The 5 Basic Life And Money Lessons

Many times when it comes to money, there are a few sayings that stick with you throughout your lifetime.  Famous clichés such as a penny saved is a penny earned and similar saying that Grandma taught you certainly weren’t far off the mark. As more and more people struggle with debt, there are some more current financial proverbs you should keep in mind.

Here is a list of 5 money lessons to remember about your personal finances.

1. Automobiles

Buy a used automobile and plan to drive it for ten years to save yourself thousands of dollars, compared to what you would spend buying new. If you must buy new, make sure you are prepared to put down at least 20% down on the vehicle you want and only agree to a monthly payment that is less than 10% of your income. Never finance your new car for longer than four years in order to keep your spending under control.

2. Student Loans

Students may not always know what they will be after graduation but many of them will at least have an idea of what field they would like to enter once out of school. A good rule of thumb for student loan borrowing is to borrow only around the amount you can expect to earn during your first year of work. Planning for college should include planning to prevent debt. Lenders will be happy to let you borrow a lot of money but you need to see the reality of how much and how long it will take to pay back a student loan.

3. Home Mortgages

If you plan to buy a home, you need to figure out if you can afford to purchase the home at a 30 year fixed interest rate. If you can not, you simply can not afford the house. Especially now, in light of the multitude of foreclosures around the country, it is much more financial sound to use the 30 year fixed term than to deal with alternative types of mortgages such as interest-only loans.

4. Emergency Funds

Your ideal number for an emergency fund should equal about three month’s worth of your total living expenses. This emergency fund money can be used in the event of a lost job or other crisis. Until you are able to sock away that amount of cash to have on hand, you should keep room on a credit card or other line of credit in the event something unexpected should happen until you are able to save up the amount of money equal to your three month’s income.

5. Positioning Your Money

Everyone always wants to know how to divide their financial priorities. It seems the order of importance is retirement funds, paying off credit cards, followed by emergency savings fund. Planning for your future should be your top financial priority and the earlier you begin saving the better off you will be. Repaying your credit card debt should be the second most important priority, especially when interest rates are so high and your debt is affecting the rest of your finances. Lastly, your emergency fund should continue to grow in the event something happens without warning, such as health problems, job loss, or even home repairs.

New Job? Start Saving Money Now!

Congratulations – you have a job! Your first full or part-time job can be exciting, overwhelming and scary…all at the same time. The biggest benefit is of course having a real paycheck! Before you run out and spend that entire first paycheck, there are a few wise financial “first moves” you should consider.

1) Decide to save. Saving is just making the decision that instead of spending all the money you have, you put some aside for later use. You can save some money and keep it at home, or put it in a savings account at a local bank or credit union. There’s no denying that saving is a discipline. If you remember how saving will benefit you, it will be easier to make it a financial priority. Start small, with just even $10 a paycheck or a little bit of money from a bonus or gift. If you get paid twice a month, then by saving $10 from each paycheck you’ll have saved $240 by the end of the year. If you keep to that for 5 years you’ll have $1,200!

2) Make time work for you. Being young and just starting out you have one huge factor working in your favor when it comes to money: time. If you make the decision to save now for your future you’ll have to save a lot less of your income because you can make that income work for you and earn money that will grow at a much greater rate than if you began saving even just 10 or 15 years from now.

For example, if you began saving $100 a month at age 25 by the time you turn 65 you’ll have earned over $630,000. But if you waited until you were 45 to begin saving $100 monthly you’ll only have accumulated a little less than $76,000. That’s a $554,000 difference!

The younger you begin saving and investing, the more you’ll benefit from the magic of “compounding.” What’s compounding? Simply put, compounding is when your money begins to earn money on its own.

Let’s say you invest $100 in an account that earns you 5% interest. Interest is the money that the bank is going to pay you because you invested your money with them. So at the end of the first year you’ll have your $100 PLUS your $5 interest. Year 2 you’ll start off with $105. Now you’re earning interest on your original $100 and the $5 interest you earned. When you begin to see interest compound on a larger scale the money can really add up.

Once you start building up some savings, look around and compare what type of interest rates you can get for investing your money. You might want to consider starting out with investments such as CDs, bonds, and money market accounts that offer a fixed-rate of interest.

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3) Create some goals. Write down 1-2 money-related goals for the next 5 years. Having a goal gives you something tangible to work toward and can help you stay disciplined when it’s tempting to spend instead of save. Maybe your goal is to take a fun vacation with friends, or buy a car, pay off your student loans, or buy a home. When you have a concrete goal, or set of goals, in mind it’s easier to create a plan for reaching that goal and be motivated to stick to it.

You’ll increase your chance of actually reaching your goal if you break it down into smaller, more manageable steps. For example, if your goal is to buy a car, decide when you’d like to be able to buy a car. Write that date down (i.e. month and year). What kind of car would you like to buy? Write that down and begin doing some research online or through magazines like “Consumer Reports” at your local library, or even talking to your local dealerships to see what kind of monthly car payment you’ll be looking at. Shop around for car insurance (which you’ll be required to have before you can drive that new car off the lot). Determine where you can get the best deal. As you cross off each step and save while you work toward your goal, reward yourself. Sometimes just seeing the progress you’re making can feel like a reward in itself.

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4) Sign up for your employer’s 401(k) savings plan. Sure, something called a 401(k) plan doesn’t sound very sexy, but did you know it’s one of the fastest and easiest ways to save for your retirement?

When you sign up for your company’s 401(k) plan you’re allowing them to take a certain amount of money out of your paycheck and invest it in a retirement plan account (such as a mutual fund) to earn interest for your retirement. Often companies will match a portion of your contribution – meaning that, for example, they will put $.50 in your account for every $1 you contribute. Not all employers offer matching funds, but if your company does then when you sign up for your account, you’re actually getting free money toward your own retirement!

By opening a 401(k) account your savings are automatically deducted from your paycheck, which makes saving for retirement more convenient for you…if you don’t see it, you can’t spend it! Not to mention, the amount that you contribute is taken out of your paycheck before taxes. That means that your overall taxable income is reduced, meaning that you get to take home more of your paycheck.

5) Direct deposit to savings. Sure, we all say that we want to save money. But when it comes right down to it, it’s hard to make the choice to save instead of spend. That’s where having direct deposit comes in handy. You can have your bank withdraw a pre-set amount of money each paycheck and deposit it directly into an account of your choice. So if it’s hard to make that decision on your own, by opening a savings account or IRA (individual retirement account), and having even a very small amount deposited from your paycheck on a regular basis you’re beginning to create a solid savings fund that you can use to invest later.

6) Budget, Budget, Budget. Ugh. The dreaded “b” word. Unfortunately the idea of budgeting has gotten a bad rap. Instead of picturing a budget like a pair of handcuffs it can help to realize that creating and sticking to a budget can actually give you financial freedom. How? Well, budgets give you an accurate “snapshot” of how you’re doing financially. When you’re able to see how much income you actually have coming in and what your financial obligations, or debts are, you can figure out where you can create savings for your future goals.

7) Get health insurance. Having adequate health insurance can be one of the wisest financial moves you make. Why? Well if you know anyone who’s taken a trip to the emergency room lately they can tell you that health care costs can add up. And if you don’t have any insurance, those fees are going to come straight out of your bank account. A major accident or illness could even push you into bankruptcy. If your job offers health insurance, sign up because group coverage is almost always cheaper than buying an individual plan. If you don’t have employer-sponsored health insurance, you can still buy individual health insurance.

Using Math To Help You Save Money

Whether you were good at math in school or not, you can make math work for you…and not necessarily the way you think when it comes to money.  The simple basics of addition, subtraction, multiplication and division can help change your outlook and habits when it comes to managing money.

Add.  Instead of trying to completely overhaul your financial lifestyle, just add one positive discipline at a time.  For example, consider not doing anything different other than starting to save just $5, $10 or $50 a week…whatever is reasonable for you to begin saving on a regular basis.  Even if it’s just putting the money in a jar, seeing the money add up can be incentive to then take the next step.  Other suggestions to help you add one manageable financial discipline to your life at a time:

  • Complete a budget worksheet to get a good start on getting a picture of what your financial life looks like right now.
  • Pay your credit card bills on time and try to pay them in full or pay more than the minimum.
  • Balance your checkbook once a month.
  • Keep your receipts in an envelope and add them up once a month to see what you’re spending.  After a few months take a second step and evaluate your spending on a monthly basis.
  • Take lunch to work instead of eating out.
  • Buy yourself a coffee maker and travel mug and make coffee for yourself before heading out the door in the morning.
  • Try shopping at a less expensive grocery store for a month.
  • Look into paying your bills online through your bank and save the money of postage for mailing payments.
  • Empty your pocket change into a jar and at the end of the month take it to a change machine to see how much you’ve saved.
  • Consider having a small set amount automatically deducted from each paycheck and deposited into a designated savings or retirement account.
  • If your employer offers a 401(k) or 403(b) retirement savings plan and you’re not currently participating in it, ask the human resources department at your work place for information on how to sign up.  Then take a second step and sign up to begin participating.

Subtract.  Allow yourself to subtract, or “lose,” your fear of managing your finances.  Sometimes just getting back to the basics can help loosen fear’s grip.  At its most basic, managing your money is about four simple things:

1) Knowing how much you earn

2) Keeping track of how much you spend

3) Trying to spend less than you make so you can save money

4) Investing your savings to make more money for the future

The next time you begin to feel anxious, remember that you CAN do this if you take it just one small step at a time.  Implementing just one small, positive change in your financial life at a time (see tips in “Addition” above) will boost your confidence that you can lessen the fear of taking control and managing your money.

Multiply.  It can be easier than you think to multiply what your money can do for you.  Compound interest – when your interest begins earning interest – can help your savings multiply even faster!

For example, if you have some savings at home, look into opening an interest-bearing checking or savings account that will pay you a little bit each month for keeping your money in the account.  If you have an interest-bearing account, check to see how much interest you’re currently making.  Consider whether you could make more interest by moving your money to another type of account.  Other ideas for multiplying what your money is currently doing for you:

  • Check to see if your credit cards offer rebates or points toward items that you would likely purchase. Visit to see what interest rates and incentives other credit cards offer compared to the cards you’re currently holding.  Be wise when selecting a card.  Look first for a low interest rate and review the terms and conditions.  Don’t just pick a card based on the potential bonuses you could accrue by using the card.
  • Look into Flexible Spending Accounts (FSA) that your employer may offer.  By setting up a healthcare or dependent care FSA, you can have a pre-set amount of money automatically deducted from your paycheck pre-tax and deposited into an account that you can use for qualified expenses (such as doctor visit co-pays or prescription costs under a healthcare FSA or daycare costs under a dependent care FSA).  Using an FSA benefits you in three ways: (1) the money is withdrawn from your paycheck pre-tax so you’re lowering the amount of pay that you’ll be taxed on; (2) you’re getting into the discipline of automatically creating savings for yourself and your family; and (3) you’re putting aside money that you can use to pay for future expenses instead of having to charge expenses or take money from other savings.
  • If you have multiple retirement accounts or savings vehicles consider talking with a financial professional about whether consolidating your accounts could reduce paperwork and the time necessary to keep track of them and possibly increase the money you can earn by compounding interest on a larger pool of savings
  • Donate gently used clothing, household items, etc. to a local non-profit organization or charity.  By doing so you will be reducing your clutter, helping someone else and you will get a tax deduction for your donation)

Divide.  One of the biggest obstacles to managing money is time.  Many people feel like it simply takes too much time to keep records and research potential ways to save or invest.  As with achieving any big goal, it helps to divide the job into manageable portions.  For example:

Sample Money Management Schedule

Week 1:  Set aside 30 minutes to pay bills and file bills/statements after they’re paid.

Week 2:  Schedule 30 minutes to update your checkbook with the deposits and withdrawals.

Week 3:  Schedule 30 minutes to enter earnings and savings in a budget worksheet and see how you’re doing with current spending and savings compared to your budgeting goals.  Note a few small changes you could make to bring yourself closer to your target financial goals.

Week 4:  Schedule 30 minutes to review monthly bank and/or investment statements.  Read the fine print!  Make notes about questions you have or changes you might like to make. Then contact your financial professional.

By dividing the big job of “handling finances” into four thirty minute tasks per month you can begin to get a better handle on managing your money in just two hours a month!

Four simple tips can help you organize your financial life and improve how you approach handling your finances:

ü      Add one small, positive financial action to your lifestyle at a time.

ü      Subtract fear from the money management process.  Stop telling yourself there is nothing you can do to improve how you manage your money.

ü      Multiply what your money can do — investing savings in interest-bearing accounts and participating in plans (i.e. 401(k), FSA plans), for example, enable you to save money, lower your taxable income and invest for your future.

ü      Divide up the job of managing your money into smaller tasks.

Add, subtract, multiply and divide.  Let the basics of math help you get a fresh start toward a secure financial future!


10 Tips To Grow Your Savings

The summer can be a good time to review your finances and think about how to begin taking small steps toward reaching your financial goals. One way to build your money confidence is to look over your budget or your current finances and see if you can carve out some savings – even just $10 or $25 a month is a great place to start!

Regardless of your age, how much or how little you already have saved, or how little you feel like you can save, it’s never too late to start saving for your future. Every little bit – at every stage – can add up to a significant amount.

By applying savings toward your first financial priority you’re going to:

  1. build your confidence about managing your finances, and
  2. invest to help create a more secure financial future.

Following is a suggested list of 10 smart places to consider applying your savings. Take a minute to think about your financial goals, to see where you could begin creating some savings, and then consider one or more of the following options for how to make your savings work for you:

  • Pay down your debt. Did you know that paying off your credit card debt is one of the smartest financial decisions you can make? Most people would jump at the change to invest in something that pays an interest rate of 18, 19 or 21%. When you pay off your credit card debt it’s like paying yourself back that much interest by not having to pay it to your creditors. So why not direct some savings toward paying down one or more of your credit cards? You could try tackling the credit card that carries the highest interest rate, and then when you have paid off that card, start making headway on paying off the next credit card you own that has a balance. Or maybe you want to boost your confidence by paying off another card that has a lower balance first, closing that account, and then working toward paying off another card.
  • Fund a college savings plan. Use some savings to open, or increase funding to, a college savings account for yourself, a child or relative. There are a variety of accounts such as 529 plans, UGMA and UTMA accounts that enable you to save for college and lower your taxable income at the same time. Learn more about your options to save for a college education.
  • Begin saving for retirement. Open an Individual Retirement Account (IRA) or another retirement savings account. By law you can invest $3,000 tax-free in an IRA each year to use for your retirement, and an additional $500/year if you are 50 years or older. Regardless of how close you are to retirement, it’s never too late to begin saving. Use our online retirement calculator to determine your retirement income needs and to see how your retirement savings can begin adding up to give you the kind of secure retirement you have always wanted!
  • Increase your retirement savings. See if your employer allows additional employee contributions to your 401(k) retirement savings plan.
  • Save automatically for emergencies. Check to see if your employer, credit union or bank offers an automatic savings plan. It can be much easier to begin saving on a regular basis if you make it automatic. You might be surprised to see how much you can begin saving when you authorize your bank or credit union to automatically withdraw a set amount from your paycheck and direct it to a savings account. If you’re already having some money automatically deposited into a savings account, consider increasing that amount. You can use those savings as your emergency fund – an account where you keep enough money to cover 3-6 months’ worth of expenses in the event of an emergency. Having an emergency fund can give you peace of mind if the unexpected happens and can prevent you from having to put everyday or one-time expenses on your credit card during an already difficult time.
  • Examine your insurance. Review your insurance coverage (i.e. life insurance, health insurance, car insurance, long-term care or disability insurance, homeowners’ insurance, etc.) and consider whether coverage is adequate for your current life situation. If not, decide what you need to do about it and create a plan for socking away some savings to afford the increased coverage costs.
  • Check your PMI. If you are a homeowner and you have at least 20% equity in your home (meaning that you have paid down at least 20% of your home’s appraised value), then you no longer need to maintain private mortgage insurance. If you took out a loan for more than 80% of your home’s value (which was appraised when you purchased the home), your lender required PMI. In that case, you have been paying PMI since you began paying on your mortgage. Lenders are required to drop your PMI requirement automatically when you reach 80% equity, but sometimes that doesn’t happen. Check with your lender to see if you are currently paying PMI and if you still need to. If not, cancel it and have that amount automatically redirected to a savings account instead of spending it.
  • Lower your mortgage principal. If you are a homeowner, consider making one extra mortgage payment a year. You can do that by writing one additional check a year to your lender and writing “to principal” in the memo portion of the check so your bank will know you want to apply the entire amount to your principal. Or you can change to paying your mortgage biweekly. That doesn’t mean you pay the full amount twice a month – it means that you just split your normal monthly payment in half. By making payments biweekly instead of monthly you will automatically make one additional payment a year which can take nearly seven years off your mortgage – and save you the interest you would have paid on that amount as well!
  • Create a down payment fund. If you’re not currently a homeowner, consider starting a savings account to accumulate a down payment to purchase a home. Visit our “Home Buying 101” section to learn more about the process of buying a home and how to make the dream of homeownership a reality for you.
  • Create a “fun” fund. Why not put take some savings and create a personal “fun” fund to pay for those little extras like visiting an amusement park, going on vacation, going out to eat, buying birthday gifts, etc.? If you have kids or others that will share in the fun, let them in on your plan. By creating a designated fund for those expenses you can budget ahead of time to know how much you can realistically afford to spend, pay cash instead of using a credit or charge card — and not be surprised by unanticipated credit card bills.

Taking just one manageable step can inspire you to take the next step, until you begin to see how a small amount of savings can make a big difference in the long-run!


What's The Difference Between Saving And Investing?

Saving means to put some money aside for later use. When your kids are little, you encourage them to put some of their birthday money in their piggy bank. When they get older you may open a savings account for them to deposit some of the money they earn from jobs. It’s the same way for adults. Saving means taking some money and putting it aside for later – maybe saving for holiday gifts or for vacation or for longer-term goals like paying for college, buying a house or saving for retirement. You can save your money at home or you can save money and deposit it in a savings account with a local bank. Investing means taking money that you have saved and using it to buy or participate in a business venture that offers the possibility of profit, or interest. You could invest by taking some of your savings and purchasing a savings bond, buying stock, or depositing money in a certificate of deposit (CD).

To plan ahead for your future, it’s a good idea to making saving a priority. Even if it’s saving just $10 from each paycheck or a little bit of money you get from occasional work or an unexpected check and putting it in a savings account, every little bit counts. Want to know how? Say you save just $20 a month, or $10 from each paycheck (if you get paid twice a month). At the end of one year, you will have saved $240. If you continue saving that same amount for 5 years you will have saved $1,200! Once you begin saving you’ll want to make that money work for you by investing it wisely. Why? Because when you invest money you have the opportunity to earn something called interest.

What is interest?
Interest is a fee. It’s the amount of money you either earn on an investment or the money you owe on a loan. When banks or other financial institutions give you credit, such as when you borrow money to buy a home or a car, they’ll charge you interest, or a percentage of the amount of money you borrow, for using their money. On the other hand, you can also make money by earning interest when you invest your money. Examples of investments where you can earn interest include depositing money in an interest-bearing checking or savings accounts, bonds, Treasury bills or bonds, certificates of deposit, money market funds, stock or bond mutual funds, or individual stocks.

Earning interest on savings
Over the past few years, Oscar has managed to put a little bit of money aside from paychecks, odd jobs, and gifts to save $1,000. Recently he learned that he could deposit money in a savings account at his local bank. He heard that his money would be protected by law and that he would earn interest for opening an account. He deposited his $1,000 in a savings account at ABC bank in an account that earned 3% interest annually. At the end of the year Oscar had earned $33 just for opening the account and leaving his money untouched.
Earning interest on an investment

Laura and Roberto received cash gifts from relatives for their wedding and combined it with some personal savings to accumulate $7,500 in savings. They weren’t ready to settle down right away but knew that they wanted to buy a home in 3 or 4 years. They met with a personal financial advisor and decided to invest $7,500 in a stock mutual fund. The funds’ interest varied each year, but after 4 years they had earned approximately 7% interest annually and saw their original $7,500 investment increase to approximately $9,800.

Paying interest on a loan
Carla and Jose just moved to a new apartment. They could barely afford the monthly rent, but they needed furniture. They charged furniture using a three-year finance plan at a local department store. They ended up charging nearly $5,200 in furniture at an interest rate of 14%. By signing a long-term loan at such a relatively high interest rate they’re actually going to end up paying an additional $1,032 for the furniture. A better idea would have been to get a lower cost personal loan through their bank or company’s credit union, to have borrowed money from family members, or to shop for lower cost, gently used furniture they could afford to pay for in cash.

The biggest loan that most people ever take on is a home mortgage. Say for example that you sign a 30 year fixed rate home mortgage for $50,000 at 10% interest. Your monthly payment will be $439. That means that for 30 years you’ll pay $439 per month for your home loan. Over the life of the loan that 10% interest that you’re paying will add up so that by the time you’ve paid the loan off 30 years later you’ve actually paid the bank $157,965 – more than 3 times the amount you borrowed to buy the home!

Although that sounds like a lot, it’s just meant to demonstrate that interest adds up. One way to is to make even just one additional mortgage payment toward principal on your loan each year. By making that one additional payment toward your principal you can cut the life of your loan by 9 years and save over $38,000 in interest!

What difference does the interest rate make?
Even a small difference in interest rates can make a big difference in how much you’ll owe or you’ll earn. The key is when it comes to debt you want a low interest rate and when it comes to saving and investing you want a high interest rate. In other words, you want to pay the least amount, or find the lowest interest rate when it comes to borrowing money and you want to earn the most, or look for the highest interest rate you can get, when you invest your money. How do you find the highest rate? Ask the loan officer at your local bank how much interest you’ll be charged. If you’re depositing money in a savings account or investing money in instruments like stocks, bonds, or mutual funds, ask how much interest you’ll earn. Take that information and call or drop in to other banks and ask them the same questions. Compare what interest rate you’re offered.

Small differences in the interest rates charged on debt can add up. For example, if you’re buying a home and you’re offered an $85,000 mortgage at 9% your monthly mortgage payment is $684. The same mortgage at 7% would lower your monthly payment to $566. Even though 2% doesn’t seem like a big difference in interest, it adds up to savings of over $120 a month.

The same holds for credit cards. Check what interest rate you’re being charged on your card(s). For example, if you used a calculator on, you might see that:

  • Let’s say you’re carrying $1,250 in debt on a credit card charging a 12% interest rate. If you stopped using the card today (meaning you didn’t charge anything else), and began paying the debt off at $50/month it would take you 29 months to pay off the debt entirely. After 29 months, in addition to the $1,250 you originally owed you would have also paid $178.89 in interest, for a total of $1,428.89.
  • Let’s raise the interest rate on your card to 18%. If you owed the same $1,250 on the card and paid the same $50/month, it would take you 31 months to pay off the card completely and you would have paid an additional $121 in interest, for a total of $298.74 in interest. In total you would have paid the credit card company $1,548.74 for making $1,250 in charges.

Shop around. Before you open an interest-bearing savings account for your savings, or invest your money or take out a loan, ask specifically what interest rate you’ll be earning or paying. Compare interest rates that you’re offered by various banks in the area.

You’ve worked hard for your money and by saving and wisely investing, you can make it work for you. Knowing how much interest you’ll be charged for a loan, or how much interest you can make on an investment, is an important part of managing your money.

Will I get the same interest rate everywhere I go?
No. Banks and financial institutions set their own interest rates. Car dealerships, check cashing stores, department stores, credit unions…the interest rates they offer for purchases vary. It’s important that you compare interest rates when you want to borrow money, earn money by depositing money in a savings account, or when investing money. Call area banks and ask a loan officer what interest rates they charge for their various loans or what interest rate they offer for their savings accounts or for their various investment options. You can use the Internet to do some research as well.

Remember that investing your money is really about you loaning your money to someone else. When you’re comparing different investment options, such as bonds, stocks, mutual funds, and CDs, you’ll want to see how much interest they either guarantee to pay out, for example, on Treasury bills, bonds, or CDs or how much interest they’ve paid out in the past (stocks, mutual funds) that might be an indicator of how much interest they’ll pay out in the future. Remember that investments such as stocks do NOT guarantee how much they will appreciate, or grow in value. You are not guaranteed to make money when you invest in stocks. You can only know how much money investors have made in the past by owning the stock.

Whatever investment you choose, the higher the interest rate offered, the more money you’ll earn on the money you invest. A note of caution: typically the higher the interest rate the greater the risk.

Remember that under law, you cannot be discriminated against when applying for a loan. That means that not only can you not be denied a loan on the basis of race, sex, religion, or national origin, but you also can’t be charged a higher interest rate.

What is a subprime loan?
“Subprime” loans carry a higher than average interest rate and typically charge more fees than traditional loans. You can get a subprime loan when applying, for example, for a home mortgage or a car loan.

If you have a less than perfect credit history (such as paying bills late, filling for bankruptcy or being foreclosed on, carrying a high level of debt or having an unstable employment history) you may be offered a subprime loan. How will you know if it’s a subprime loan? The loan may:

  • Carry a higher interest rate than the standard interest rate offered by the bank or financial institution you’re working with
  • Have a lower loan limit, meaning that you may not be able to borrow as much money as you would like, or as much money as you could if you had better credit. How much difference does the higher interest rate on a subprime loan make? Consider the example of two brothers – Greg and Ray.
  • Greg manages an auto parts store. He has been putting aside 5% of every paycheck into a savings account monthly since he started work and pays his bills on time. When Greg goes to apply for a home loan he qualifies for an $110,000 mortgage at 7%. His monthly mortgage payment will be $732.
  • Ray is a claims adjuster. He frequently pays the minimum amount due on his credit cards, periodically forgets to pay his utility bills on time, and has accumulated a high amount of credit card debt. Because he has a poor credit history he qualifies for the same $110,000 mortgage but at 12% interest. That means that Ray will pay $1,132 a month FOR THE SAME MORTGAGE AS GREG. That means that Ray is going to pay about $400 more A MONTH than the same mortgage as Greg simply because he doesn’t qualify for a loan with a lower interest rate.

If you have poor credit, like Ray, you may only qualify for a subprime loan. However, if you have good credit you should not feel pushed into a subprime loan, especially if you suspect it’s simply due to your race or gender. The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. If you are denied a loan, or offered a loan that charges a higher interest rate than is advertised, you have the right to find out why.

To make sure that you’re getting the best, most fair loan you qualify for:

  • Shop around. Check for at least three different options when borrowing money. Call banks, credit unions, look online, or talk to a nonprofit counseling agency to make sure you’re getting a loan with the lowest possible interest rate with the loan terms you want.
  • Get the entire contract in writing and read it. Know exactly what you’re paying for. Be on the lookout for additional costs such as life insurance, warranties, and ask about anything else that is added into the contract that you’re not sure of.
  • Ask questions. If there is anything you don’t understand in the loan documents you’re signing, ask until you are clear on the terms and conditions of your loan.
  • Don’t ever feel pressured to sign anything you don’t understand or aren’t comfortable with.
  • Don’t agree to anything over the phone or by someone making door-to-door sales calls. Ask them to leave or mail information to your home for you to review instead.
  • If you do begin to turn your financial habits around to improve your credit (i.e. paying your bills on time, reducing the number of credit cards you use, etc.) talk to your lender about refinancing your loan. The bank may lower the interest rate on your loan, which will save you money.

How can I make interest rates work for me?
Again, the key is to make sure that you’re earning the most interest possible on money you’re saving and investing and that you’re paying the least interest possible on money you’re borrowing.

Before you deposit your savings in a savings account or before you invest your savings, you’ll want to call around or do some online research to find out which bank or financial institutions will you offer the highest interest rate on savings accounts or on various investment options such as certificates of deposit (CDs), bonds, stocks, or mutual funds.

When you’re borrowing money, do a periodic interest rate check-up. Pick a date, maybe once a year, and take a look at the interest rate you’re paying on your credit cards, loans, or mortgages. You should be able to find the interest rate easily by looking at a recent statement. If you’re not sure, call your bank or credit card company and ask them to look up your account. They should be able to tell you, over the phone, what interest rate you’re being charged. Do a little research to compare it with current rates offered by other cards and banks.

You may be able to save a substantial amount of money by refinancing your home mortgage, auto loan, even your student loan. The general rule of thumb is that you should consider refinancing if your current interest rate (the interest rate you’re paying on a loan) is more than 2 points HIGHER than the current rate being offered. So, for example, if you have a 30-year fixed rate mortgage at 9.75% and the current interest rate is 7% you should think about refinancing. But you’ll also want to consider a few things in addition to the interest rate being offered like application fees and closing costs. You’ll want to add up the total cost of refinancing before signing papers to refinance your loan.

In many cases you can also transfer your credit card balance to another card offering a lower interest rate. Or call your current company and ask if they’ll lower your rate if you’ve been a good customer. Again, before transferring your debt to another credit card, check to find out what fees you’ll be charged for the transfer and check the interest rate you’re being offered on the new card and that it’s not a “teaser” rate – meaning that it will only be good for a short period of time (i.e. 30 or 90 days) and then will increase significantly without you realizing it.

Stop Bouncing Checks… Tips To Help Keep Your Account In Order

If you’re like most people with a checking account, chances are you have bounced at least one check in the past. “Bouncing” a check – meaning that you wrote a check for more money than you had in your account – is at the least embarrassing and at the worst, possibly a very costly financial mistake. But bouncing a check is just one way that you can overdraw your account. You can also:

  • make a debit card purchase
  • make an ATM withdrawal or
  • make an automatic bank payment to

If you try to overdraw your account using a debit card, automatic bank payment or by ATM withdrawal those transactions may simply be denied. If you write a check for more than you have in your account your bank may simply return the check to the store or person to whom you wrote it marked “insufficient funds.” In that case your bank would charge you a fee for the transaction AND the person or company to whom you wrote the check may also charge you a returned check fee.

Another possibility, however, is that your bank would pay the check using something called overdraft protection.

A new federal law enacted July 1 concerning overdraft-protection plans may affect how your bank reacts –and what it could cost you – if you bounce a check or overdraw your account. Most banks have two ways of handling customers who overdraw their accounts: courtesy bounced-check protection and traditional overdraft protection plans. Let’s look at both.

  • Courtesy bounced-check protection. Most banks automatically extend some form of “courtesy protection” for accountholders who bounce an occasional check or overdraw their account another way. Your bank will cover your check (meaning pay the store or person to whom you wrote the check), but will then charge you an overdraft fee for each item – meaning each check presented, bill paid or debit card transaction. And banks typically set a limit on the total amount that your account can be overdrawn – for example, $300, $500 or $1,000 – including fees. In addition to the overdraft fee your bank may also charge a small daily fee ($5 – $15) for every day that your account is overdrawn. Bank rules vary so be certain you know how your bank handles bounced checks and what automatic protections, if any, you have through your account.
  • Traditional overdraft protection plan. A traditional overdraft protection plan is actually a line of credit or loan that you have to apply for with your bank. When you are approved, any amount that you overdraw your account would be covered with funds available through your line of credit. You will then need to pay interest on the loan and possibly an annual fee. It is important to remember that this is a loan. While it may be less expensive than risking mounting fees through courtesy bounced-check protection, it is still a loan that requires your application, approval and will cost you money in interest and possibly fees.

New rules enacted July 1 require that banks disclose their total fees and charges for overdraft protection (whether it’s courtesy protection or through a traditional overdraft plan) when customers open an account and in periodic account statements customers receive either electronically or by mail. In addition banks are prohibited from using possibly misleading advertising regarding their overdraft protection for bounced checks.

Whether you are considering opening an account for the first time, or if you already have a checking account, be clear about your bank’s overdraft policies and options for ensuring that you pay the least amount possible for accidentally overdrawing your account. Specifically, ask a bank teller or customer service representative:

  • How will I know when I have overdrawn my account? Will someone from the bank call or email me the day that I overdraw the account? Will my ATM withdrawal or debit card transaction alert me that I am about to overdraw my account so that I have the choice to cancel the transaction? Will I be alerted electronically when an automatic bill payment would cause me to be overdrawn? Will I get a notice in the mail before I am charged for the overage?
  • If I bounce a check, or otherwise overdraw my account, how long do I have to deposit money into the account to cover the cost?
  • If someone presents a check I have written and there’s not enough money in my account, do you provide courtesy bounced check protection so that you will pay the person, store, to whom I wrote the check OR will you return it unpaid to the payee marked “insufficient funds,” and then charge me for the bounced check?
  • If you do provide courtesy bounced check protection, what penalties do you charge for the protection — individual item fees, daily fees, etc.?
  • Do you allow me to overdraw cash from my account using my ATM card? What penalty is there for doing that?
  • Do you allow me to make purchases using my bank debit card for more than I have in my account or would the purchase be denied? What is the penalty for doing that?
  • Do you report any bounced checks or overdrawn account activity (either by debit card or ATM) to the credit bureaus?
  • Are deposits credited to my account on the same business day? If not, how long will it take to post a deposit to my account?
  • If I apply for an overdraft line of credit what interest rate would I be charged for money used from that line of credit to cover any bounced checks or overdraws?

In addition to courtesy bounced-check protection and traditional overdraft lines of credit, there are other options to covering the “gap” created when you accidentally overdraw your account. For example you could:

  • Link your savings account to your checking account. That way if you overdraw your checking account your bank could automatically transfer funds from your savings account to cover the difference. Ask a bank representative if it offers this option and, if so, what fees it charges for the service.
  • Link your checking account to a bank credit card. Some banks will allow customers to link their checking accounts to a bank-issued credit card (for which you will have to apply and be approved for). Then if you overdraw your checking account that amount would be applied as a cash advance against your credit card. Be very careful, however, because you will have to pay a cash advance fee on the card and interest on the charge, and interest rates for cash advances are typically much higher (19% and higher) than interest charged on purchases.

While it can provide some peace of mind to know that you have a something in place to cover an accidental overage (like courtesy bounced check protection, linking an account to a credit card or savings account or having an overdraft line of credit), it is not substitute for carefully monitoring your account, balancing your checkbook and ensuring that you do not overdraw your account. Anytime you overdraw your account you are going to have to pay more for the transaction because of fees, penalties and/or interest. That money can add up very quickly and create a cycle where it becomes difficult to work your way back out of a negative checking account balance. Deposit money in your account as soon as you are aware that you have overdrawn the account to prevent mounting fees and penalties.

To avoid the future possibility of bouncing a check be sure to:

  • Enter all checks, ATM withdrawals and deposits (and ATM fees!), online bill-paying fees, and debit card purchases in your check register.
  • Balance your checkbook at least once a month against the account statement that your bank sends you. You may discover additional fees charged (i.e. monthly maintenance fee, check order fee, etc.) or deposits posted (i.e. if you have an interest-bearing account) to your account that you were not previously taking into consideration when you wrote checks.
  • Ask your bank to clearly outline what regular fees you are responsible for with the checking account you have selected.
  • Make sure you are clear on how long it will take when you deposit a check for it to be posted to your account so that you don’t accidentally overdraw your account because you thought the check had already posted. Most banks post any deposits that you make after 2:00 p.m. on the next business day so, for example, if you made a deposit at 3:30 p.m. on a Friday it might very well not be credited to your account until Monday morning at the earliest. Check too about your bank’s policy on large deposits – it may put a “hold” on the check for longer than 24 hours which will affect your balance and could cause you to accidentally overdraw your account.


Understanding How A Debt Card Works

Just the name “debit card” can seem confusing. Is it something you can use like a credit card? Is it something you use to take cash out of an account like an ATM card? Using debit cards wisely involves knowing what they are, how they work and then thinking carefully about how to use them as part of your overall financial plan.

What is a Debit Card?
In the 1980s banks began to issue ATM (automated teller machine) cards to customers. These cards enabled customers to withdraw money directly from their account at ATM machines. Over time banks wanted to offer customers more features with the same ATM card, like the ability to make purchases directly linked to a specified account. Thus the creation of the debit card. The best way to think about debit cards is to consider them as a combination ATM card and checkbook.

Debit cards are linked to a specific account – typically they are linked to your checking account, but you should talk with your bank to verify which account the card will be linked to. When you make a purchase with a debit card it automatically deducts that amount from the account linked to the card, in the same way that when a check is cashed the amount is immediately deducted from your account. So, for example, if you purchase $89 worth of groceries from the supermarket and put it on your debt card it will show up as an $89 POS (point of sale) transaction or withdrawal from your account. Debit cards are unlike credit cards because they have a fixed limit (your bank account balance) and, because you’re using your own money and not borrowing from a credit company, you don’t have to pay interest when using a debit card the way you do if you charge something on a credit card and carry a balance. You can also withdraw money directly out of your own account when you use a debit card and the funds are automatically deducted from that balance.

When Should You Use a Debit Card?
Debit cards can help you maintain financial discipline. Instead of using, and potentially racking up significant, ongoing credit card debt, consider using a debit card. The fact that the purchase will be automatically deducted from your account may force you to think twice about a purchase…or at least determine that you have enough money in your account to pay for what you want to buy so that your card is not declined.

If you have an uneven credit card record (meaning you have maintained high balances, not paid on time or defaulted on the account), you may want to consider strictly using your debit card rather than your credit card for a certain period of time. Proving that you have used a debit card responsibly and maintained an account balance can help in re-establishing or shoring up your credit rating. While debit card transactions are not reported to credit bureaus (like credit card activity is), you can use the monthly bank account statement for the account that is linked to your debit card to prove to creditors you have improved your ability to manage your spending and payment habits.

Often parents of college-age children choose to give their children debit cards for purchases instead of a credit card. Debit cards can be a useful tool to help students learn how purchases and payments add up and how to pace their spending to keep within the balance of the funds in their account.

Making Purchases with a Debit Card
Most stores, gas stations, restaurants and other locations accept debit cards for payment. Ask the cashier or clerk if the store accepts debit card. If so, making a purchase or a payment (i.e. for car repair, meal at a restaurant, etc.) with a debit card is fairly simple:

  1. The clerk or cashier will swipe your card in the same way he or she would swipe a credit card for payment. If the cashier doesn’t ask, make sure to tell him or her that you are using a debit card.
  2. The cashier will then enter the amount of your purchase, which you should see on a PIN (personal identification number) pad or station. The PIN machine will ask you to enter your 4-digit identification number and to verify the amount that is being debited from your account for the purchase. Some retailers will give you the option of withdrawing additional money above the cost of the purchase – to have extra cash on hand–say $10 or $20. If you choose that option then you will be asked to verify the final total transaction amount (including the cash back that you requested) and then the request will be sent to your bank.
  3. The cashier will then get an approval code from your bank, which tells him or her that the transaction was approved, meaning that you have enough money in your account to pay for the purchase.
  4. Once your purchase is approved the bank “holds” that amount of money in your account to process and send funds to the retailer where you made your purchase. It’s important for you to know that the funds are held from your account, because if the transaction is incorrect and the cashier goes to “void” it out, those funds will still be held in your account until the transaction is verified with the store. So if there is an error with the transaction ask the cashier to do a “sale return” instead of voiding it out. That way the exact amount of the transaction will be credited back to your account and those funds will not be held by your bank. Then the cashier can process it as a new transaction with the final, correct amount to be deducted from your account.
  5. Your monthly bank statement will list each debit card transaction directly on your account statement in the same way that checks are listed (for checking accounts) or withdrawals.

Questions to Ask Before Obtaining a Debit Card:

  • Is there an annual fee for using the card?
  • What account is this card linked to? You want to know which account the card will deduct money from when making purchases or payments – i.e. your savings account, checking account, money market account, etc.
  • Is there a fee for using my debit card to withdraw money with the card from another bank’s ATM?
  • What happens if I lose the card? Who should I notify? Because your debit card is directly linked to your chosen account, a thief can possibly tamper with your savings or checking balance directly using your card. Under the Electronic Fund Transactions Act, you are only liable for $50 (i.e your account will still show a $50 loss) if you report your card missing within 2 days. Between 2 and 60 days you may be responsible for up to $500 of the funds used from your account (meaning your account will show up to a $500 loss) and if you wait longer than 60 days none of the amount stolen from your account will be refunded by the bank. Know exactly how your bank wants you to report a loss to resolve the issue quickly and to limit your liability.
  • What happens if there is a discrepancy on my bank statement related to a debit card purchase or payment?

Using a debit card can be a great way to track and maintain control over your spending without racking up credit card debt at high interest rates. Take the time to ask a few questions at your bank to understand how their debit card services work and consider using the debit card as a financial tool to manage your finances wisely.


A Short Guide To Financial Planning For Students

Going to college can be exciting, fun…and expensive. And we’re not just talking about tuition, room and board. There can be a lot of unexpected, small expenses that can add up. Expenses like new clothes, school supplies, books, furniture, a computer, and spending money. Get a good start on your higher education by learning, or brushing up on, some personal finance skills while you’re hitting the books. Here are a few tips to help you stay on top of your expenses and be financially fit come graduation day:


  • Start out with a “true” picture. Get in the habit of tracking the money you have coming in and what you are spending it on. If you are like most people, you are getting money to pay all your college bills from various sources (i.e. student loans, family financial assistance, grants, scholarships, etc.). List all your sources of money, the amounts, and all the categories of expenses that the money has to pay for (i.e. tuition, room and board, books, phone bill, food, transportation). Remember to note how long each source of money has to last. For example, a loan may have to pay for more than just one year’s worth of expenses. You don’t want to think you can spend money now, when in reality it has to be used for future expenses.
  • Don’t let debt “sneak” up on you. You don’t want to arrive at graduation day and suddenly realize how much income you’ll need just to pay back your student loans and credit card debt. Keep track not only of what regular expenses you have (i.e. rent, car insurance, gas, tuition, food, etc.) but also of your large debts such as financing for school (i.e. student loans, private loans, financial assistance from family members, etc.)
  • Be very careful about using credit cards. It can be easy to start school with student loans, take a job or get some financial assistance from your family for regular expenses, and still feel like you’d like a little more financial “breathing room.” It can be additionally hard when new friends – some of whom have more spending money than you – want you to go out and do things with them. Things that cost money. That’s when it can be hard to ignore those credit card applications that fill your mailbox.It can seem like an easy answer to get a credit card to help make ends meet or finance small, or “fun,” purchases, or nights out, but it doesn’t take long for it to become a habit to use credit cards to finance your lifestyle. And once you are living and spending above what your overall financial situation can sustain, credit cards can be a hard habit to break.

    The first thing to remember is that just because you’re offered – or even approved – for a credit card doesn’t mean you have enough income to pay for the bills. Next, if you do apply for and get a credit card, get a clear picture of how much you’re charging by subtracting your charges from your checkbook (if you have a checking account). That way when the bill comes in the mail you will already have the money set aside to pay the full amount.

    If you find yourself not paying the full amount after three or four months, consider cutting up your credit card and instead using a charge card (that requires payment in full every month) or using a debit card that withdraws money directly from your designated (checking/savings) account for each purchase or charge.

  • Stick to cash. There’s something about actually taking the money out of your wallet that can quickly put spending into perspective. Instead of paying with a credit card or by check, try paying for all of your expenses (or at least your day-to-day miscellaneous and entertainment expenses) with cash. Decide in advance how much miscellaneous spending money you need for a week and take out only that much cash at the beginning of the week (or for each pay period). Having to pay cash for items or services will make you much less likely to overspend.
  • Be wise. Identity theft is on the rise. Identity theft can be more than a nuisance. If someone obtains your personal or financial information, they can create serious problems that can take you years to resolve. Protect your personal and financial information — and that includes your account numbers, your ATM pin number, your Social Security number and your on line passwords — by keeping a close eye on your wallet or purse at all times, shredding receipts or bill statements, and safeguarding your online and bankcard passwords…even from your friends.
  • Balance your checkbook before you “bounce.” If you’ve never had, or used, a checking account, it’s a very good idea to learn how to balance your checkbook before writing a flurry of checks and finding you don’t have the money to cover them all. Take a minute to ask a clerk at your bank for help, or family or friends. If you have had a problem bouncing checks in the past, consider getting overdraft protection to avoid costly “insufficient funds” fees charged by stores and banks for bounced checks. Check to make sure you understand and agree with the terms of your bank’s overdraft protection. Often the protection is considered a “loan” that a bank extends to you to cover the amount of the check. You’ll pay interest on that loan until you pay it back by putting enough money into your account to cover the check and the loan.
  • Identify some practical ways to save. If you’re wondering where the money is going and how you can cut back on costs, first keep a journal of how you spend your money for a few weeks. You might find some easy ways to save right off the bat, such as:
    • Make coffee instead of paying a premium price at coffee shops.
    • Make your own lunch or dinner more often instead of eating out.
    • Shop at discount stores or online for gently used furniture, school supplies and more.
    • Buy used textbooks and sell your textbooks at the end of the semester.
    • Look for people to share a ride home over weekends.
    • Consider taking on an additional roommate.
    • Check to see how much you’re spending monthly on long-distance phone calls. Shop around for a better rate with a different long-distance carrier, cell phone service or pre-paid calling cards.
    • Consider what skills or talents you have to “swap” with friends – i.e. typing term papers, cooking meals, etc.
    • Look for on-campus jobs.
    • Park your car and try walking more or using campus or public transportation.
  • Stay focused on your future…not someone else’s bank account. You’re always going to meet people who have more money to spend than you—and people who have less. You can take control of your own financial future by taking steps now to establish how you will handle your finances responsibly. When you are starting college and meeting new friends and having to pay for things you haven’t had to before, it can be easy to take more notice of other people’s financial situations than planning your own. You need to take responsibility for your own financial well being in the context of your own financial picture, not someone else’s. Remember that YOU will have to pay back the debt you incur, not the person who encourages you to spend money you don’t have. And remember that this is about your future. Being able to get an apartment or a job or loans for big items like a car or a house may be affected by how you handle money now.


College is a great time to discover what you want your future to look like. Begin charting a course to financial security by developing some basic personal financial habits now…you’ll be glad you did.

5 Important Money Management Tips Every College Student Should Know

Going to college can be exciting, fun…and expensive. And we’re not just talking about tuition, room and board. There can be a lot of unexpected, small expenses that can add up. Expenses like new clothes, school supplies, books, furniture, meals and spending money. Unfortunately too many college students turn to loans, credit cards or a combination of both to finance their college years only to find out that it’s far easier to get into debt than to get out of it.

Nearly two-thirds of all college students carry some debt and their total debt load is rising. According to a 2006 USA Today/Experian survey all types of debt among college students is on the rise:

  • The average student loan balance is $14,379
  • The average credit card balance among college-student cardholders is $5,781
  • The average balance on installment loans (i.e. car loans) for college students is $17,208

As college students’ debt load is rising, their ability to repay their loans is on the decline. Experian reported that nearly half of all college-age students have stopped paying on their debt which can result in collection agency action, repossessions or even having to face the prospect of filing for bankruptcy.

Laying a good foundation for money management as early as possible in your college career can enable you to accumulate less debt and take advantage of more opportunities – such as studying abroad or pursuing a job you’re really interested in after school – because you won’t have to be as concerned about, or work toward paying off debt and/or loans after graduation. According to Experian:

  • Twenty-two percent of all college graduates surveyed say they have taken a job they otherwise wouldn’t have because they needed more money to pay off student loan debt.
  • Twenty-nine percent say they have put off or chosen not to pursue more education because of their debt load, and
  • Twenty-six percent have put off buying a home, 11 percent have put off marrying and 14 percent have put off having children because of their debt.

To avoid mounting debt that could limit your ability to make choices in the future consider a few tips to help you stay on top of your expenses and be in charge of your financial future come graduation day:

  • Budget
  • Clamp down on credit
  • Balance your checkbook
  • Create a bill-paying system
  • Keep focused on your financial reality
  1. Budget today and you’ll be glad tomorrow. Get in the habit of tracking the money you have coming in and what you are spending it on. If you are like most people, you are getting money to pay college bills and expenses from various sources (i.e. student loans, family financial assistance, grants, scholarships, jobs, etc.). List all your sources of money, the amounts, and all the categories of expenses that the money has to pay for (i.e. tuition, room and board, books, phone bill, food, transportation). Remember to note how long each source of money has to last. For example if you have a two or three-year loan ensure that you pace your spending (and spend only on what you’re supposed to spend it on) so that you don’t run out of funds before the term of the loan. You don’t want to think you can spend money now, when in reality it has to be used for future expenses.
  2. Clamp down on credit. It can seem like an easy answer to get a credit card to help make ends meet or finance small, or “fun,” purchases, or nights out, but it doesn’t take long for it to become a habit to use credit cards to finance your lifestyle. And once you are living and spending above what your overall financial situation can sustain, credit cards can be a hard habit to break.The first thing to remember is that just because you’re offered – or even approved – for a credit card doesn’t mean you have enough income to pay for the bills. If you do apply for and get a credit card, get a clear picture of how much you’re charging by subtracting your charges from your checkbook (if you have a checking account). That way when the bill comes in the mail you will already have the money set aside to pay the full amount.

    If you find yourself not paying the full amount every month, it’s a good idea to cut up your credit card and instead using a charge card (that requires payment in full every month) or using a debit card that withdraws money directly from your designated (checking/savings) account for each purchase or charge.

  3. Balance your checkbook before you “bounce.” If you’ve never had, or used, a checking account, it’s important to learn how to balance your checkbook before writing a flurry of checks and finding you don’t have the money to cover them all. Take a minute to ask family, a friend or a clerk at your bank for help in getting started. If you have had a problem bouncing checks in the past, consider getting overdraft protection to avoid costly “insufficient funds” fees charged by stores and banks for bounced checks but make sure you understand and agree with the terms of your bank’s overdraft protection. Often the protection is considered a “loan” that a bank extends to you to cover the amount of the check. You’ll pay interest on that loan until you pay it back by putting enough money into your account to cover the check and the loan.
  4. Create a bill-paying system. This will likely be the first time you have been responsible for paying your own bills. Did you know that paying your bills late can affect your ability to borrow money in the future for things like a car and a home, and how much interest you’ll be charged for those loans? Start creating good financial habits by making bill paying easy — set up a place and schedule a regular time to pay bills; mark the due date on your calendar and create scheduled online payments from your checking or savings accounts.
  5. Stay focused on your future…not someone else’s bank account. When you are starting college, meeting new friends and having to pay for things you haven’t had to before, it can be easy to spend more time noticing other people’s financial abilities than taking control of and planning your own. You need to take responsibility for your own financial well-being. Remember that YOU will have to pay back the debt you incur, not the person who encourages you to spend money you don’t have. And remember that this is about your future. Being able to get an apartment or a job or qualify for a car loan or even a home can be affected by how you handle money now.

College is a great time to discover what you want your future to look like. Begin charting a course to financial security by developing some basic personal financial habits now…you’ll be glad you did.


10 Tips To Help With Budgeting And Saving Money

 1. Develop a simple, easy-to-implement plan. Guess what? You’re at the perfect place to begin. 

2. Figure out how much you could put toward paying off your credit card balance(s). Trim a little from your monthly miscellaneous expenses and begin paying more than your monthly minimum payment on each card as quickly as possible. Remember, paying off your credit card balance can be one of the highest-paying investments you can make.

3. Check to see if your company offers an employer-sponsored retirement plan – otherwise known as a “401(k) plan” (or “403(b) plan” if you work for a public agency or a nonprofit organization.) When you sign up to participate your employer will automatically deduct a certain amount of money (determined by you) from your regular paycheck and funnel it to this retirement plan (often you are able to choose which fund or funds the money is invested in.) The four biggest benefits to employer-sponsored retirement plans are:

  • the company does all the legwork for you;
  • it’s an automatic payroll deduction so it forces you to save;
  • most companies will match a certain percentage of their employees’ contributions, and
  • at least a portion of your contribution will be “pretax” so it will help lower your tax burden at the end of the year.

4. Open up an individual retirement account (“IRA”) through a local bank, credit union or brokerage fund. You can contribute up to $4,000 a year (up to $5,000 if you are age 50 or older) into this account which, for many people, is tax deductible. So you save in two ways – you’re putting money away toward your retirement, and you’ll pay less in taxes at the end of the year.
5. Make one extra mortgage payment per year. Write “to principal” in the memo portion of the check so your bank will know you want to apply the entire amount to your principal. By lowering your principal, you’re also lowering the amount of interest you owe on your mortgage…which can lead to substantial savings and can cut years off your mortgage.
6. Keep a strict record of expenses for one month. Write down everything. Then at the end of the month review your list. Categorize your spending and you’ll begin to see where you could cut back. You might be surprised by how much you can begin to save once you really know where your money is going!
7. Transfer your credit card debt to a card that charges a lower interest rate. When checking for a new card, make sure that you’ll get the lower rate you want for at least 6 months. Read the fine print in the application. You may find that the bright red “7% offer!” on the envelope is what’s known as a “teaser” and only lasts for a few months, when they’ll jack the rate back up to 18, 20, or 22 percent, often without you noticing. If you have a good history of timely payments with your own credit card company, call and ask them to lower your interest rate and lower or waive some of the fees in return for your continued use of their card. Many companies are willing to do so. You can also log on to or check to see if your local library carries “Bank Rate Monitor” (BRM) newsletter to get a list of the best rates for credit card deals both in your state and nationwide. You can contact any of the banks listed for an application and transfer your balance. If you belong to a credit union you should check with them to take advantage of lower interest rates. If you’re interested in comparing costs and services of your local bank with a credit union in your area you can contact the Credit Union National Association (CUNA) by logging on to their website or calling (800) 358-5710.
8. Have you checked out your utility bills lately? Taking even a few simple steps can add up to hundreds of dollars in savings. For example, lower your hot water heater to 120 degree (which is recommended for families with small children anyway) and you can save 10-15%. Check with your electric or gas company to see what peak hours are. You’ll save money by doing your laundry or dishwashing at non-peak times. And yes, it may be painful to hear, but your father was right…you don’t need to leave the lights on in every room. Flipping the switch can help save money. These are small, easy steps to take to save money that even your kids can do. Many energy companies will send you, free of charge, a list of energy-efficiency (read: money-saving) tips, or will even come to your home to do a free evaluation at your request.
9. Review your next phone bill to see how much you’re paying for services that you don’t really need. Do you call your sister in-state every weekend but rarely make out-of-state long-distance calls? Your phone company can let you know of a calling plan that will give you better rates for the calls you typically make. Check out what you’re paying for long-distance fees. Often phone companies will reduce your rates if you call to say you’re considering switching to a cheaper plan offered by their competitor.

10. Review your insurance policies. Are you paying for more coverage than you need? By visiting websites like you can comparison shop for virtually any type of insurance policies including life insurance, homeowners insurance, disability, dental, even small business coverage. It’s worth a few minutes of research to determine if you could lower your monthly insurance rates and still receive the coverage you and your family need.