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.

Advertisements

Start your financial journey right

This was originally published on Monday, June 5, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question:  I am a recent college graduate and was lucky enough to be hired just before graduation.  I will be moving out of my parents’ home next month and will be moving into a rented apartment. Although I feel my financial health is good, I want to ensure it stays that way.  Do you have any tips for a new graduate?

Answer:  Congratulations on your college graduation!  When you are moving out of your parents’ home, entering the workforce and becoming responsible for more financial obligations, you may start to question your financial priorities. It is important to start off on the right foot.  The habits you create now can have a huge influence on how you manage your finances later in life.

Keep your frugal student lifestyle: Although your new income is exciting, it is very easy to get caught up on spending. Consider ways to keep your living costs low, such as living with roommates, driving your car a couple of years longer and limiting unnecessary spending.

Take full advantage of employee benefits: As you start your new career, retirement seems far away.  Even though retirement is not in your near future, it is important to start planning.  It will take many years to build a nest egg that will make retirement comfortable.  If your employer offers matching contributions to a tax-advantaged retirement account, take full advantage of it. By not contributing enough to earn the full match, you are basically turning down free money. Besides retirement, also take advantage of other benefits offered like health insurance, short- and/or long-term disability insurance or life insurance at attractive group rates.

Create and stick to a budget: This is a habit that will benefit you for years to come. Even small unplanned purchases can hinder your financial goals.  Be sure to set money aside for savings and other big purchases like a car or even a home.  Download a user-friendly app for your smartphone to help you track your expenses.

Emergency budget:  Plan for the unexpected such as an unforeseen car repair, a medical issue, or home repair.  This account is strictly for rainy days.

Work on your credit score: The best way to improve your credit score is to pay all your bills on time, every time. Another way is keeping your credit spending in check. Do not over extend your credit limit by taking out more loans.  Keep your existing credit cards open. It proves the length of your credit history which also affects your score.  Know what your credit score is by obtaining your three free credit scores annually.

Protect your personal information: Personal identity theft continues to grow especially as we rely more and more on technology for banking, shopping and other online financial transactions.  Once your identity is stolen, it takes a long time to repair and rebuild it.  Cross-shred all documents with your personal information.  Change your passwords often and keep PIN numbers safe.

Pay off higher-interest debt first: Like most recent graduates your student loans make most of your debt. You may also have some credit card debt. Putting as much as you can toward the higher-interest debt first will save you money and allow you to pay it off quicker, giving you more money to put toward your student loans.

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 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

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

Take time to review your personal budget

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

It is November and very soon we will be ringing in 2017. As festivities get started, it’s time to step back and take a look at your personal finances.

Take time to reflect back to the start of the year. Have you meet your personal financial goals or did you fall short? Maybe your life took an unexpected turn and you may need to re-evaluate your goals. Reviewing your personal finances before the year ends also gives you some time to make adjustments that will affect you when tax season rolls around.

Get organized. Life is hectic and sometimes filling paperwork is not a high priority. But getting organized will create a solid picture of your financial behavior and habits. It will also help ease the strain at tax time if you start with files that are well-organized and comprehensive. If you itemize deductions on your tax return, organized statements will help you quickly track down important purchases. Ensure that your files are well-organized and stored in a place that will be easily found come tax time.

Spending and budgetUnderstanding how you spend and save is a valuable step to reviewing your spending habits and patterns. Did you stay on budget this year? Re-examine your spending ratios, the amount of money you spend on a specific category within your budget. Monitoring the amount spent on each category can help you decide if you are spending too much on one category and not enough on another. Every household budget is different depending on the dynamics of your household. These ratios are a general guide that you can use to help you improve your spending and stay on budget:

  • Housing costs are normally the largest portion of your budget and should account for 35 percent of it. This will include rent or mortgage payments, maintenance and repair costs, insurance, and your utilities. Decreasing your power consumption can make a huge difference in this category, along with streamlining your cable services.
  • Transportation costs are the second largest category. Approximately 20 percent of your budget should go to car loan payments, insurance, fuel, repairs and maintenance. If you spend more than 20 percent of your budget, think about finding a lower insurance rate, carpooling or downsizing your vehicle.
  • Living expenses are similar to transportation costs — 20 percent of your budget. Living expenses include food, clothing, medical insurance and medical costs. It also includes entertainment, personal upkeep, hobbies and more. This category may be a bit more deceiving, as many of the components in this category may not cost much, individually. It can add up quickly and be quite costly. This category is the best place to find ways to be thriftier.
  • Debt should consume the second smallest portion of your budget at 15 percent. This category doesn’t include your home mortgage and car loans. It includes student loans, credit card payments, personal loans, store charge cards and other unsecured loans.
  • Savings is the smallest category coming in at 10 percent of your budget. This category is a bit more flexible. If you are saving more than 15 percent of your budget, consider using the money allocated for savings to pay off your debt. Once your debt is paid off you can start rebuilding up your savings.

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

Money can be the cause of a full spectrum of emotions

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

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

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

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

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