Tips for the family vacation

This was originally published on Monday, May 1, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: My family and I have talked about going on a dream summer vacation off island a few years from now before my oldest graduates from high school. Do you have any tips to help me give my family the vacation of a lifetime?

Family vacations, whether on island or off island, are lots of fun and create many wonderful family memories. These family memories will be shared for a lifetime, but you don’t want the trip to put you and the family in a financial bind.

Going off island can be very costly. Just the plane tickets alone are expensive. Of course, with anything that expensive, you need to save. Making the family dream vacation come true is a great feeling, but you certainly want to plan and budget well in advance. Here are a few things to consider when putting your family vacation budget together.

  • Be flexible. Do you know exactly where you want to go? If not, keep your options open. Do some research with your family. You may want to consider traveling internationally, especially if the dollar is strong. Look for destinations that provide you the most for your money. The typical tourist destinations are usually pricier.

The best time to travel is May through early June. Although the kids are still in school, it can save you money. Talk to your child’s school and see if they can arrange a way to let your child out a little earlier. By traveling during the off-peak times, you can save a lot of money. Airfare, rental cars, and hotels have some of their best deals outside the peak summer travel months. Weekday travel is usually cheaper than traveling on a weekend. Also avoid traveling on three-day weekends.

  • Non-summer travel. Does your vacation have to be during the summer time? Think about spring, Thanksgiving or winter break. Most schools are willing to work with you to extend these breaks a few more days so that you can travel. Schoolwork is a great way to keep kids busy on an airplane.

Use your points or rewards. Many companies now give incentives to use their services. Many airlines, gas stations, car rentals, hotels and credit card companies can save you money by using their customer loyalty programs. Some programs may even partner up with other companies to offer package discounts.

  • Shop around. Travel agents can help you create the dream vacation and are convenient. But they do charge extra for their time. Get quotes from several different agencies before committing. You may also want to consider an online booking agency. Many of them can create package deals with airfare, hotel, rental car and amusement parks. Since they have direct contracts with these companies, they can be less expensive to book.

Whether you use a traditional travel agent or online booking, be sure that you know what you are buying. Spend a little extra money for a refundable option. You may run into some difficulties during travel or even before you start. The last thing you want is to pay for that dream vacation that you never took.

  • Book in advance. Whether it is airfare, hotels or rental cars, booking in advance usually saves you money. Some travel websites recommend anywhere from 45 to 90 days in advance. Check fares early and often. You can sign up for airfare alerts through certain programs online. Once again, be flexible. Usually the most direct route is the most expensive. If you have time, consider alternate routes or flying one route to your vacation and flying back on another. You may have more stops and layovers, but as the saying goes, “It’s not about the destination, but the journey.”

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

A few financial rules

This was originally published on Monday, April 24, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

As April comes to a close, so does Financial Literacy Month. In these times of economic uncertainty, money management is a necessary life skill. Many of us are not taught how to handle money or prepare ourselves for the future.

Most of the time, we learn as we make mistakes. Sometimes we bounce back, but sometimes it is a life of continuous hardship. Being prepared makes a huge difference when dealing with money management.

Here are a few rules:

Plan. You can’t go through life not having financial goals. The only bad plan is a plan not followed. You must plan for your future. Plan for all your major expenses like home ownership, a car, schooling and periodic expenses.

Goals. What are your short-term (less than one year), mid-term (one to five years) and long-term (more than five years) goals. Make sure your goals are specific and reasonable.

Develop a budget. Determine your living expenses, periodic expenses and monthly debt. Create a budget that can be realistically followed. Follow your budget as closely as possible and evaluate it at least twice a year.

Keep your expenses under control. Try to spend only the money you make and not use your credit cards. Do not incur other debt until you are able to manage the debt you have now. Know where your money goes by keeping a log of all your purchases.

Save. Save up for major purchases such as cars, homes, vacations and major appliances. Experts say that saving 10 percent of your paycheck will add up to a nice savings account. Create an emergency fund with about three to five months of your expenses. Start saving for retirement — the sooner the better.

Need vs. want. Sometimes we have a hard time distinguishing between the two. Needs are must-haves to survive and wants are things we crave. We may need a new car, but we may want a car that is beyond our financial means. Determine your financial priorities to guide your spending choices. Take care of your needs first. Then, if you have some money left over, you can use it for your wants.

Credit. If you must use credit, do so wisely. Use credit for planned purchases only. Determine what amount you can afford to purchase on credit. A golden rule is not to allow your payments to exceed 15 percent of your net income. Do not use one form of credit to pay another and repay the credit back as soon as possible.

Treat yourself. What good is working if you can’t enjoy your money? Even if it’s a little treat like ice cream or a dinner out, enjoy the fruits of your labor, or it will become very hard to follow a budget or stick to your goals.

Don’t get consumed by material things. Trying to keep up with the Joneses will only lead you to financial ruin. Live an enjoyable life but within your means. A 70- inch flat screen television is nice, but so is living debt free.

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 obstacles most households face

This was originally published on Monday, April 17, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Whether you make a lot of money or a little, finances are an issue in most households. Many families don’t communicate about finances, leaving one person in charge. Discussions are a key to making families financially sound. Regular discussions on budgets and goal settings can make a huge difference.

Here are a few money obstacles households face.

  • Conflicting financial values. One of the main causes of divorce in America is money. Usually it’s not about how much they make but how the money is spent. Couples need to be on the same page and have the same money goals. Compromise and discussion is a must on a daily basis.

Create a budget and stick to it. Both individuals must agree and be aware of what the other person is spending. If you don’t communicate, you may overspend and not have enough money to spend on what is important. Keep a realistic attitude and hold each other accountable, in a friendly way.

If you have children, share with them what your financial status and goals are.

  • Health care costs. With the current uncertainty of what health care insurance will and won’t cover, one thing for sure is health care costs continue to rise. Health insurance is a necessity, especially for families with children. There’s a huge financial risk associated with going insurance-free that could jeopardize your family’s financial well being. Be sure to read exactly what your health insurance covers.
  • Lack of income. The cost of living continues to rise and unfortunately household incomes tend not to follow that trend. Some of the largest expenses households face are medical care, food, and housing — all of which have significantly outpaced income growth.

Most of the time a household’s debt increases because they use credit to cover necessities. Find ways to cut expenses and increase income. It’s not uncommon to have one or even both parents taking on a second job.

Not all jobs have to take you away from your family. If you have a skill that people are seeking, such as baking, repairing cars or gardening, take advantage of it and start a small business. A part-time job may not be ideal, but it may be exactly what you need.

  • Retirement plan. A survey done by the Federal Reserve states 31 percent of non-retired respondents reported no retirement savings or pension — that includes 19 percent of people ages 55 to 64. Social Security isn’t a guaranteed source of income, nor is it enough to cover your retirement expenses.

As you get older, you will require more medical care. Without your own nest egg to assist with those medical bills, you may have to consider working much longer than you would like.

  • Life insurance. Having life insurance will help ease the stress of losing a loved one. There are some affordable and very flexible life and supplemental insurance plans available.

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 handle financial challenges

This was originally published on Monday, April 10, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Most of us have some financial uncertainties. Some may be beyond our control, such as unemployment or health reasons. Others may be from overspending or taking on too much debt. Financial challenges arise and it happens to everyone.

  • Overspending. There are many reasons for overspending. It can be because of the holidays, the lack of willpower, or even emotions. I am sure a few of us are guilty of having a bad day at work and bringing home a shiny new object which temporarily lifts our spirits. Overspending usually leads to using credit, which can lead to a dangerous spiral.

Get to know what your spending triggers are. It could be your mood, your friends, certain environments, even the time of day. Keep track of your spending. You will be surprised how something as routine as a daily cup of coffee can add up. Carry cash.

  • Don’t rely on cards. You can see your cash being spent, but using your credit or debit card is a very out-of-sight, out-of-mind behavior. Proactively decide where your money should go and put it aside. Whatever you have left over then can be used to spend on yourself.
  • Save in advance. Do you have a car that needs to be replaced? Are you planning on purchasing a home in the near future? Many of your large expenses are known usually well in advance. Many of us rely on taking on huge amounts of debt instead of saving for it because it is the easier way out.

Even if you take on debt to help pay for the purchase, you still should pay down as much debt as you can. If you save $10,000 for a $100,000 home, the amount you save on interest alone will be doubled after paying off the debt.

  • Too much debt. According to NerdWallet.com, the average U.S. household has about $16,748 in credit card debt. The average household pays a total of $1,292 in credit card interest per year.

If credit card debt is a major problem, the first step is to stop using the card. Many Americans now depend on their credit cards to pay off other debts. It is a cycle that is hard to break. To stop depending on your card, you must decide where you can cut spending. Decide what expenses you can live without.

Create extra income that can be used solely for paying down debt. Pay off the credit card with the smallest amount and carry that payment amount over to the next card and so forth. Once your credit card is paid off avoid the temptation to use it.

  • Credit score. The 2010 National Foundation for Credit Counseling Financial Literacy Survey states “about two-thirds of adults (65 percent) have not ordered a copy of their credit report within the past year and nearly one in three (31 percent) do not know their credit score.” Your credit score is important because it is the first point of reference that lenders use to judge your trustworthiness with money.

Take advantage of your three annual free credit scores. There are also credit monitoring companies that charge minimal fees.

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

Important to budget; have emergency fund

This was originally published on Monday, April 3, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

April is Financial Literacy Month. Since 2003, the United States has recognized the importance of economic and financial education. The mission is to improve lives through financial education. During April, these columns will explore some of the top personal finance problems most face and offer some solutions.

Most of us aren’t strangers to financial issues. We have, at one point in time, felt that our finances could use improvement. Often, financial problems translate into stress, which affects our personal and professional lives. The National Foundation for Credit Counseling reports that 42 percent of Americans graded themselves between a “C” or “D” when it comes to their personal finances.

  • No budget. According to a Gallup poll, only 32 percent of Americans keep a household budget and 20 percent don’t have a good idea of how much they spend on housing, transportation, food and other categories.

Having a budget is one of the most successful strategies to being financially healthy. It is also one of the easiest once you get into the routine. Being conscious of how you spend your money can help you understand just where your weaknesses are and then correct them.

A good rule of thumb is the 50/20/30 Rule. This rule stresses that 50 percent of your net income should go to essentials such as rent/mortgage, utilities, transportation and groceries. The next 20 percent should go to financial priorities such as health insurance, an emergency fund, retirement savings and debt repayment. The last 30 percent should go to entertainment and other miscellaneous items that we don’t need but like or want.

Your budget should be based on reality, not guesses. Take a look at your budget and ask yourself: Do I need to eat out this much? Do I need that new pair of jeans? Are there ways that I can cut back on my grocery bill?

  • Emergency fund. Uncertainty and the unexpected are the best way to describe the economy today. One of the fundamentals of personal finance is to have an adequate emergency fund. A statistic from Debt.com states that half of the American population has less than one month’s income saved for emergencies.

Determine how much you need by how much you spend monthly. Most experts agree that having any amount in an emergency fund is good, but a great emergency fund will cover three to five months’ worth of expenses.

Your fund should be easily accessible, but not so easy that you are tempted to make non-emergency withdrawals. Your fund doesn’t have to be in one location; you can spread it out — a savings account, a savings bond, a cash lockbox or safe at home.

Make adding to your emergency fund a priority. Consider setting up an automatic transfer that will help build the fund. Decide what you consider an emergency and stick to it. Build your fund realistically, $10 each week will give you $500 in a year.

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

Don’t miss deductions and credits

This was originally published on Monday, March 27, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

As the tax deadline quickly approaches, be sure that you are getting all of the deductions and credits for which you are eligible to help lower your tax bill. Many deductions are overlooked because people are unaware of them or don’t want to take the time to see if they qualify.

Here are some tax tips for the 2016 tax year:

  • Charitable contributions. If you attended a charity benefit or event, you may be able to deduct the dollar amount. The benefit or event must have taken place in the tax year. The type of donation and the type of organization can limit your charitable deduction. Donations to assist victims of natural disaster can be included.

If you donated clothing, toys, furniture, or other household items to charity, you can use the fair market value of the items donated. If you contributed to a church, use the Schedule A form. The IRS requires that you keep a written acknowledgment or receipt from the church for any contributions.

  • Estate and gift taxes. You can generally give money or property to another person without any tax consequences, provided the amount does not exceed $14,000 per year. If this amount is exceeded, it must be reported on a gift tax return.
  • IRA and retirement. There is no additional 10-percent tax on early withdrawals up to $10,000 in your lifetime from an IRA if you are buying a first home for yourself, your children or your grandchildren. There is also no additional 10-percent tax if you are paying higher education expenses for yourself, your spouse, your child or your grandchild.

You can contribute up to $5,500 to your IRA (or $5,500 to your spouse’s IRA if married filing jointly). Each taxpayer age 50 or older is eligible to make an additional $1,000 “catch-up contribution.” Learn more about IRA and retirement accounts at the IRS website.

  • Real estate property. Your home purchase can be a wonderful tax advantage. You may be able to benefit from itemizing your deductions. If itemizing, you can deduct payments such as mortgage interest, real estate taxes and most points paid by you or the seller in the year of purchase. The earlier in the year you purchase your home, the more months of mortgage interest you will have by tax time. Mortgage insurance premiums will be allowed as deductible interest on Schedule A, Itemized Deductions.
  • Military. If you are an eligible member who served in a combat zone, the IRS can exclude your income from taxation. Excludable income is your basic pay, re-enlistment bonuses, school loan repayments, imminent danger/hostile fire pay, discharge benefits and awards and other financial incentives. Non-excludable taxes are military pay earned while in combat zone, but they are are subject to Social Security and Medicare taxes.

The exclusion is for the months you served in the combat zone. Military members serving in a combat zone may qualify for a deadline of 180 days after returning for filing taxes. Contact the IRS and inform them of your situation.

The IRS excludes retired military receiving Department of Veterans Affairs education benefits as taxable income. Payments you receive for education, training, or subsistence under any law administered by the VA are tax free. Don’t include these payments as income on your federal tax return.

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

Child-related tax deductions, credits

This was originally published on Monday, March 20, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

No matter what your children’s ages are, raising them can definitely be expensive and stressful. As parents, we focus on the raising the children and often have to weigh the cost of money versus the cost of time.

With life’s everyday hustle, we tend to lose sight of financial shortcuts that may make life a little easier. But sometimes it’s worth taking the time to find ways to make your dollar stretch. Tax time should be no different.

If you meet certain criteria, you could be eligible to claim tax deductions and credits. Some of these deductions and credits could save you money that can ease some financial shortcomings of raising children.

Adjust your withholdings. Did you have a baby recently? If so, don’t forget to get with your employer and adjust your tax withholdings. Adding a new child to the family can give you more tax deductions when filing.

Your employer deducts taxes based on the number of allowances you claim on your W-4. When you have too much withheld from your paycheck, you basically are giving the government a loan on your money. You can be using that money to invest, save, or to reduce debt.

On the other hand, having too little withheld from your paycheck could mean you pay at tax time rather than get a refund.

The goal is to balance out to zero, so you don’t pay extra tax or receive a big tax return. You can calculate your withholding easily by going to the Internal Revenue Service’s tax withholding webpage, or go online and look for a free tax withholding calculator.

You can adjust your tax withholding at any time if you or a spouse get a second job, change jobs, were unemployed, got married or divorced, or had a baby or adopted a child.

Earned Income Tax Credit. Many qualified taxpayers may overlook this tax credit, but it can save them thousands of dollars. The eligibility is limited to low- to moderate-income earners. You must be 25 years and older, but younger than 65. Your dependents must have a valid Social Security number. According to the IRS, for tax year 2016 the maximum credit you can obtain this year is $6,269.

If you are self-employed, you may still be eligible for this credit. Unfortunately, if you receive more than $3,400 of income in 2017 from investments, stocks, rental properties or inheritance, you will be disqualified from the credit.

Higher Education Credits. Did you recently send a child to collage? Parents can claim two credits for higher education:

The American Opportunity Tax Credit: An eligible student can’t have completed four years of schooling, must be enrolled in at least one academic semester, and must maintain at least half-time status in a program leading to a degree. For more on eligibility, visit the IRS website. Only one American Opportunity Credit is available per eligible student each tax year. The maximum annual credit per student is $2,500.

The Lifetime Learning Credit: You must have made tuition and fee payments to a post-secondary school (after high school) during the year. The Lifetime Learning Credit has no limit, as long as your child participates in an eligible degree program.

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