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.

Millennials should be ready for retirement

This was originally published on Monday, October 17 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Millennials have been in the workforce for nearly two decades. Although they worry mostly about debt, they are pretty knowledgeable when it comes to retirement.

A study by Ramsey Solutions notes that four in 10 Millennials know how old they want to be when they retire, and 38 percent know how much they will need to retire comfortably. Many Millennials want to retire at 60 to 65 years of age.

One of the biggest advantages that Millennials have is time. Since many of them know when and how much they need to retire, they can start planning. The same Ramsey Solution survey noted that 58 percent of Millennials start saving for retirement at the average age of 23. That gives the average Millennial about 40 years to save up for retirement.

Many Millennials don’t foresee that Social Security will be in existence by the time they are of retirement age. According to the Ramsey Solutions survey “Millennials rank Social Security a distant third (44 percent), choosing instead to rely on their own savings through a 401(k) (58 percent) and personal savings/cash (54 percent).”

A lot of debt

Unfortunately, Millennials carry a large amount of debt. Many carry large student loans and credit card debt, and this has become a barrier to saving enough for retirement.

According to a survey on Forbes.com, 14 percent of the Millennials polled have taken a hardship withdrawal from their retirement account with in the last 12 months. Although they have a good while before hitting retirement age, this practice could lead to a pattern that will be hard to break, and cancel out any good that compound interest and time can afford them.

A bad habit

Another unfortunate habit that may devastate a Millennial’s retirement fund is that 42 percent have used pawnshops, payday loans, rent-to-own companies and other substitute financial services. The Forbes.com survey noted 14.1 percent have used an online “peer-to-peer” lender in the past six months. These alternative sources of funding usually are easy to acquire but their interest rates are three to four times higher than a conventional loan.

Millennials have the opportunity to be a little more aggressive with their investments.

Unfortunately, 54 percent of Millennials use their savings accounts to hold their money. Most savings accounts offer dismal interest rates, generally earning less than 1 percent.

 Life happens

Some believe that they will have more money later as they get more experience in the workforce and get promoted. But that is when life usually happens — children, a home, and other things that require money will become a priority.

Millennials should take advantage of an employee offered 401(k) and, if possible, max out their contributions, or at least contribute as much as their employer will match.

By reducing their debt, increasing the amount they put towards saving, and taking advantage of the time that they have to save, Millennials will be one of the most prepared retirement generations.

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.

Consider the pros and cons of homeownership

This was originally published on Monday, September 5 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Q: I have noticed that home mortgage interest rates are at an all-time low.  Currently, I am renting my home and have been giving a lot of thought into taking advantage of the low interest rates and purchasing my home. My credit score is pretty good and I know I could be approved for a rather low rate.  I have never purchased a home, and I am wondering if owning a home is really for me?

A:  It is true that mortgage interest rates are currently low and purchasing a home now would be a great time to take advantage of these low rates.  On the other hand, owning a home is quite different than renting.  Purchasing a home will be one of the largest financial decisions you will ever make.  Before deciding, consider the advantages and disadvantages of homeownership.

Advantages of buying a home

  • Personal wealth.  Owning a home offers long-term benefits of security, equity and potential growth in your personal wealth.  Over time, homeowners will build equity.  Your monthly mortgage payment is divided between paying the interest on the money borrowed and the principal, the actual cost of the house.  Every dollar you put on the principal is a dollar towards your ownership – your equity.  You can increase your equity by renovating and upgrading your home, appliances, and updating its curb appeal.  Your home can also be a source of emergency money if health or other issues arise unexpectedly.
  • Tax benefits.  The interest and property tax portion of your mortgage payment is a tax deduction.  This will reduce your income tax payments and you could save or use the money saved to make renovations, make extra mortgage payments, or for other uses.
  • Potential rental income.  It might be possible to rent part or all of your property to generate extra income.  The income you collect can go to paying off the mortgage.  If you decided to purchase a second home you can make the rent higher than your mortgage payment which will pay the mortgage.
  • Control of your property.  As a homeowner you have creative control on what you can do to your house.  There are no constraints placed upon you by landlords.  You can choose what color to paint your rooms/house, change the landscaping, create a patio, extend your living quarters, and so much more.
  • Builds credit.  If you make your payments on time you can improve your credit profile.  It looks good to credit companies to see that you are trustworthy with a large financial investment.
  • Sense of pride.  Homeowners normally take more interest in what is going on in their community since they usually tend to stay longer in their homes.  Homeowners also create ties to the community and place roots that last longer than most renters.
  • Privacy.  One of the best aspects to homeownership is that the property is yours.  You create the type of privacy you want.  You do not have to worry about a landlord dropping by unannounced.

Advantages to renting

  • Flexibility.  Renting a home gives you the flexibility to change location.  If you do not like where you live, you can ride out your contract and move without a lot of effort and cost.  Your commitment is shorter.  Most leases are for a year versus a 15 to 30 year mortgage.
  • Repair costs.  As a renter, most maintenance and repairs are the landlord’s responsibility.  Many home repairs are expensive; especially if you call a repairperson.
  • Dream locations.  Most areas that are costly to purchase can be rather affordable as a renter.
  • Insurance.  Renters do not have to get renters insurance but it is highly recommended.  Because renters insurance covers only your possessions it cost much less than a homeowner who has to cover not only their possessions but the property and structure as well.
  • Credit requirements.  Many landlords do check your credit score before you sign the lease.  Purchasing a home will usually require a higher credit score especially to qualify for lower interest rates.
  • Real estate market.  Property values fluctuate and as a renter if the property or economic conditions of your area declines you are not tied to the property.
  • Utilities.  Many rental properties include utilities in the rent.  Some even include cable, telephone, and Internet.  Homeowners generally pay more for their utilities.

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

For less stressful holidays, start preparing your finances now

This was originally published on Monday, July 18 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Christmas in July? Ho, ho, ho!

Can you believe that 2016 is more than halfway through? Soon the holidays will be here. How prepared will you be? For many, the holidays are a fun time of the year. For others, the holidays heighten anxiety levels because of the cost. Preparing now can help bring down that anxiety and get you in the holiday spirit.

  • Naughty or nice list. Start thinking about to whom you want to give a gift. How much are you willing to spend? From there, start creating a budget. How much can you spend without starting next year further in debt? Take a look at what you spent last year and compare that to what you think you will need this year. Don’t forget to include in your budget holiday food, decorations, clothing, and party necessities. You may also want to factor in the spike in your power bill and gasoline budget.
  • Start saving now. Since you planned your budget you now know how much you need to save. Decide how you want to save your money. Would you prefer to save it in a separate savings account, in a jar, or in a time certificate? Store your savings in some place that is a bit difficult for you to access so you can’t use it on every temptation.
  • To gift or not to gift. Not everyone needs a store-bought gift. As we get older our social network grows and that can put a hurt on our budget. Think of ways to say “I appreciate your friendship” other than store-bought gifts. Find gifts that come from the heart and not the pocket. There are many websites and apps that are dedicated to creating homemade gifts and affordable prices.
  • Start buying early. Start shopping now for those gifts you intend to buy. Shops are less busy before the big holiday rush and you will feel less pressure. Leave yourself plenty of time to compare prices and think about purchases. Your shopping will go a bit easier when you are not pressured.
  • Be careful of holiday credit. In-store credit may look tempting but store credit cards charge much more interest than the traditional credit cards. Sometimes they will offer you nice savings on your first purchase making it much more tempting. If you do give in, pay that card off in full with the money you budgeted. Don’t think of it as extra income that has freed up your money for other uses.
  • Use cash if possible. It is easy to lose track on how much you spent when you swipe your card. By using cash you can see just how much you spend. Do be careful and keep it safe. Do not go around flashing wads of money around. You will make yourself a target.
  • Keep safe. Although the holidays are a time of cheer, there are some that think of the holidays as a way to take advantage of those shoppers who are completely involved in their holiday shopping. Park your car in well-lit parking areas. If possible, shop with a buddy. Keep an eye on your purse/wallet. Be sure you always get a receipt. If you do use a credit card, never let the sales associate walk out of sight with it. Be aware of your surroundings, especially at an ATM. Keep your home well lit and safe as well. Following these safety tips can spare you heartache of being a victim of theft.

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 for a better financial outlook

This was originally published on Monday, June 27 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

It can be frightening when you are overwhelmed by money problems.

Research has proven that money, or the lack of money, is one of the main culprits to stress and even depression. Take comfort in the fact that you are not alone.

Here are more ideas to help you brighten your financial outlook.

  • Monitor your habits. Are you sleeping too much or too little? If you are sleeping too much, get yourself out of bed. If you’re sleeping too little, find activities you can do that will tire you before you go to bed. Eat healthy foods that are not processed. A healthy lifestyle helps curb depression and can clear your mind that can bring forth solutions to your financial troubles.
  • Avoid drugs and alcohol. Stress is very common when you are going through financial troubles. Stress literally causes physical and mental symptoms in the body. Headaches, tight muscles, mood swings, ulcers, and elevated blood pressure are a few symptoms you can experience when under stress. Resorting to drugs or alcohol to relieve some of these symptoms can create other problems that will just add to more stress. Find healthy ways such as exercise or meditation to help cope with the stress.
  • Reflect. Take a hard look at why you are in this situation. What part can you change and have control over? Examine how your use your money. If you share the money with a spouse or significant other, sit down together and have an open discussion. Make plans on how to fix the behaviors that put you in financial distress.
  • Inspiration. Find people, books, or websites that inspire you. By surrounding yourself with positive thoughts you will be more motivated to find solutions to your financial stress.
  • Network. Network with colleagues especially if you lost your job or need a better job. Reach out to past colleagues as well. By doing so you build up your support network. It may even lead to a job.
  • Depression. Do you know the signs of suicide? Become familiar with them particularly if you know someone who is going through financial hardship. If you feel that you have no more options, get help immediately.
  • Volunteer. What better way can you feel good about yourself than making others in need feel good? Volunteering will help you get out of the house and think about other things than moping about your troubles. It will also help you network with others and could bring about work opportunities.
  • Be creative. Studies have shown that painting, sketching, cooking, sewing and other creative forms help clear the mind.
  • Ask for help. Talk to a financial counselor or a therapist. Check with your local credit union or bank to see if they have a counselor on staff. Talk to your insurance company to see if they cover a therapist. You can always confide in a family member or friend. Do not take on the problem by yourself.
  • Stay positive. Be thankful for what you do have. Positive thoughts help in a variety of emotional and physical factors that improve health and dealing with diversity. Of course, most financial problems cannot be solved by positive thoughts. But it is terribly difficult to solve your financial woes when you are glum.

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.