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

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Financial tips for newlyweds

This was originally published on Monday, November 2, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

Q: My husband and I just got married three months ago. We are still trying to consolidate our two households into one. What financial tips do you have for newlyweds?

Congratulations on your new life together! There are a lot of adjustments that are going to take place and one of them is your finances. Finances are never an easy topic to discuss, because it is a very personal topic. While it may not be easy, it is a conversation that needs to be discussed. It is imperative that you and your husband are on the same page with spending and saving money. Be open and honest with each other about your financial situation. The goal is to come to an agreement about how your household finances will be managed.

Gather your important financial documents such as insurance, retirement plans, wills, bank and credit card statements, loans, monthly bills, and any other documents that affect your financial health. Get a copy of your credit scores as well. Knowing what your score is will help you plan your household’s financial goals.

Talk. This is your opportunity to learn about your spouse’s past and present money habits. Discuss how your family talked about money as you were growing up. Were they open about the family finances or was it secretive? Were they big spenders or frugal? Did they fight about money? Most of us learn how we deal with finances from our parents and each one of us deals with money differently.

Also, discuss your current money habits. How much, if any, do you save? Do you live paycheck to paycheck? What do you consider a luxury item?

Goals. Much of what you and your spouse want to achieve will probably revolve around money. Whether it is going on vacation, purchasing a car, going back to school, saving to purchase a house or retiring. Set up financial goals you want to achieve within a year, five years and 10 years.

After deciding what goals you want to achieve, agree on how much to invest. You will need to work together to figure out how much you can afford without stretching your finances too thin. For short-term goals, think about using bonds, certificate deposits (CDs) or a money market fund. Think about using a mix of stock and bonds that provide a higher rate of return based on your risk management. The younger you are, the more likely you can tolerate more risk since it gives you an opportunity to gain more money in case your portfolio loses money. Don’t put all of your money in retirement accounts because there are penalties for early withdrawal.

You may need to consult a financial adviser to help you maximize your investments and savings. It can be difficult to determine how much money will be allocated to achieve your goals. If both of you have investments, ask your adviser to look for areas where there is overlap. You want to be certain that your money is working efficiently. Review your goals yearly to monitor how your goals are being achieved.

Another financial goal is to start an emergency fund. Most experts feel that three months of income is an optimal amount of money to put aside. To help you achieve this goal, use an automatic deduction into your savings account. That way, you don’t have to remember to put money aside or be tempted to spend it.

Joint or individual. Will you have a joint account or separate accounts or maybe a combination of both? This is a personal choice and what works for one couple does not necessarily work for another. Many couples use a joint account to pay household expenses that they share and use individual accounts for their personal use. Individual accounts are best when there are different spending habits. If using a joint account, decide how much each of you will contribute. There is no right or wrong amount but what is sensible in your marriage. A shared account requires spouses to communicate and not keep secrets from each other.

When filing taxes, you may want to visit an accountant and talk about filing joint or individual. There are certain advantages and disadvantages for both. Having a professional evaluate your situation will certainly clear things up.

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.

Challenge yourself to make savings

This was originally published on Monday,January 26, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

When people think of savings, budgets or debt, they automatically get a heavy feeling of despair. They start thinking of drastic ways their everyday life is going to change. Yes, making changes of any kind takes some effort. Change is always uncomfortable but it does not have to be. I have gone online and found a few New Year’s challenges that you can try.

• 52-week challenge. This is probably one of the most popular and easiest challenges. There are 52 weeks in a year. At the beginning of each week, deposit the number of dollars that corresponds to that week. For week one, deposit $1; for week two, deposit $2; and so on. By week 52, you would save $1,378! You can deposit the money into a jar or savings account. If you deposit it into a savings account you will earn interest.

I have also read that you can start backwards by depositing $52 the first week and $1 the last week. This is beneficial since most of us need that extra money for the holidays. The hardest part is not spending it.

• Track your expenses. For 30 days, track every expense you make, even that $5 purchase for gum and a bottle of water. By week two, you will get a better understanding of your spending habits. Because you can literally see where your money is going, you may start to change before the 30 days are over.

•  Cash Only. This is another 30-day challenge. For 30 days, leave your credit/debit cards at home and only use cash. Having your cards on you makes it easy to stray off your budget and to lose track of how much you spend. By having a limited amount of money, you will make wiser spending choices. After a while, you will get tired of having to run to the bank to make withdrawals.

•  The morning minute. Take a minute or two before you get started in the morning to view your accounts. Knowing what your balance is at the beginning of the day gives you an idea of how well you are sticking to your budget. Review your spending habits from the past day. Watching your balance get smaller is never fun, but you will think twice before making unnecessary purchases.

• Necessity challenge. For a month, pay only for your necessities (food, rent/mortgage, utilities, insurance, etc.). Do not make any other purchases. Do not eat out, buy clothes or go to a movie. This is difficult, but not having these luxury purchases will give you an appreciation for your hard-earned money.

• Spare change challenge. At the end of the day, throw your spare change into a jar and watch it grow. At the end of the year, take your spare change to the bank. You will be surprised just how much you saved. If you really want a challenge, add all your spare $1 bills in as well. Try not to dip into the jar.

• The de-clutter challenge. Every month, go through your clothes, your children’s clothing and toys, and other parts of the household that you can rid of clutter. Once you have enough items, have a yard sale or go to the flea market. You will not get what you paid for them, but you will earn a little extra cash. Or you can donate them to a thrift store. Ask the thrift store for a tax deductible slip that you can use toward your income taxes in April.

There are many more challenges out there. Get creative and find other ways to save. If you really want to add some fun, get your family, co-workers and even neighbors involved. Create an office pool of who can save the most or have a neighborhood yard sale. Challenges are always much more fun when done with others.

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.

To improve your finances in 2015, start with a budget

This was originally published on Monday, January 5, 2015, in the Pacific Daily News. Click here to subscribe to the PDN.

Question: My New Year’s resolution is to improve my finances this year, but I just don’t know where to start. I feel overwhelmed and frustrated. Do you have any ideas that can help?

Answer: There is a lot to consider when you are planning your personal finances. The new year is always a great time to start making changes. Take advantage of the New Year’s tradition of making resolutions. Many make resolutions to lose weight, stop smoking or to go back to school. Resolutions aren’t only for personal physical changes, but also can be made for your personal finances. After all, resolutions are goals.

Before you make any goals, you need to know where you stand. Research your past spending trends and create a budget. A budget is a spending plan that will help you meet your goals. Start by calculating your monthly income. Your income should include your wages, tips, child support, alimony and any other money that you expect to receive.

Next, determine your monthly expenses. Expenses are usually broken down into fixed or variable expenses.

Fixed expenses are those that do not change and remain the same. Such as rent/mortgage, insurance (car, home, health), loans (student, car, personal) and some utilities. Some of your fixed expenses may be paid bimonthly, quarterly, biannual or even annually. These include income taxes, car registration or real estate taxes. Although you do not pay these monthly, you still need to include them into your monthly budget. Take the yearly total of the expense and divide it by 12. This will be the average monthly expense.

Your variable expenses occur regularly but fluctuate month to month. Variable expenses include utilities, food, gas, clothing, entertainment and hobbies. Because they vary, estimate their yearly total from last year and divide it by 12. The more expenses you list, the more accurate your budget will be.

Take the total of your expenses and subtract it from your income. The total will either be a surplus or deficit. Does this number accurately portray what you are left with at the end of the month? If it doesn’t, you will need to go back and review your budget until it truly reflects your monthly spending. If there is some money left over, you can use it to pay down debt, contribute it to a retirement or emergency fund, or just simply save it. If your budget breaks even or is negative, review where you can cut back on an expense.

It is important to be honest when creating your budget; it is the only way you know where improvement is needed.

People are shocked to see that it is the little expenses that add up. Many people have no idea how much they spend on eating out for lunch every day until they multiply the cost of a lunch by five (work days), then multiply that by four (weeks in a month). They then quickly see that it adds up. The same goes for your daily coffee, soda, bottled water or cigarettes.

The spending plan you created can also be used to predict different outcomes.

Try recalculating your budget by cutting back in areas that really are not needed or increase your income from the raise you are expecting.

Use these projected budgets to help you decide what areas you want to improve and what financial goals you want to achieve.

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.

Planning frees you from worry, what-ifs

This was originally published on Monday, April 22, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Suze Orman once said “a big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.” That is undoubtedly the mindset you want when it comes to planning for your retirement. Unfortunately for many people, retirement planning causes anxiety, especially when faced with numerous financial uncertainties.

Whether retirement is just around the corner or thirty years away, there are several steps to planning for a successful retirement.

Have a goal — I discussed this a few weeks ago. But I feel it is worth repeating. It is essential to know how much you need to live comfortably during your golden years. Having a set goal will ultimately line up how much you need to put away yearly till that day of retirement. It is uncertain how long you will live after you retire but consider having enough put away for twenty to twenty-five years after retirement.

The sooner, the better — Start a plan as soon as you can. It is never too late. Even if you have ten years or less till retirement, you can start saving. You may have to work a little harder to catch up, but having something put aside is better than not having anything at all.

Keep track of your progress — Once you have your target goal and your money is working for you, watch your progress. Review your investment portfolio yearly. If your investments perform better than expected, you may want to consider a less aggressive strategy and lower the risk level needed to make your goal. And vice versa, if your investments are not performing to meet your goals, you may need to invest in a higher level of risk. As time goes along and your lifestyle changes (marriage, family, homeownership, etc.), you may need to readjust your goals or contributions.

Stay invested — Many retirement plans are based on the stock market. It is very difficult to watch the market rise and fall. Don’t give into the temptation of moving your investments around. Ride it out for a while. Stocks generally are considered a long-term investment. The ups and downs usually average out and provide a steady return on investment when you invest long term.

Work with a professional — Planning for the future is very important and can be quite confusing. You may want to hire someone who can help you grow your nest egg. Look for someone who has your best interest in mind. They should have access to a wide variety of investment options from different companies. They should not represent any specific investment company. Their fee should be based on how your portfolio performs. If they ask for their fee up front, there is no incentive to make your money grow.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and with 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.

Improving your financial status in 2013

This article was originally published on Monday, 07 January 2013 as the Money Matters article in the Guam Pacific Daily News (PDN).  Click here to subscribe to the PDN.

Question: This year I plan on improving my financial status. Do you have any tips on how to achieve this goal?

Answer: First, happy New Year and thank you for reading Money Matters.

This is a great question, especially for this time of year.

With the year just starting off, many of us make resolutions to exercise, to lose weight or to quit smoking. Making a new year’s financial resolution is just as important.

In these uncertain financial times with fiscal cliffs all around us, we must decide what we can control versus what we cannot.

You can control how much you save and how you allocate where your money goes. You can’t control what the markets and economy may do in 2013. Being prepared for those unexpected times is imperative.

Get a financial plan in place and decide how you want your money to work for you. What are your short- and long-term goals? How much do you need to get there?

How will you go about achieving those goals? If you don’t know where you’re headed with a sound strategy in place, it’s less likely you will arrive at your financial destination.

Here are three tips that can help you achieve your financial goals:

Set achievable goals. Set goals you know are attainable. Making a goal that is unreasonable will only discourage you. Think about what you really want to achieve, what steps you will need to achieve these goals, and what they will cost you. Write these goals down and hold yourself accountable.

Plan your estate. Many of us procrastinate on this because we do not like to think of the worst.

Making sure your loved ones who are dependent on you are well taken care of should be a priority.

Think about an advanced health care directive, a will and/or a living trust, a durable power of attorney, and an in loco parentis. Depending on your situation, you may not need all these. You can purchase software or get templates online.

I suggest you have an estate planning attorney look over your documents, especially if your situation is complex.

Examine your credit. This is the best time to check your credit.

For the past month or so you have been using your credit card(s) to spread the holiday spirit.

Take a good look at your credit card statement for any false purchases and let your bank know immediately if you see anything suspicious.

The start of the year also is one of the best times to check your credit score.

You can receive a free credit report at www.annualcreditreport.com.

This website allows you to request a free credit report once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.

You may get all three reports at once or spread them out over a four-month period.

I recommend getting a report from each of the three companies mentioned above in four-month increments. That way, you’ll be monitoring your credit throughout the year and not just once a year.

Carefully look at your report for any odd postings and try to get them fixed as soon as possible.

You also can use sites such as quizzle.com and creditkarma.com to see your score for free and learn more ways to improve it.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years 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. To read past columns visit the Money Matters blog at https://moneymattersguam.wordpress.com.

As 2012 ends, consider your financial goals

Merry Christmas Eve! Tomorrow, we’ll see the wishes of our children, family, and friends fulfilled as gifts are opened on Christmas Day. In the next few weeks, you can start thinking of your own wish list for the upcoming year, as well as for your long-term future.

We’re nearing the end of this series of tips for your annual financial review, and now it’s time to take what you’ve learned and use it to create goals for the future.

Tools for Creating Goals

Throughout your financial review, you’ve had the opportunity to set upcoming goals related to debt and retirement, which you can now include on a list of your overall financial goals for 2013.

You also have some tools to guide you in creating your 2013 goals. In last week’s column, we discussed reviewing last year’s savings goals. You considered the strategies that worked and the goals you did and did not meet, and you can use this as a leaping off point for a new set of 2013 goals.

Last week included a review of your net worth, which you can now use to create or change short-term and long-term goals. How do you want the figures for your assets and liabilities to change within the next year, and the next twenty years? What can you see for yourself and your family?

Take notes on the ideas you have from reviewing these lists, and if you share finances with a spouse or a partner, take the time to discuss each goal. As you make each goal more specific, you’ll also begin thinking about how to manage and reach goals with your current and future resources. Your discussions and notes will also help you prioritize goals for 2013 and the years ahead.

New Goals and Ideas

A year is a long period of time, and the new experiences you’ve had and the people you’ve met in 2012 can influence your thinking about new goals, or even change your financial direction. You may also have experienced changes in your family or circumstances that result in new goals for you.

The end of the year is a good time to think back on those experiences and changes, and to write down new goals or ideas that you have been considering. You can discuss these ideas with your family and friends, so that you have multiple perspectives available to you.

Revise or Draft a New Timeline

In previous columns, we’ve talked about create a timeline that helps you map out your specific financial goals, which are marked at specific dates of completion. This can help you decide whether or not your goals are realistic, given the time and the resources you have to complete them. A realistic view will give you more motivation to prioritize, and focus on the goals you truly need and want to meet.

This timeline, or multiple timelines, should be a part of your annual financial review. You can choose any span of time that is helpful to you, from a short-term timeline of five years to a 30- or 40-year timeline.

Choose Goals for 2013

Now that you have a complete list of goals and a timeline to help you prioritize, mark out the goals that you intend to pursue in the upcoming year.

We’ll use this goal list next week, in revising your monthly budget for 2013.

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