Learn from financial mistakes

This was originally published on Monday, December 25 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Maybe you remember your parents saying that you should learn from their mistakes. It’s not any different when it comes to finances.

Perhaps you have witnessed others make financial mistakes that have led to financial hardships. It’s much easier to avoid financial mistakes if you know what others have gone through. By recognizing your financial behavior in others, you may be able to steer clear of these pitfalls and avoid the hardship that comes with them.

  • Too much house. Are you in the market to buy a home? Be sure to know how much you can spend on the mortgage and insurance before looking at homes. It’d be nice to move into a brand new home with several bathrooms and enough rooms for all. But on the logical side, you may not be financially ready. Instead, a nice fixer-upper may be the solution. Look at homes in your price range. You don’t want to be stuck with a mortgage that restricts you to a slim budget. Purchase a house that you can comfortably afford. Also, remind yourself that the kids will eventually start lives of their own and move out of your house. If you are in a huge home, you’ll have to maintain that empty nest.
  • Upgrading your house. One of our biggest expenses is housing, whether for rent or for a mortgage. When upgrading your house, decide on a budget and stay within that budget. Decide what exactly needs to be urgently upgraded and what can be put off for later. Try setting up a savings account just for the upgrades and avoid taking out a loan.
  • Emergency fund. Job loss, cars breaking down and medical emergencies are just a few things that are never planned. Having money put aside just for the emergencies provides a crucial crutch when things don’t go as planned. Most experts say you should have at least three months of living expenses saved if you are a two-income home. If you are a single-income family, consider five to six months of living expenses. Saving that much money can be difficult, but any money stored away will help.
  • Co-signing a loan. There may be a time when a family member or friend will ask you to help them get a loan by co-signing. Although your intentions are from the heart, know that the debt is now yours. The loan will appear on your credit report. If they don’t make a payment it will directly affect your credit score. If an asset secures the loan and the loan defaults, the asset will be seized and used toward the loan balance. If the sale of the asset isn’t enough to cover the amount of the outstanding balance, the lender can come to you for the remaining balance.
  • Lending money. We want to help those who are close to us when they are in a time of need. If you loan money to a friend or family member, there is a good chance that you may not get your money back. If it becomes habitual, you may have to learn how to say no. There are other ways of helping. Buying a week’s worth of groceries, offering them a job around the house or even helping them find an additional source of income may help more than just lending them money.
  • Not paying your debt. According to NerdWallet, the average American carries about a $15,355 balance on his or her credit card. If the credit card carries 15-percent interest, that can easily be more than $2,000 a year. Reducing the amount of debt will increase your financial security and the amount you have in your bank account. Paying off debt should be one of your top priorities of 2017.

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

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Avoid some common financial mistakes

This was originally published on Monday, December 19 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

It goes without saying that money is of the utmost importance and, if not dealt with in the right way, could land you in a bad financial situation. What you are today and where you want to be tomorrow are the results of all the financial choices you have made in the past.

The good news is that you can prevent most of these mistakes if you are aware of them. Here are some more common mistakes made:

  • Your mortgage length. The most common mortgage term is 30 years. Many new home owners settle for the 30-year mortgage because the upfront costs are lower. But take some time and really look at your mortgage contract. If you purchased your house with a 30-year mortgage for $250,000 at 8 percent, the total amount you will be paying is $660,000. That is a difference of $410,000 that goes directly to your lender. If you can refinance your home to take advantage of low interest rates, do so, and take a 15-year mortgage instead. If you can’t afford to make higher payments with the 15-year mortgage, try paying half your mortgage every two weeks. At the end of the year you will have made 13 payments instead of 12. By doing this, you can pay your mortgage five to 10 years earlier and save $100,000 or more, depending on your interest rate.
  • Automatic payments. Let’s face it, life is hectic enough. You don’t need to run to the bank to deposit paychecks or run errands at lunch time to pay bills. By automating your finances, you can save time, fuel and the expenses of late fees if you forget to pay your bill on time. Create an automatic payroll deduction with your employer to your checking or savings account so that you ensure you are paid first. Financial institutions make it easy to pay bills or credit cards on line with their online bill-paying services.
  • Not monitoring your credit score/report. Your credit score and report are important because these two items essentially tell potential lenders how well you handle your money. If you are purchasing a home, your credit rating is considered in determining your loan interest rate, and the difference between a poor credit rating and a good rating can be enormous. With a good score, you are offered lower interest rates, which in the end can save you thousands of dollars and sometimes even hundreds of thousands of dollars. Future employers can also look at your score and use it to determine how dependable you are. To keep a good score, pay your credit cards and other debts on time. A good rule of thumb is to use 10 percent to 30 percent of the credit available to you. Check your credit report and score for free three times a year and dispute any odd accounts or mistakes on your report.
  • Not having a will or trust. We never want to think about passing, but not having a will or trust can cause some serious financial issues for your loved ones. Even though you feel that you do not have enough assets or money to pass on, what you do have should stay with your family. A will or trust can also plan for the care of your children upon your death. If a guardian is not named, the state will have to decide who will provide care for your children. Protect your family and your estate by having a will or a trust.
  • Life insurance. Life insurance can assist your family members in covering the cost of your funeral expenses and pay other bills long after you are gone. Not only should you be covered, so should every member of your family. Funerals are expensive no matter how old you are. Life insurance can also help pay for medical bills that may be left behind.

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

Money can be the cause of a full spectrum of emotions

This was originally published on Monday, June 20 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Money is a very personal topic. When you think of money, it can stir many different emotions. When you receive money, you can be joyful. When you go through hard financial times, your emotions are quite different.

Your financial health can affect your mental health. It’s important that you take care of yourself. Here are some tips on how to maintain your mental health.

  • Don’t isolate: Many people feel shame when going through financial difficulties. That is a very common emotion. Often we do not want to let our loved ones down or have friends think less of us. Isolating yourself is probably the worst thing you can do. Share with those closest to you what you are going through. Just knowing that there is someone there to support you helps lighten the burden.
  • Talk: You may be surprised how many of friends and family have gone through similar situations. Talk with them. They may be able to offer some sound advice, or solutions to troubles you have not thought about. Sometimes talking can help put your troubles in perspective and renew your thought process.
  • Acceptance: Coming to terms with where your situation is at the present time is a huge step. You will feel worse if you tune out your problems. By ignoring the problem, it will start to snowball until you are in dire trouble. You may not get rid of the pain of losing a home, but accepting it and understanding that this is a temporary situation will help ease your mind. This in turn will prepare yourself for the next steps you will need to take.
  • Responsibility, not fault: One of our biggest road blocks is ourselves. When times get tough, we tend to blame and criticize ourselves. By beating yourself up and harping on the situation, you can expect your mood to go in one direction – down. Take responsibility for what has happened, but don’t beat yourself up for doing so. Stay clear of accusations and self-punishments.
  • Focus: Review your budget and make an action plan to improve your finances. Decide what are needs and wants. You need power and water, but do you need cable TV? Be honest and make the assessment of what you actually need. Tighten your budget and think of ways to earn some extra income. There are websites that offer free downloads to help you create your budget.
  • Stay in the present: Of course learn from the past and plan for the future. But living in the present is what is going on now, and now is where you have to be productive. Do not dwell in the past or worry about the future. Do things that will help you here and now.
  • “Me” time: When in financial stress, people tend to cut back on everything. Getting back on track does not mean cutting out those things that make you feel good. You must take time to care for yourself. Get a little creative to keep the cost down. You may have cut your gym membership, but continue to workout at home or go on hikes. Scale back on manicures and pedicures, but have a girl’s night at home. Take time to do the things that make you happy.
  • Passive activities: Sitting in your pajamas and watching too much TV will not help your state of mind. Unfortunately, negative stories sell in the media, and we are constantly bombarded with those messages on TV. If you are watching some of the recent news on our island home, your mood may follow. Get up, get moving and get those endorphins flowing.

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.

Be smart about staying out of debt

This was originally published on Monday, March 28 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Financial trouble can happen to the best of us. Small mistakes or an emergency can cause our finances to get out of control. Once you pull yourself out of trouble the important thing is to remember how difficult it was to get out of it. Mistakes happen but if you don’t learn from them you’ll find yourself back in that same situation.

Understand what started your troubles: Did you lose a job? Was it due to unforeseen circumstances? Or maybe it was a combination of several catalysts. Whatever the cause, be aware and stay clear from making the same mistakes again. Go back and think what could have reduced the impact? A larger emergency fund? Better budgeting? Or possibly understanding how credit works?

Budget: If you’ve been reading my past articles, you’ll realize I’m a believer in a budget. Think of a budget as the blueprint to your financial health. You build your wealth and security based on these blueprints. Be aware of what comes into the household and where it goes. The goal is to have a little left over every month and put a little away in savings. Prioritize your spending with your necessities first and then work your way through your bills saving the “luxury” items for last. These are the items that bring you joy such as the movies or dining out.

Tailor your lifestyle to your budget: In other words, live within your means. Don’t try to keep up with the neighbors or friends. Be creative and find ways to stay comfortable. If your income is reduced your spending should be too.

Charge no more than what you can pay: Bad credit habits are one of the major reasons people find themselves in financial trouble. If you do not have the money in your pocket or in your bank account, don’t use your credit card. There are some circumstances where you may need it to purchase a vacation or large item. In that case, before you purchase, reevaluate your budget. How will you pay off the balance and how long will it take? What are you willing to sacrifice to pay it off?

Spending is emotional: Whether it’s to ease the troubles of a long, hard day at the bar with friends or purchasing a video console for the perfect birthday gift, our money is usually connected to our emotions. Find out what triggers you to spend impulsively and find a way to stay away from it or ways to cope with the emotion.

Expect the unexpected: Create an emergency fund. Everyone has an optimal amount they want to set aside. The bigger the emergency fund, the better you’re prepared. This fund should be able to cover car repairs, busted pipes, or even the loss of a job for a few months. Whatever your amount is, the important thing is to start.

Get money smart: You don’t have to hire a financial counselor or pay for a lesson. There are many free resources online, in the library or from nonprofit organizations that you can turn to. If you become familiar with money, you will not be intimidated by it.

Enjoy your financial freedom. You worked hard to get out of your financial troubles. Enjoy your new-found freedom. With good planning, you can realize your dreams.

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.

De-stress on financial bumps

This was originally published on Monday, March 21 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

It is common in today’s society for people to find themselves in financial trouble.  Studies show that we do not save as much as our parents or grandparents did in the past.  Job stability is not the same as when we were growing up.  Today’s ebb and flow of unemployment and high cost of living can put a lot of financial stress on people.  When you find yourself in financial trouble take action immediately.  Here are a few steps you can take to help you start overcoming you financial troubles:

Face your troubles.  Because finances are so personal, people often link their financial troubles to failure.  We are all human and we make mistakes.  But burying your head in the sand is not going to make it go away.  The first step is to admit there is a problem.

Reevaluate your budget. Calculate how much you make and  your expenses.  Cut out the unimportant expenses like entertainment, eating out, magazine subscriptions, and even your cable bill.  Identifying these is probably the hardest part besides actually following through.  Harsh times require tough actions.  Once you are out of your financial troubles you can always enjoy the extras, in moderation of course.

Create a plan.  A plan is only good if you can follow it.  Set a timeline with specific goals.  For example, in two months, pay $1,000 on your credit card.  Keep your plan accessible and in plain sight.  It will be a reminder of what you are trying to achieve.

Stop borrowing money.  Do not obtain a loan or another credit card to start paying for your expenses.  This is part of a malicious cycle.  Although it may seem you are paying off your debt you are actually adding more debt. Your interest rates will increase as you go further in debt negatively affecting your credit score.  At this point no one will loan you money and you are stuck with multiple debts.  It is best just to stop borrowing money altogether.

Negotiate your existing terms.  It is difficult to talk to people who entrusted you to repay the money they lent you.  But most financial institutions are willing to help and create solutions that could help you.

Have a yard sale.  Look around your house.  Like most of us your house is probably filled with items that you and your family no longer use.  Go through the kids clothing and toys.  They very quickly t grow out of clothes and their tastes are constantly changing.  We tend to become attached to our personal belongings and it can be hard to get rid of.  Some of your items can be replaced later once you get out of your troubles.

More employment.  Look for part-time or a second full time job.  Today there are many options for working out of home or from a mobile office.  You can also start a small business from your hobby.  It may take you away from what you enjoy for a while but the outcome of being financially free will be well worth the time.

Track your progress.  Looking at where you started and where you are now is very motivational especially if you sacrificed and worked hard.  Keep something visual to remind you of where you stand and how far you have to go.  Don’t forget to treat yourself to something small when reaching milestones.  If it feels like work all the time, you will never stick to you plan.

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.

Reader faces multitude of financial challenges

This was originally published on Monday,March 7 2016, in the Pacific Daily News.  Click here to subscribe to the PDN.

Q: During the last six months, I have had to deal with some expensive life events such as getting my car repaired and health issues. I am starting to fall behind on my mortgage, credit card payments, and some of my regularly occurring bills. I am really starting to stress out about my financial troubles. What are some steps that I can do get myself ready for the rough road ahead?

A: There are many steps in addressing your situation, so I’ll cover them over the next few weeks. I am sorry to hear about your recent hardships. Life can sometimes throw us a curveball when we least expect it. On the upside you have taken one of the hardest steps, which is realizing you are heading into trouble and taking the necessary steps to prepare yourself. Evaluate how dire your situation is. Is it possible to work your way out of the situation within the next six months? Is your financial situation going to lead to some serious counter measures such as selling your home or bankruptcy? Let’s begin with a few questions to ask yourself that will help you evaluate your financial troubles:

Do you have any idea how much is in your bank account? Using your debit card freely without knowing how much is in your account can cause overdraft and returned check fees. Over time, these fees will compound and waste hundreds of dollars a year on unnecessary fees. You should review your account on a weekly basis. Know what your available balance is and determine how your money is spent.

Do you avoid opening your bills and bank statements? I am not referring to just letters but emails and phone calls as well. Avoiding communication with your creditors may mean you are swimming in debt. This could further jeopardize your financial situation. You need to explain your hardships to your creditors early. Most companies will want to work with you to help you pay off your debt or even offer some temporary relief.

Do you defend yourself making poor financial decisions? Whether it is tapping into your 401(k) or opening another line of credit to pay off another debt, do you find yourself reasoning that it is “just this one time?” Once you start heading down that slippery slope, it becomes very difficult to break the habit. Don’t become unaffected by poor financial decisions. Financial institutions are notorious for giving out pre-approved credit. Don’t avail of these unless it is absolutely necessary.

Do you ask friend/family members for money? You can put a huge burden on those you care about. You can’t learn to be financially secure if you constantly lean on those close to you to help you out of sticky situations. Sometimes to succeed you have to fail and learn from your mistakes.

Do you justify adding more debt? Do you find yourself using your credit card thinking you’re so far in debt that charging another $200 isn’t going to make a difference? The truth of the matter is that the smallest amount added to your debt can make a huge difference because the interest you pay on the debt adds up. Your total debt increases and so does the time it takes to pay it off.

Are you paying off one debt with another? Do you transfer money from one credit card to another? Or are you paying your car, home, or other loans with a credit card? This pattern makes it impossible to pay off your debt because you will increase the amount of money you owe. Many financial institutions will charge you fees for these practices. These fees can really add up, especially if it is a common practice.

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.

Be prepared in case of disaster

When a disaster forces you to evacuate, and you have minutes to decide what to take with you, you may not have the time to search through files to find your passport, or wait for printouts of your important documents. Whether it’s an earthquake, a fire, or a tsunami warning, you’ve got to get to safety as quickly as possible.

But if you keep an emergency pack by the door, filled in advance with essentials for basic survival and copies of financial documents that can aid your recovery, you’ll be in a much better position to respond to the disaster, both in the short term and the long term.

When it comes to disaster and your personal finances, you will want to be sure of three things: that you can continue to manage your day-to-day finances, that you can efficiently deal with the damage, and that you’ve preserved important documents that would be difficult to replace.

You also will want to anticipate handling these tasks without the Internet, access to your computer, a power source or a network for your cellphone, or electricity in general. Disasters are unpredictable, and the more prepared you are, the better off you will be if things take a turn worse than expected.

Managing your finances. If you have a working landline, and nothing else, you can still make sure you pay your bills on time, or notify your creditors about unexpected financial hardship that came with the disaster. You just need a printed list that includes the bills that are expected every month, quarter and year. List customer service phone numbers, account numbers and bank account numbers, both from your regular account and your emergency fund, and you’ll be able to manage your finances right off the bat.

Be sure to safeguard this information: you want it available, but you also don’t want identity thieves to get a hold of it. Keep it in a safe place, and tell your trusted family members about it, so that they know to grab it if you’re not home.

Dealing with disaster. You will want contact information and copies of your insurance policies in your pack, along with receipts and an inventory of your belongings. Having that information with you can give you peace of mind, and it can smooth the way for the claims process. You also should consider keeping some emergency cash in your bag.

Preserving your important documents. It’s a good idea to place your family’s most important papers (records on birth, death, adoption, marriage, divorce, social security, medical instructions), financial records (wills, deeds, insurance policies, tax returns), and digital backups in a safety deposit box. For more peace of mind, you can add copies of these documents to your emergency pack, along with your family’s health insurance cards, prescriptions, passports, emergency contact numbers and an inventory of your financial accounts.

Preparing your finances for disaster can take some time and effort. But when those minutes really count, you’ll be glad you did so.

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. You can email him at moneymattersguam@yahoo.com.