Plan to fund your family vacation

This was originally published on Monday, May 22, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Next week is Memorial Day and that officially kicks off the summer travel season. Planning and budgeting the cost of your vacation can vary wildly depending if you are taking a week-long trip to Saipan or flying to Orlando for the whole month.

Once you know approximately how much you are going to spend, the challenge then becomes funding for all that fun.

Sacrifice today for fun tomorrow. Reduce how often you eat out to once a week or once a month. Pack your lunches to work and school. You will be surprised how much you spend on dining out. Cut back on how often you get your hair cut or instead of going to the movie theater wait till you can rent it and watch it at home.

Get everyone involved. Encouraging the kids to help by babysitting for friends or family, washing cars or cutting lawns for the neighbors is a great way for children to earn some extra money to help toward the family’s vacation goal.

 

Holiday spending. There is one time of year that could potentially harm your vacation budget and that is the upcoming holiday season. Talk to your family and remind them of what you want to do. Create a slimmed down version and agree to stay within a certain amount.

Do the same for birthdays and other occasions. For extended family or friends, be creative and make homemade gifts or offer your talents or services instead of material goods.

Tax refund check. If you received a refund you can use it toward saving for your vacation. You don’t have to save it all for the vacation. You can divide the check up many ways.

Extra income. This is a great way to increase your savings for that dream vacation. Extra income does not have to be a formal second job. It could be selling your talents. If you can bake, sell your baked goods to friends or during the holidays. If you are a good seamstress, offer to alter clothing for your friends. Maybe you’re a skilled mechanic and can help with oil changes.

Let others know. Let your friends and family know what you are planning. You may inform them that this year you would prefer money instead of a gift. There are several websites that you can use to ask friends and family to donate. Your friends and family can make a gift or donation to your cause directly online.

Don’t forget to keep track of who helped. While on your trip you can pick up little thank you gifts or create a thank you collage of all the wonderful places you visited.

Stay motivated. There will be days when you are tired of eating that same sandwich you packed for work three days in a row. But before you go out and regret spending the money you are saving, find ways to motivate yourself to keep on going. Put pictures of your dream vacation on your fridge, on your screen saver or even in your wallet next to your credit cards and money.

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

Teach your children about finances

This was originally published on Monday, February 6, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I have made some financial mistakes that took years to overcome. I am now about a year out of debt and turned my credit score completely around for the better. My parents never talked about money and I think if I had learned about it sooner I may have been able to make more sound decisions.  My question is, when should I start teaching my children about money?

Answer: As a parent, it is important and our duty to teach our children important financial lessons. Your financial history gives you the tools to become a great teacher to your children.

Now that you have learned about managing your finances, it is logical that you want to ensure your children don’t make the same mistakes. Many parents don’t talk to their children about finances.

Parents are the No. 1 influence on their children’s financial behaviors. You have the opportunity to raise your children to be savvy in spending, investing, saving and giving.

According to researchers at the University of Cambridge, kids’ money habits are formed by the age of 7. That means there are several years before the age of 7 to start introducing them to money and finance ideas. Teaching your children about money is a necessity. The method depends on their ages.

Kids at ages 3 to 5 will start to get curious about money. Although they may not truly understand the value of money, they can start to learn the name of the coins and which dollar bill is greater.

  • Wait for it. This generation is surrounded by instant gratification. No longer do they have to search through encyclopedias for answers or wait for a letter in the mail. However, the ability to delay instant gratification is a skill that will keep them from depending on credit or going into debt as an adult.

Teach them that if they want something, they should save for it. If there is a small toy that they want, help them save money in a jar and when they have enough, take their money to the store and have them make the purchase.

  • Three jars. Clear jars are a great way to teach kids about money because they can physically see their money grow or shrink. Label the three jars “savings,” “spending,” and “sharing.”

Every time your child receives money, have them divide the money equally among the jars. The savings jar should hardly be touched and can be used to buy a more expensive toy or just to grow. The spending jar can be taken to the store to buy smaller items that they want. The sharing jar can be used to help a friend or go to a cause in which they are interested.

  • Play time. Kids have great imaginations. Set up a store or a restaurant in the living room. They will learn the basic idea of spending and commerce by using play money and exchanging it for goods. There are many board games from which play money can be used,
  • Coupons. Go through the newspaper or magazines and have them clip coupons with safety scissors. At the store, hand your child a few of the coupons and have them search for the item at the store. This will make them feel like they are helping the family save money.
  • Set the example. Kids are sponges and they learn from your habits and behaviors. If they see you using credit cards or constantly arguing about money with your spouse, they will mimic these ideas and actions. Remember they are watching you and you should set a healthy example for them.

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

Think twice before paying off mortgage

This was originally published on Monday, May 30 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Q: My husband and I purchased our first home 10 years ago. During this time my husband and I have been fortunate enough to advance in our careers and are making more than what we were when we bought our house. When we purchased our home, mortgage rates were much higher that what they are now. My husband and I want to take advantage of our current situation and are considering paying off our mortgage early. Can you help us decide if paying off our mortgage is beneficial?

A: A mortgage is a huge investment that takes a lot of dedication, especially if you purchased your home on a thirty-year plan. Whether you have a shorter fifteen year or a longer thirty-year plan, much can happen between now and paying off your mortgage. Like any large decision, you should weigh the pros and cons and consider where you are in life. Although it may be tempting to live mortgage free, you should consider your other financial goals and your tax situation.

Here are some reasons that you may want to hold off on paying your mortgage early.

  • Other debt: If you have other loans or credit cards that charge a higher interest rate than your mortgage, you should consider paying those off first. Interest on debt other than a mortgage is not tax deductible.
  • Maximize retirement: If you aren’t already maximizing your retirement contributions, use the money you would use to pay off your mortgage to increase your contributions. Do this especially if your employer matches a portion of your contributions. If you are close to retiring or if you started your plan later in life, you should take advantage of getting the most out of your plan. Also, your contributions are tax deferred.
  • Emergency fund: Do you have enough money saved up for a rainy day? If not, create an emergency fund. Most experts suggest to save up at least three months of your current income. You do not want to pay off your mortgage only to put your house up for collateral when an unforeseen event happens.
  • Life insurance: Do you currently have life insurance? If so, is it enough coverage to keep your family from undergoing financial hardships when you pass, especially if you are the primary bread winner.
  • Interest deduction. Paying a mortgage has its benefits when it comes to your income taxes. You receive a tax break based on the amount of interest you pay on your mortgage. If you are in the 25-percent tax bracket and you paid $24,000 in mortgage interest this year, you will be giving up a $6,000 tax break if you pay off your mortgage.
  • Limited liquidity. We all know that selling a home is a long process. If you decide to move or have a medical emergency you may want to have liquid assets, or money, that is easily available to you. You could take the excess money you would use to pay your mortgage and put it in a liquid investment. You can still make money on your investments and still be able to liquidate them much easier than you would a house.
  • Saving habits: If you choose to pay off a mortgage early, what would you do with the money you would have used to pay your monthly mortgage? If you don’t invest or save it, and just spend it, you are not benefiting yourself financially.

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.

Make some financial New Year’s resolutions

This was originally published on Monday,December 22, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

By now your holiday festivities are in full swing. You probably have started thinking about your New Year’s resolutions. Do your New Year’s resolutions include your finances? Before you set any financial goals, you need to understand where you are financially. An end-of-the-year review of your finances will help you set your 2015 financial goals.

Retirement Plan

• What is your risk tolerance? Are you about to retire? If so, your tolerance for risk will be lower than someone who is just starting their career. Although a higher risk usually has a higher rate of return, it also can have the higher possibility of the greatest loss. You also can determine your risk by how comfortable you feel. If the high risk is keeping you up at night, adjust it to where you feel comfortable.

• Is your strategy in line with your goals? When you started your retirement goals you may have been just out of college and starting your first job. Have you adjusted your plan to fit your current life situation?

• Did you start a new job? If so, you may want to check to see if your employer has a retirement plan. Can your current plan roll into the plan they are offering? Will your current employer contribute to the plan you currently have? Do they match your contributions? If so, how much? If your employer does match, you may be able to double your money by simply investing in your plan.

• How often do you track your progress? Because your money is being invested into other endeavors or stock, you cannot predict the future with precision. Check the progress of your plan at least every other month. If your plan is not reaching its goals, you may need to readjust your investments or increase your risk. With today’s technology, you no longer need to visit your broker. Most plans can be tracked online.

Estate Plan

Do you have an estate plan? Do your loved ones know what your final wishes are or how you would like your estate divided? If you do not have one, you may want to make it a part of your New Year’s resolution. Having an estate plan will alleviate some of the stress your loved ones will endure when you die. Ensure your will, trust and advance health care directive are up to date. If there have been changes in your family dynamics, be sure to update your beneficiaries. Does your family know where you keep your estate plans? Have you discussed estate planning with your parents?

Automatic Deductions

Recurring bills such as your mortgage, savings, emergency fund and car note can be paid by automatic deductions. By automatically deducting from your paycheck or your savings/checking account, you don’t have to worry about your payments being late or getting behind. Late or missed payments could affect your credit score.

Savings

Do you have enough at the end of the month to save? You may not think so, but if you keep track of your spending you would realize that there may be some way to save. How much do you spend on eating out? On cigarettes or alcohol? Five dollars here and there do add up. Do you have an emergency fund? How much do you contribute? If you do not have one you may want to make that a resolution for next 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.

Planning helps you get the most savings out of vacation

This was originally published on Monday, September 9, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Family vacations are a great way to relax and create lasting memories.

They can carry a hefty price tag, but that dream vacation is not out of reach, even if you are on a tight budget. Once you have saved money, you want to make sure you get the most bang for your buck.

• Sooner the better. Book airlines, hotels, car rentals and amusement parks in advance, play around online with different dates to see how much you can save.

• Off-peak traveling. Most of us feel that summer is the time to travel, but you can pay much more during these busy travel months. Think about the week of spring break, the four days of Thanksgiving, or a few weeks before or after summer break. Talk to your children’s school. Schools are willing to work with you by giving your children’s schoolwork in advance or staying connected via emails. Schoolwork is a great way to keep kids busy on an airplane. The day of the week that you travel or stay also can affect your budget. Be flexible.

• Use your privileges. Use the discounts offered to you through your credit cards, airline or hotel memberships. Many vacation services and destinations partner up and offer discounts. If you belong to an organization such as American Association of Retired Persons (AARP), make sure you contact them for vacation offers and discounts.

If you are a military member or retiree, ask for discounts while you are traveling. You may be surprised how many locations offer military discounts to thank you for your service. Check with your recreation services on discounted tickets to amusement parks or museums. Many services offer lodging worldwide (http://www.dodlodging.net), and some even offer great destinations such as Kauai or Naples. If you are really flexible and would like an adventure, try flying space available (MAC Flights). You earn these privileges, so take advantage of them.

• Lodging. Hotels are expensive, but there are some other options. The most inexpensive option is staying with family or friends. You can satisfy the obligatory visit and save on lodging.

If you are staying in a location for a while, find an extended trip hotel that offers suites you can rent by the week or month. They are usually cheaper than hotels and offer all the amenities of a home, including a fully functioning kitchen.

You also could look for a hostel, a budget-oriented dorm room usually with shared amenities.

You also may try camping in our nation’s parks like the Grand Canyon or renting a home or condominium. Also, look for kid-friendly hotels that offer free lodging for children under a certain age.

• Eating. Food is one of the biggest expenses while traveling. If you booked lodging with a microwave and refrigerator or kitchen, prepare your meals in your room. Going to the grocery store can be just as exciting as trying products that you can’t find on island. I am always amazed at the availability and choices of fresh fruit and vegetables when I shop in the US. Some grocery stores even offer a deli with full meal choices. Look for a farmers’ market and get fresh produce.

• Remember the small stuff. Tips, fees and taxes all add up. Bring your children’s entertainment with you.

Don’t use the small stores in hotels or amusement destinations as they cost much more.

Travel light as baggage fees can be very costly.

You will gain clothes, toys and much more during your travels. It can be much less costly to mail them home.

Look for areas with free WiFi.

Also remember that if you take your cellphone, you may incur some hefty roaming charges. If you want to take your phone, have your data services suspended before you leave.

You also may want to consider purchasing a prepaid phone that you can purchase at any large chain retail store. Using the phone in a hotel can create a much larger bill.

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/
 

Teaching kids the value of money is a life lesson

This was originally published on Monday, June 24, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I have a young niece who goes through her allowance as soon as she gets it. I would like to start teaching my niece about money. Do you have any ideas?

Answer: I commend you for recognizing the pattern early. Learning the value of money should begin at an early age. As we grow up, having money is a necessity and being able to properly handle the money we make is a great skill to have. Being financially fit takes practice and it takes correcting if you see a child is irresponsible with money. Adults should layout guidelines about spending, saving and donating to charity.

Children must understand that money is something that has to be earned and not just given out for free through an ATM machine. Having an allowance can be an effective tool for teaching children that lesson. If they want to get paid more, sit down and negotiate, as they would with an employer. Help them understand that not all their allowance has to be spent at one time.

For older kids, getting a prepaid debit card can be beneficial. The child can then spend it anywhere a debit card is accepted. Some debit cards keep record of your teen’s spending so that you can track purchases or know when you need to reload the card. It is a good opportunity to teach teens budgeting skills in a real life scenario.

Help your niece set up a budget. If she has been eyeing a particular pricey item, explain to her how she would be able to get that if she waited an “x” number of allowances. As she gets older, her budget can get a little more complex, such as setting aside 20 percent for savings. You can even make a pretend tax of 10 percent that she must pay you (you can, in return, pay them back every April). For older kids in middle or high school, include their weekly expenses such as, for example, lunch and gas money in their allowance. This lesson can even be done using play money.

Expect children to make mistakes. When you take your niece out shopping next time and she once again spends her allowance on something frivolous, ask her a week later if she is still pleased with her purchase, or if the item is misplaced, or broken, or if she wishes she had kept that money for something else. If she agrees with you that her money could have been better spent, ask her how she will change it next time. Engage her in conversation; although she may make the same mistakes over and over again, she will in time get the hang of it.

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.

More options for saving for your retirement

This was originally published on Monday, April 15, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Gone are the days of retirement that most of our parents enjoyed. We can no longer expect our employer pension and social security benefits to get us through the golden years. Planning for retirement is necessary. Last week I discussed two retirement plans, IRAs and 401(k). Here are more retirement plans:

403(b) — Is a retirement fund very similar to a 401(k) but is available only to certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. To set up an account you must go through your employer.

Profit-Sharing Plan — Is a plan set up by an employer to give employees a sense of ownership in the company. The company decides what percentage of profit will be shared. Employees do not contribute to the plan only the employer. There may be penalties for early withdrawals.

Money Purchase Plan — Is a pension plan in which the employer and the employee make contributions. The contributions are based on a percentage of annual earnings. The employee’s benefits are based on the amount of contributions to their account, whether it is a gain or loss, at the time of retirement. In other words the employee is responsible for the amount available at retirement.

Employee Stock Ownership Plan (ESOP) — Is a plan that gives employees the opportunity to buy stock of their employing company. There are certain tax benefits that both the employer and employee share. This plan encourages employees to do what is best for the company’s shareholders since the employees themselves are shareholders.

Take advantage

If your employer offers a retirement plan you really should consider participating. Especially if the plan requires that your employer matches your contributions. Many retirement funds provide great tax incentives that may reduce your end of the year tax payments. The Internal Revenue Service website, www.irs.gov, offers more information on these plans. Know what your contribution limit is. If you can max out your contributions do so. It definitely will ensure a comfy nest egg when you retire.

Consider participating in more than one retirement plan. An investment mix that has a good balance between asset allocation and diversification is wise. Asset allocation spreads out your investment risk through various types of investments (cash, stocks, bonds, etc.). Asset allocation is a strategy that tries to balance your risk versus your reward. Diversification mixes a wide variety of investments to reduce risk within your portfolio which allows for a more stable performance of your money under different economic conditions.

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.