Create a system for your money

Whether you’re a new graduate starting out or someone starting over in your personal finances, a well-organized financial system is a must.

You don’t need a complicated system; in fact, the simpler it is, the better.

In a recent Rotary Club of Tumon Bay meeting, a feng shui expert mentioned that eliminating clutter and simplifying life is part of Feng Shui. Eliminating clutter assists in balancing your life.

When you create and stick to tools that help you manage your finances, those tools can protect you from financial pitfalls and give you a greater sense of control. Saving money, keeping on top of your bills, and planning for the future are all great reasons to put together a good personal finance system in the months ahead.

Try to keep your financial system in a permanent, dedicated place. Here are some of the basic files to keep in your system:

Your goals. A glance at your goals can give you fresh motivation when you’re tempted to spend instead of save, so keep that file nearby. You can split your goals between short-term and long-term goals, and you can list the reasons why you chose each goal to help you prioritize.

It’s also helpful to translate your highest priority goals into specific bi-weekly or monthly amounts that you can divert toward your savings. You can keep that list here, and refer to it when you put together your budget.

Your receipts. When you keep your receipts in a file, you can easily calculate your real-time balance on any specific account. Some transactions can take a few days to settle, so that when you view your account online, you may not see all of the transactions you recently made. When you don’t know your balance, it’s easier to overspend and end up with overdraft charges on your next statement. If you don’t view your accounts online, it’s even more important to hang onto your receipts and track your balance throughout the month.

When your monthly statement comes in, compare your receipts to the statement, and cross off the amounts that match. This can help you look out for any potential mistakes in your statement.

Your bill schedule. A simple reference list of the due dates for all of your obligations can help you stay on top of your bills. You can use this list to update your general calendar at the beginning of every month or year.

Your budget. Your budget is the control center for your finances. It combines your income with your goals, your bills and your spending categories, and determines whether you spend less or more than you earn, and by how much. When you can see where your money is going, you can make decisions to divert spending from one category to another, and target areas where you can look for more savings.

Account files. Keep a separate file for each account, and file statements and communications as soon as you get them. If you need to reference your files for taxes or your budget, you can easily retrieve them.

You can add more files for financial tips, future goals, taxes, pay stubs, and any other material that can help you manage your finances.

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. If there is a topic you’d like Michael to cover,  please email him at  moneymattersguam@yahoo.com

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Protect your teen from identity theft

As your teenage son or daughter becomes more involved in the financial world, he or she also may become more susceptible to identity theft.

Here are a few basic tips for teens that can help them safeguard their information as they become more financially independent.

Protect your sensitive information. You use your name, Social Security number, date of birth and other sensitive information to apply for, and often access, financial accounts. A thief who gets a hold of this information can use it to open a new credit card in your name, and charge purchases that go unpaid.

Any entity that requests this information from you should have a very good reason for doing so. Exercise caution with any requests, especially with any requests that arrive by email.

It’s not likely that a financial institution would ask you to send such information via email, so always call the institution or log in to your online account to verify the request.

Safeguard your account numbers, checks and credit cards. Keep your checks in a safe place, and if you pay bills or shop online, check to be sure that the business is reputable and that the website is secure before entering your information. As soon as you notice your credit cards are lost or stolen, report them to the credit card issuer, so that any subsequent charges won’t be billed to you.

Don’t share passwords. You are the only person who should know the passwords to your financial accounts, as well as the email account where you receive financial statements and communications. (An exception to this rule can be a letter of instruction that you prepare for your family in case anything happens to you.)

It’s generally a good practice not to share your passwords, to store them in a safe place, and to use different passwords for each account.

Review credit reports every year for errors and fraud. Errors can happen, and left alone, they can negatively impact your credit rating for some time. You can avoid this by pulling up your credit reports every year, once you have a loan or credit card in  your name. You can go to www.  annualcreditreport.com to request a free credit report from each of the three major credit bureaus. You are entitled to receive these free reports once every twelve months.

Your credit reports also can alert you to fraudulent accounts opened in your name. You can lessen the potential damage to your credit rating if you catch such activity early.

Review your bills and statements as you receive them. If you have questions about recurring fees, or if you find a mistake or a charge that you didn’t incur, it’s best to deal with them as early as possible. Try to look over your statements as soon as you get them, call your financial institution with any questions, and keep your files organized so that you can retrieve them easily when you need them.

Safeguard your records. Keep your important records in a place where only you can access them. When you make electronic backups, password protect your files in order to secure them. Use a safety deposit box for your most sensitive records, and shred any records that you plan to dispose.

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  moneymattersguam@yahoo.com

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.