Money matters: Ways to increase your income

This was originally published on Monday, January 15, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: This year I want to be able to save money, but right now it is difficult and I find myself living paycheck-to-paycheck. I am making my monthly payments on time, but I can’t seem to save or even enjoy the money I do make. Do you have any suggestions to help increase my income?

Answer: According to a CNN.com article from November 2017, in the United States “unemployment inched down to 4.1 percent, the lowest since December 2000.” That same article also sites that “wages took a step back. They grew only 2.4 percent in October compared with a year earlier.”

Although many are employed, the wages they earn aren’t sufficient to keep up with inflation and the rising cost of living. Most would say: “Get a better paying job.” But at times it isn’t that simple. You may actually enjoy the job you have, the people you work with, or maybe even your work schedule. Here are a few ideas to help increase your income:

Part-time job. The tried-and-true method of making more money is taking on a second job. You can look for another job or work from home. Part-time jobs add up.

Many people are getting creative and selling their skills. A talent that seems ordinary to you might be extraordinary to someone else. Can you speak a second language? Perhaps you can be a tutor or help companies as a translator. Are you good with pets? Many people are looking for someone to watch Fido or Kitty while they are on vacation. Are you a good cook? With today’s hectic schedules people are looking for alternatives to fast food; a personal cook may be a niche that needs filling.

Just think, if you cut grass for five of your neighbors for $50 twice a month you will earn $500 a month. That is $6,000 a year!

Renting. Do you have an extra bedroom in your house? You may want to consider renting out a room and taking on a roommate. In this economy, many single people are looking for others to help ease the cost of rent and utilities. With the rise in rentals, a roommate could lighten some of that financial stress.

You can also rent out your room to visitors. Airbnb has made a few headlines on Guam lately. I was surprised to see how many rooms/houses were available on Guam. If you are interested in turning your home into a rental, be sure you follow the correct procedures and visit the Department of Revenue and Taxation, or you could run into some costly penalties.

Skill and worth. Ask your boss how you can be more valuable to your company or organization and what you would need to do to earn a higher wage. Take what your boss says and do it. It may involve gaining additional skills, a degree or certification. The most important asset to a company is human capital. It takes a lot of money to train and hire people. If you can stand out and show incentive to want to make a difference for the company, it may just pay off in the long run.

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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For next year, set financial resolutions

This was originally published on Monday, December 18, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

There are just a few more weeks left in 2017. Have you started reviewing your end-of-the-year financial checklist? Now is the perfect time to start reviewing and setting your 2018 New Year’s resolutions.

With that in mind, here is a look at some end-of-the-year financial tasks to tackle:

  • Schedule a meeting.If you have a financial planner, schedule a meeting. A financial planner can help you prioritize your goals. If you use a tax accountant, meet before the end of the year to review your finances and take advantage of any last-minute tax breaks.
  • Minimum distributions.In the year following the year you reach age 70-1/2, you must take the required minimum distribution from your IRA by April 1. If you don’t, a substantial penalty will be taken on the amount you should have withdrawn.
  • Tax-withholding. If you got married, divorced or had kids in 2017, you probably need to update your tax withholding with your employer’s human resources department. Receiving a large tax refund means that you have overpaid your taxes and the government “borrows” the money you overpaid. Instead, you can lower the amount the government withholds during the year and use that money to pay debt or invest it. The idea is to owe as close to zero as you can at tax time.
  • Capital loss. If you have an investment that is trading at a significant loss, you may want to consider selling it and using the capital loss as a deduction. A capital loss is the result of selling an investment at less than the purchase price or adjusted basis. Talk to your broker or financial adviser. Just like with any tax break, there are certain criteria to be able to utilize the loss.
  • Flexible spending account.A flexible spending account is a special, tax-free account in which you can contribute money that will pay for health care services your insurance doesn’t cover.  Check with your benefits adviser to find out deadline for using that money. If you don’t use it by the end of the year and you don’t have a roll over plan, you may forfeit some of that money.
  • Solar energy credit.Unfortunately the tax benefit for residential alternative energy equipment terminated for property placed in service after Dec. 31, 2016. However, the credit for solar electric property and solar water heating property is available for property placed in service through Dec. 31, 2021, based on an applicable percentage. The applicable percentages can be found at the Internal Revenue Service website, irs.gov.
  • Talk to your family and let them know where the family stands financially. Access your current financial situation and review the past year. Answer questions honestly with your spouse and children. If there is an area that needs improving, commit to it as a family.

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.

Evaluate finances before 2018

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

It is hard to believe 2017 is coming to an end. In a few weeks we will be ringing in the New Year.  December often flies by with holiday parties, present wrapping and cookie baking.  With all of the commotion happening around us, take some time this month to review your personal finances.  Here are some items to check-off of your end of the year checklist.

  • Your net worth. Calculate what you own and subtract what you owe.  This is the best way to start figuring out if you met this year’s financial goal and how to improve and set next year’s goals.
  • Credit report. You are entitled to one free of each of the three major credit reports from TransUnion, Equifax and Experian. It is best to request one at different points in the year to catch errors or irregularities.  Pull your credit report at AnnualCreditReport.  Look at your report and verify that there are no errors.  Not happy with your score?  Work on any past due or collection debt, make payments on time and lower your debt to improve your credit.
  • Insurance coverage. Review your life, home, auto and health insurance policies.  If you have had a major life change such as a new baby, marriage, or divorce you will want to make sure your insurance reflects those changes.  Many policies, especially health, have an open enrollment period which is the only time you can make changes.  Know when that period is and make the necessary changes.  If you have made any structural changes or improvements to your home, make sure you have informed your insurance company and it is reflected in your homeowner’s policy.  Now is also the time you can get quotes from other insurance companies to ensure that you are getting the best coverage for your money.
  • Estate plans. If you have sold or gained property, had a major life change, opened or closed a new account, you may want to appraise your will and make the necessary changes to reflect your new status.  Also examine your living trust and health care power of attorney. If you don’t have a will, living trust or health care power of attorney, make that a goal for 2018.
  • Review your beneficiaries. A lot of change can happen in a year: births, marriage, divorce, death, adoption, etc. Ensure that you have the appropriate person or persons listed as your beneficiaries on your insurance, retirement accounts, and even checking/savings.
  • Donate to charity. December 31 is the deadline for charitable contributions you plan to deduct from your 2017 tax return.  This includes money, clothes, cars, or even stock.  Be sure that you get a receipt of your donations to include with your tax forms.
  • Use up FSA. If you participate in a health or child care flexible spending account, double check the balance on that account. If you don’t use it, you’ll typically lose it. While there may be a grace period to submit an expense for reimbursement, the actual expense needs to have been incurred by the end of December.  Double check your plan’s terms to be sure.

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.

 

 

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.

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.