Planning spares financial stress of a new child

The experience of bringing new life into the world is incomparable. It also can be overwhelming, as the finances associated with a new baby catch you off guard. With some careful planning, you can make a smooth transition into a new family budget, and that will give you more time to enjoy the child in your life.

Start your financial planning as soon as you know a baby is expected. When the baby arrives, financial planning will be the last thing on your mind, so get your finances in order now. If you have a solid system in place while you’re adjusting to parenthood, you can avoid the stress that comes with forgotten bills or misplaced documents. You also will have plenty of time to make changes to your budget and your financial goals.

Set up your current household budget. Your finances are about to drastically change, but you can anticipate those changes, using your current budget as a starting point. How much do you and your family currently spend every month? How much do you save? Are you spending primarily on needs, or wants? What parts of your spending will you be able to cut back on, to make room for the costs associated with a newborn? With a clear picture of your family’s financial behavior, you can make the adjustments you need.

Plan for long-term child care. Will you or your spouse be taking time off from work to care for the baby? If you previously survived on two incomes, and one of you will be staying home to care for the baby, there are big changes ahead. Adjust your finances and discuss the changes in your lifestyle or financial habits well in advance of the baby’s birth — this can only help in the long run. You also will need to make sure that your health-care coverage remains consistent if one of you leaves work.

If you are a single parent, a solid plan for your child’s care will be all the more helpful to you. Talk to your close family members and friends about your options. If you could use their help, it’s much better to talk to them sooner rather than later, and to be as clear and specific as you can. If you need to plan for day care or caregiver expenses, adjust your budget and do your research in advance, so that you know exactly how to proceed as soon as the baby is born.

Anticipate your costs. If you haven’t had children before, talk to relatives and friends about the costs involved. Ask them about how much they typically spent in a month, and whether they spent more than they had planned for. This should give you some idea about how your spending will change, and allow you to change your budget now so that you can cover new expenses.

There’s still more you can do: Build up your emergency fund, prepare your will, investigate life insurance and ask about college savings accounts. What’s most important is that you simply get a good head start, so that you feel prepared and confident in the first moment you hold your child in your arms.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. You can email him at


Protecting yourself with insurance

In looking after your personal finances, one of the smartest things you can do is protect yourself against massive financial loss.

Think about the largest purchases you will make in your life: your home and your car. If either suffered damage from an earthquake or a collision, you’d need to pay the repair or replacement costs, just to keep your life running. Those costs can stretch into thousands of dollars, emptying your bank accounts and sending you into debt.

Insurance policies can protect you against those high and unexpected costs, in exchange for premiums that you pay on a regular basis. In effect, you trade unpredictability — in the form of typhoons, earthquakes, fires, vandalism, theft, and collisions — for smaller, predictable payments. In some cases, the law mandates that you buy insurance. In other cases, the financial institution that lends you money for your home or car will require the purchase of insurance, before you sign the final papers.

We’ll talk more about home and car insurance in upcoming columns. But for now, here are a few tips to help save you money and stress, before an emergency occurs.

What’s needed

Insurance can pay for itself several times over after a disaster, but you also don’t want to buy more insurance than you need. What you decide to cover, beyond what is mandated by law or your financial institution, depends on your assets and your comfort zone.

There are two major components in home and car insurance:

  • Third-party liability: Your legal responsibility to pay for damages, if your actions or negligence cause injuries or property damage to a bystander; and
  • Replacement costs: The cost of replacing your belongings in the event of a collision, natural disaster, fire, or theft.

Beyond mandatory limits, you can decide how much coverage you need. You should think about for what risks you need to insure yourself, and what you can afford to pay out- of-pocket if disaster strikes. Start with the belongings that you would absolutely need to replace, and work from there.

Keep good records

You should keep copies of your insurance policies, receipts, photographs, and other necessary records somewhere safe and easily accessible.

Try to keep back-up copies with a trusted relative, in a safety deposit box, or on a secure online storage site with hefty security. If anything does happen to your home or car, you’ll save yourself stress by knowing exactly where to go next.

Save for deductibles

If you insured your own belongings, and you need to file a claim, chances are that you’ll need to pay a deductible before your policy pays out the remainder of its coverage. If you have a $300 deductible on your car’s collision insurance policy, and an accident on Marine Corps Drive leaves you with $1,000 worth of damage, you’ll need to pay $300 out of your pocket before your insurance covers the remaining $700.

Out-of-pocket expenses for replacing or repairing your most important belongings are just one reason for having an emergency fund. Double- check the deductibles on all of your insurance policies, and make sure you have enough to cover them, so that you’re totally prepared when life delivers the unexpected.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.

Save up, shop smart for that new car

If you’re smart about financing your car, you can save yourself money and protect yourself from owing too much. Here are a few things you can do, before you start browsing.

Save as much as you can for a down payment.

The more you pay up front for your car, the less you’ll need to borrow. If you borrow a smaller amount, you’ll also pay less in interest fees over time, leaving more room in your budget for the other parts of your life. You may also qualify for a shorter loan term, and own your car sooner than expected.

Check your credit reports.

The interest rate on your car loan will depend on your credit score. The higher your score, the lower the interest rate you’ll qualify for. Borrowing at a lower APR (annual percentage rate) will leave more cash in your pocket over the life of the loan.

Information on your credit reports determine, in large part, your overall credit score. You can download these for free once a year from the three major credit bureaus, at Make sure all of the information is accurate, and if it’s not, correct it. You want your credit score as high as possible before you apply. Make sure that you’re paying your obligations on time, and that you’re paying as much as you can on your lines of credit.

Figure out the total cost of the car you can afford.

By now you should know, from last week’s column, how much room there is in your monthly budget to pay for your car.

What you want to do now is find out what price range is affordable for you. You can start by using a car affordability calculator online, for a first estimate. You can find these calculators at,, and

You will need:

•Your monthly payment

•Your down payment

•An estimated APR (keep in mind, this will depend on your credit history)

•Your term (The number of months you’re comfortable with carrying a loan)

•The value of a car you’re trading in.

Add these figures to your calculator, and you should have a final number: the amount you can afford to pay for a car.

Keep in mind, this is just an estimate. It will give you some broad guidelines for kinds of cars you can browse — whether or not you should choose an economy car, or whether you can upgrade.

Inquire with financial institutions about rates you qualify for.

Now that you have a rough idea of how much you can afford, and you’ve done some research on cars that fit that affordability ceiling, you can start checking on the kinds of rates you’ll qualify for.

It’s a good idea to check with a wide range of financial institutions. You can talk to them about the monthly amount you can pay, and the estimated amount you’d like to borrow. Different institutions will give you different APR rates and terms, and you can compare these rates with each other and with the rates you can get from the car dealer. It never hurts to have as much information as possible, before heading in to buy your car.

Now that you know what you can afford, need, and what kind of financing is available to you, you’re ready for the next step: shopping around.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.

Balance your budget before buying a car

When you buy a car, it may be the first major purchase you make. Your car will not only give you more freedom –it can also help you establish a positive credit history, if you finance your car and pay your bills on time.

The process of buying a car can serve as a dry- run for the next big thing you want in life: a home that you own.

That said, you don’t want to make choices that hurt you, like buying a car that you can’t afford. If you have bad marks on your credit history, from late or skipped car payments, they can affect your later — and possibly more important — financial decisions.

You don’t want to risk defaulting on your loan or the repossession of your car –and you won’t, if you behave responsibly from the beginning of your search.

There are two things you should think about, before you start shopping: how much you can afford to spend, and what you need from your car.

Can you afford it?

The first step is to find out how much room you have in your monthly budget for a car. To begin, it’s best to write down the other costs you have per month and weigh them against your salary.

Think of your housing costs, your credit card payments, your cellphone bill and the amounts you spend for food, household items and clothing. When you do this, remember to keep some room for unexpected expenses, like an appliance replacement or typhoon repairs.

You should also factor in all of the costs that are connected to the car. For instance, you will have yearly registration fees to pay at the DMV. You’ll need to pay for preventative maintenance throughout the year, to keep your car in good running condition and prevent expensive repairs. Car insurance is required by Guam law, and you may want to purchase more than the minimum required for coverage that you’re comfortable with. If you get into a minor car accident and you decide to pay out-of-pocket for repairs, you’ll need funds for that as well. And last, you’ll need to pay fuel costs to run your vehicle.

You can talk to friends and relatives about their auto costs if you’ve never owned a car before, and online calculators can help you estimate supporting costs. Just keep in mind that they often predict the U.S. average, and those costs may vary for Guam.

After all of these factors have been considered, you should have a solid idea of how much you can afford to pay each month for your car. Hold onto that number for now: in next week’s column, we’ll talk about using this number to find a car you can afford, and financing your car in a responsible way.

What do you need?

If you’re on a limited budget, you can help yourself in the long run by outlining your basic needs. How many passengers do you have, and is that number going to change within the next five years, the life of the loan?

You may decide to have more children, or your parents may move in. Do you need to haul large items for your home or business? Does anyone in your family have health issues and need to be seated comfortably?

A list of these needs can help you stick to your budget, so you can make a purchase that you won’t regret.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.