much older person — yourself, in the future — who may be more vulnerable than you are now. Your out-of-pocket medical expenses may increase in retirement, and you may not be able to work at the same pace that you did when you were younger. That sense of security that comes from being financially independent in your old age will have a positive effect on your outlook for your retirement years.

Protection against risk. To make the most of the funds in your retirement account, you want to invest in assets that bring you a good return. The assets that are known to have the potential for the highest returns are the stocks, also known as equities-shares, that represent partial ownership of a company.

Stocks, unfortunately, do not give you the same steady return, month after month, that you get with a savings account. With stocks come the potential for losses as well as gains. Over the short term, as we’ve seen in the past few years, the stock market can be subject to jaw-dropping volatility. The markets may rise to dizzying heights in one year, and plummet the next. Individual stocks can rise and fall, and one sector may be harder hit than another by particular changes in the economy. Investing in equities over a short amount of time can be very risky, because of this volatility.

One way to protect yourself against this risk and potentially gain a higher return from equities is to give yourself a long timeline. Over twenty or thirty years, those highs and lows can potentially average out to reflect the underlying growth – – steady, incremental growth over decades — of the many companies that you have invested in. To give your retirement account that longer timeline, start saving now.

Compound interest. We’ve talked about compound interest before in these columns, and it boils down to this: time is money. The more time you have, the more time you give your savings’ earnings, and your earnings’ earnings, to grow. Starting to save for retirement in your twenties and thirties can give you an enormous advantage in pursuing a comfortable retirement.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover,  please email him at  moneymattersguam@yahoo.com.