College decisions impact financial future

This was originally published on Monday, September 11, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Many college students do not realize that their financial performance in college will impact them long after they graduate. Decisions they make on using their credit cards, financial aid, and over spending can impact their job search, their credit score, and their ability to payback what they borrowed.

Getting a good financial start out of college will ease the stress of the transition and open many more opportunities.

Failing classes. For many years your child has had a structured learning environment. They go to school and follow a strict schedule. After school, parents enforce homework and studying times.

College is very different from what they have been accustomed. Many professors don’t expect students to be in class every session and depending on their course load they may have a lot of time that they may consider free. Socializing is also a big part of the college experience. This new freedom could lead to academic troubles and financial troubles.

Retaking a class is expensive and could prolong their time in college. If it becomes a trend, they may be put on academic probation or worse, expelled. There may be fees associated with failing a class and loss of scholarships and/or grants. Being accepted by another college will become difficult. Student loans still must be paid off even though they are not in college.

Scholarship and grants. Being a student in college doesn’t mean they cannot continue to look for other scholarships and grants. Most believe that scholarships and grants are just for high school seniors going into college. In fact, there are many scholarship and grants that are targeted to students who are currently in college.

Have them speak with their academic adviser or counselor about these opportunities. They can also do some research online. Even if the amount is small or pays for certain expenses such as books, these opportunities can be a huge help. There is no rule to how many scholarships or grants you receive.

The more assistance you get the less you will have to pay or borrow.

Inappropriate use of assistance. Most scholarships or grants are paid directly to the school. But some are not and many student loans are paid directly to the student. This is very tempting to use unwisely. This money should not be used to fund a spring break trip.

Many students do not understand that paying for these loans right out of college is difficult. Most college students won’t be earning six-figure salaries at their first job; many of us don’t reach that level of income during our careers.

Large student loans. College tuition has been on the rise for years and it does not look like it will be leveling off any time soon. Many parents can no longer afford college tuition, living expenses, books and other incurred financial education related expenses.

Student loans are becoming a more popular way to fund higher education with the students being solely responsible. With that in mind, students should consider the cost of their education. Choosing a more affordable college in an area with lower living costs will certainly lower their debt. Be sure to understand the terms of the loan be for accepting it.

Even though your child is still in college, advise them to make monthly payments to keep the accrued interest from growing too large. The sooner they pay on the loan the better.

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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Talk to students about budgeting, credit cards

This was originally published on Monday, September 4, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: Our son is starting college off island this September. We have set him up with a new checking account and a credit card. He will be living in the dorms and is hoping to find a part-time job on campus. This is his first time living on his own and we want to ensure that he starts his financial well-being on the right track. Do you have any suggestions to offer that we can discuss with him?

Answer: I am thrilled to see that you are being proactive with your son’s financial well-being before sending him off into the real world. Many parents do not discuss this important topic with their new college students and many students leave college with a lot of debt and sometimes ruined credit scores. Managing their finances without a parent’s close supervision can be exhilarating and intimidating.

No budget. This is a mistake practiced by many adults It is because they have not made budgeting a financial habit. Learning this vital skill and making it a habit early in life will certainly help your college student beyond the college years.

Most students often have limited or sporadic income. It is easy to waste money on unnecessary items if they do not carefully track their spending. Sit down with your college student and show them how to create a budget. Inform them that they will have to revise this as their income and expenditures change.

Give them an understanding of needs versus wants and that they may have to be more frugal. Teach them about using coupons and how to take advantage of sales and looking for the best buys. Most millennials are tech savvy and downloading one of the many smartphone apps will make this task much easier.

Not planning. Many students get to college not certain on their major or they decide to change majors. Sit down with your college student and create a plan on how many credits a semester they need to take to graduate on time. Talk about ways that they can expedite their time in college by taking classes during the summer and winter breaks.

Also remind them that senior year will be more expensive with graduation fees and senior projects.

Peer pressure. Living on their own without parental supervision leaves them open for all sorts pf peer pressure. With their newfound independence, some students can get into financial trouble trying to keep up with their friends, who may not be financially savvy or have a larger spending limit from their parents. They may be pressured into eating out more often, buying more clothing than they need, going out on the weekends or planning a costly vacation during their breaks.

Talk to them about how to handle peer pressure and that they should not be concerned how others perceive them by being more financially responsible.

Credit cards. Help your college student understand the pitfalls of using credit unwisely. Credit cards have become a way of life and makes obtaining things extremely easy. Credit card debt that is created in college years can affect their credit score for years after college.

They are just starting their credit history. Many credit cards will offer them high interest rates and hard-to-meet terms. Explain to them how interest works and that making minimum payments each month prolongs the payoff making it much more expensive than the initial cost of the items.

Credit cards can help them build their credit history and improve their credit scores, if used wisely.

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.

The pros and cons of credit cards

This was originally published on Monday, August 21, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Almost everyone uses a credit card these days especially with the boom of online retail. You can’t rent a car or make a hotel reservation without one.

The ease of swiping your card makes it too easy to pay bills or cover you in case of an emergency. This ease of use can also land you in deep debt. Before making the decision to get a credit card, consider these pros and cons.

Pros

  • Purchasing power: the power to make a purchase while traveling overseas, online, by phone and of course in the store. Many of the large credit card issuers like Visa and Master Card are accepted nearly everywhere.
  • Financial backup: In case you have an unexpected event like a busted pipe in your kitchen, your credit card can be used to pay for parts and, in some cases, a plumber without going to an ATM. They can also help in case of a health care emergency or an expensive auto repair.
  • Rewards: Some cards will reward you for using their credit card for every-day purchases such as gas or groceries. Others will reward you when you travel or award cash back as an incentive.
  • Credit score: If you use your card wisely it will certainly help your credit history. It can also help repair your credit by showing how responsible you are by making your payments on time.
  • Expense record: Especially when you are traveling, a credit card can help you keep track of your expenses
  • Pay later: It has happened to the best of us, and we run short of cash and need to buy groceries or fuel. You are able to make your purchase and pay it off later.
  • Protection: Credit cards allow you to dispute billing errors and some even provide insurance for expensive purchases. Most credit cards are now equipped with an EVM chip. A Europay, MasterCard and Visa chip is a global standard for credit cards to authenticate and secure transactions. The EVM chip is much harder to hack than a swipe strip. In the case of a fraudulent transaction, the card holder is usually protected.

Cons

  • Interest: A high annual percentage rate can send you deep into debt if you do not make significant monthly payments or pay your balance off.
  • More usage: Studies have shown that people tend to purchase more when they use a credit card. Some feel compelled to spend more than what they have.
  • Late fees: If you do not make a payment you incur a late fee. Although it may be $30 to $50, it adds up quickly if you repeat this habit. Sometimes consumers will allow the balance to roll over for several months racking up interest and late fees.
  • Bad credit: Studies have shown that many people fall into serious debt due to poor credit card habits. Carrying a large amount of debt and acquiring too much debt can ruin your credit score.

After weighing the pros and cons and understanding the type of credit card that is suitable for you and your lifestyle, remember to keep track of your purchases, avoid overspending and make timely payments to avoid extra fees. Use your card with reputable businesses and if your card is lost or stolen, report it to your credit card company as soon as possible.

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.

Variety of credit cards from which to choose

This was originally published on Monday, August 21, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

There are many types of credit cards and not all cards are for everyone. Before you begin applying for a credit card, you should check your credit score to ensure that there are not errors that could prevent you from getting the best interest rates.

Most people feel that the credit card company is the most important factor — Visa, Mastercard, etc. Although that should be factored into your decision, here are other types of cards you ought to consider:

Standard credit card. These are no frills and no rewards, just credit. If you simply want a credit card to make an occasional purchase, then this card is for you. They are relatively easy to understand and most financial institutions offer this type of card.

Usually there are different interest rates for standard purchases, cash advances and balance transfers. Your interest rates are determined by your credit history.

Rewards Credit Card. These cards encourage you to use their credit cards when you make purchases by rewarding you with cash back, points or merchandise.

  • Cash back. This reward is getting a certain percentage of your purchase back as cash. Most cards offer 1 percent to 3 percent for general purchases and sometimes a higher percentage at a certain store for certain purchases, such as groceries. Look for a card with low or no annual fees.
  • Travel. If you are an avid traveler, this card may be of interest to you. Many airlines team up with a bank to offer an exclusive airline credit card. Making purchases with these cards earns mileage or discounts with partner hotels and rental car chains. Some may waive baggage fees or access to airport membership clubs. Accumulated points can also be used to upgrade seating on a trip.
  • Merchandise. You receive points for your purchases, which can be exchanged for merchandise that the credit card issuer sells. These items can be small, like a watch, to larger items such as tablets, cameras and even jewelry.

Student credit cards. This card is designed for college students. Students usually must be enrolled in a four-year university. These cards usually have a lower interest and lower credit limits. Students should be careful they don’t go overboard and get into debt they cannot pay off with little to no income.

Premium cards. These are offered to those with high income and excellent credit. They usually enjoy perks such as personal shoppers, hotel room upgrades, access to airport lounges and priority airline boarding. These perks usually come with high annual fees.

Store credit cards. Some large retail chains offer in-store credit cards. Sometimes they are issued by a financial institution and not by the store directly. Usually, a clerk or manager can issue you a card right in the store. The card is issued after a quick credit check. Most of the time, a salesperson will offer you a discount if you open a card during your visit. Store credit cards usually have high interest rates, especially if you do not pay your monthly balance in full.

Retail credit cards. Large credit card issuers may partner with a major retailer. These are not like the in-store credit cards, which can only be used at the store. These can be used anywhere, like a regular card, but their rewards offer perks at their store or online website, such as free shipping and discounts not offered to other customers. You can only redeem the reward with the retailer and interest rates are usually high.

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.

Choosing a life insurance policy

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

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

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

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

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

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

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

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

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

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

Tips to save on your power bills

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

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

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

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

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

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

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

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

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

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

 

Millennials, learn good money habits

This was originally published on Monday, October 24 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

When you think of millennials, you might conjure up free spirits who like adventure, take risks and seek thrills. Pictures of 20- and 30-somethings cliff diving, hiking and traveling to exotic places are common.

But when it comes to finances, millennials are quite conservative. Millennials came of age when the Great Recession was in full swing. Many saw their parents lose jobs or lose big when the stock market and real estate markets took a plunge. Millennials watched as their parents struggled to keep their homes or moved to downsize.

Growing up during the Great Recession has made millennials uncomfortable when it comes to investing their money. This generation has an opportunity to form good money habits that will last into retirement. Here are some tips to follow:

  • The future. Many millennials grew up to think very short term when it comes to their money. Think about what you want to do in the future. Get another degree? Do you want to retire early and maybe even seek a second career? By planning today you can set some goals that will make your future dreams come true.
  • Retirement. Your retirement is still some time away. You have the opportunity to diversify your portfolio and be as aggressive or conservative as you want, depending on your goals. Decide when you want to retire. Use that date to determine your course.
  • Debt. Know the difference between good debt and bad debt. Good debt increases your value, like a mortgage or student loans. Bad debt is something that you cannot cash in, like credit cards or vacation loans. Pay off your loans with the higher interest rates first and then move on to the next highest and so forth. If you use the money that you would have used to pay off the debt, and add it to what you currently are paying on the second debt, you will be amazed at just how fast they will get paid off.
  • Technology. Millennials do not know a world without the internet. They grew up digital and are not intimidated by technology. So why not use it to manage money? There are some awesome apps that can make managing your money fun and easy. Some apps will even send a text to your phone to let you know that you are coming too close to going over your budget.
  • Don’t forget yourself. You don’t have to work hard and not enjoy your money. Always set aside some money for you to enjoy. It is OK to treat yourself, just as long as it is in moderation. But stay firm to your spending plan. It’s easy to get sidetracked and think you can make it up later. If there is something you want that is outside of your spending limits, take the time and save for it.
  • Credit score. Start by getting copies of your credit reports from the three free credit bureaus. Your credit score determines what lenders are willing to charge you for borrowing their money. It is also used to determine how reliable you are. Employers, landlords and utility companies will often take a look to see your spending patterns and how responsible you are with your money.

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