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THE CREDIT CARD - START AND STAY DEBT-FREE 

What does a credit card do? Silly question, right? Everyone knows how to use a credit card, but what do you know about the credit side of a credit card? Investopedia defnes “credit” as an agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, typically with an additional fee attached, known as “interest”. The card is simply the medium with which the transaction is conducted. For example, say you buy a new pair of $70 jeans on your credit card. When your credit card bill arrives some time later, you are reminded that your card charges you 15% interest, so your bill (and thus, your jeans) actually end up costing you $80.50. Di erent credit cards will have di erent amounts of interest, di erent lengths of time before you actually owe interest, and many even have rewards programs. Obviously, there’s a lot to consider when using a credit card and understanding the credit behind it.

A credit card tests your nancial discipline and resolve. When used properly, a credit card can be a useful tool to build good credit and improve your credit score. However, in a society that screams, “I need it now, I want it now!”, the credit card can feed that urge and provide an avenue for an individual to give in to those temptations. An August article by Market Watch says that, “Americans had $1.021 trillion dollars in outstanding revolving credit in June of 2017” - a record level of revolving credit! This clearly tells us that many Americans are living outside of their nancial means. If you choose to use a credit card, be responsible! Only charge what you can a ord to pay o monthly and eliminate monthly balance carryover. The rewards and incentives are great, but do not let that entice you to overspend.

A very common way for this lack of nancial discipline to occur is by allowing young people and newly independent college students access to get a credit card. They often have meager monetary resources and are easily persuaded by the ability to get what they want, when they want. I can remember clearly my frst day as a young freshman on the university mall, seeing all the credit card booths. These companies worked so hard to get you to sign up, even offering free school swag as an incentive. Young, impressionable adults, trying new things, now have this new resource that allows them to take part in virtually any activity they want with a swipe of the card. Little does this person know, but they are at the beginning stages of a vicious downward spiral of continuous debt and poor financial habits. Fast-forward a month from that point and this young, naive college student has had the time of their life, but now cannot a ord to pay the bill in full.

Credit card companies know all of this, of course, and their marketing departments know how to appeal to the younger generation. Unfortunately, our educational system usually lacks education on money management as a critical life skill, so nancial habits are often instead learned behaviors that come directly from parents and other family members. As denoted by the

large revolving debt number above, when it comes to nance, unwise adults are passing their habits on to children.

The question then becomes, how do you set yourself up to succeed nancially? The answer is actually relatively simple! First, you must always start with a budget. With a good budget, you can always know where your money is going. Make sure you include a savings category. Next, have the self-discipline to spend less than you make. If you can learn to live on 80% of your income, you will start the process of developing sound nancial habits that can last a lifetime. Finally, learn to live within your means and have the self-discipline to say NO! You can’t a ord to do everything all at once!

The bottom line is that the wise use of credit is a critical skill in today’s world and if done correctly, can be a great thing. But if used unwisely, credit can rapidly turn from a useful tool to a crippling burden. As a nancial planner, my hope is that our younger generations improve their nancial I.Q. to live a debt free, more stress-free life. 

 15543029 - credit card inserted to piggy bank slot
 

 15543029 - credit card inserted to piggy bank slot
 

Borrowing Cents

Now that summer is over, and some of our hard-earned cash was used to soak in all the sun and fun, we may find ourselves in need of cash for a major purchase. Here are the loan basics:

A loan is basically borrowed money. The lender, typically a bank, credit union or even a family member, has cash on-hand and is willing to lend you, the borrower, a specified amount with specified terms. These terms refer to the interest rate, the loan term or length, and the security component.

The interest rate is the lender’s charge for borrowing money. It can either be fixed (i.e. static, never changes) or variable (i.e. adjustable, changes). Along with paying the principal (i.e. the borrowed amount) back, interest will be paid to the lender as well.

The loan term is the length of the loan or the amount of time extended to the borrower to pay back the loan. Typically, longer loan terms lead to higher interest rates but lower payments, and shorter loan terms lead to lower interest rates but higher payments.

Regarding the security component, the loan may either be secured or unsecured. Secured means the loan is backed (i.e. secured) by some type of asset usually owned by the borrower. This is also known as collateral. This is less risky for the lender because it ensures the lender will get his/her share back in case the borrower fails to pay the lender back entirely. In exchange for security, the lender will typically offer a lower interest rate to the borrower of a secured loan. If a loan is unsecured, there is no collateral guaranteed to the lender if the loan goes unpaid which is risker for the lender and typically correlates to a higher interest rate. If a borrower does not have collateral, he/she may usually have a cosigner, like a parent or guardian, who promises to pay the loan back if the borrower does not.

There’s a plethora of loans available on the market today. However, most of them will abide by these general concepts. As always, ensure you do your homework or consult with a financial professional before signing the dotted line. Loans can be a great way to get off of your feet, help with major expenses or endeavors, and even assist you in building your credit when properly applied. Happy borrowing!

 

 37535897 - pink piggy bank with glasses standing in front of a blackboard with simple college savings or fees chart.
 

 37535897 - pink piggy bank with glasses standing in front of a blackboard with simple college savings or fees chart.
 

Earning Cents

words | Justin Figueredo, Financial Analyst

With summer vacation just around the corner, now’s the time to start looking for a summer job or internship to beef up your resume, acquire extra spending cash, or stash your earnings into savings. Regardless of the reason, applying for a new job or internship involves the same important information every time. Here is what you’ll need to create or gather:

•   Resume – This document, typically written in word processing software, lists chronologically all your previous work experience, volunteering, education, awards/honors, and special skills or certifications.

•   Cover letter – A cover letter usually accompanies your resume in an application. It should be a quick snapshot of who you are, what you bring to the position you’re applying for, and why you want the position. A great cover letter is to the point and intrigues the hiring manager just enough for him/her to then look at your resume.

•   Job/internship application – This refers to the paper or electronic application that is required to fill out when applying. You’ll need a lot of your personal information handy like your home address, email, phone number, references’ contact info (people who would vouch for your work ethic, character, or skills), and your work availability.

After you land the job/internship, you will need a form of i.d. and should be prepared to fill out the following forms for employment:

•   IRS W-4 Form – This federal form basically tells your new employer how much federal income taxes to withhold from each paycheck. This is a bit tricky, so your best bet is to do your homework online so as to know what you will be writing down.  The lower the total number you list on your W-4, the more taxes that will be withheld each paycheck usually leading to a tax refund after you file your taxes for the year. The higher the total number you list on your W-4 means you get more money per paycheck, but you will likely owe taxes to the federal government when you file your taxes for the year.

•   Direct Deposit Form – This form will easily and conveniently enable your new employer to transfer money from their bank account to yours. This eliminates the need for you to receive a check or cash you would need to deposit yourself. You will need your bank account information or wherever you want your wages to be deposited - including the full name on the account, the bank account number, and the bank routing number. You can always check with your bank to see where to find the info needed.

Best of luck with your job or internship search! At the end of the day, just go out there, be confident, and have fun in the process. It’s more about the journey than the destination!

 31654537 - piggy bank in sunglasses on the beach - vacation concept
 

 31654537 - piggy bank in sunglasses on the beach - vacation concept
 

Saving for a Rainy day

words | Justin Figueredo, Financial Analyst

It’s a new year...a new year for more opportunities, more successes, and unfortunately, more rainy days. Things happens, and sometimes we find ourselves in need of cash like when our car breaks down, we drop our cellphone, or we need new gear. Here are ideas on how to save money for unexpected expenses knock on our doorstep.

1. You’ll need to find a spot to store your money such as a bank. Typically, you just need to name a parent or guardian as a joint account holder if you’re in between the “minor” ages of 14-17 and want to start a savings or money market savings account. When you turn 18, you can convert your minor savings account to a regular savings account. Savings accounts have a feature called 'accruing of interest', which is basically additional income you earn for storing your money at the bank. Banks pay a small percentage to you. Worst-case scenario, you can always buy an old-fashioned piggy bank, but realize you won't accrue interest using one.

2. The next step is sometimes the hardest - saving! Start small. For every dollar earned, put away at least a dime. Talk to family members about your goal to save money this year for rainy days.

3. Lastly, ask family if they would match your savings at least dime for dime or maybe even at a two for one ratio-two dimes! Sounds little when we’re talking in coins; however, if you earn $100 in a week, and save $10 (10% of $100), your loved ones would match your saving investment with $10 or up to $20!

Week after week, you’ll see your savings account grow. It never hurts to start saving today for tomorrow’s rainy days! 

 10465178 - financial insurance. piggy bank with umbrella
 

 10465178 - financial insurance. piggy bank with umbrella
 

Earning Cash for Gifting

words | Justin Figueredo, Financial Analyst

If you capitalized on the free or affordable summer ideas provided in the last issue, you may still have enough cash in the piggy bank to spend on one of the most fulfilling activities this upcoming holiday season: gifting! If you don’t have enough cash, here are some simple ideas to raise some significant gifting capital this fall.

1. Host a garage sale. Find the excess in your house, and negotiate with your parents or guardians a percentage share of the revenue. Offer to coordinate it all, and market it on free social media sites and apps. Many free websites will walk you through how to host a garage sale. Remember, one person’s excess is another person’s treasure!

2. Donate gently used clothes to consignment stores like Plato’s Closet. Dig through your closet and dresser, and look for articles of clothing that you do not wear frequently or that you outgrew. Items to sell also include accessories like belts, hats, shoes, and eyewear. The better the condition and the more current style, the better the payout. Remember, there is a difference between what you have and what you need!

3. Ask parents in your neighborhood, church, school, family, etc. if they could use a babysitter for date night. Find a simple résumé template online and market your trustworthiness, responsibility, and relevant leadership experience. Word of mouth advertising through your parents goes a long way as well!

Whether you’re selling your parents on hosting a garage sale or a neighborhood parent to hire you as a babysitter, always explain your motivation to raise money for holiday gifts.Whatever you decide to do, smile, have fun and learn along the way. The hard work now will make giving next holiday that much more worth it and fulfilling!

 1.     Host a garage sale.  Find the excess in your house, and negotiate with your parents or guardians a percentage share of the revenue. Offer to coordinate it all, and market it on free social media sites and apps. Many free websites will walk you through how to host a garage sale. Remember, one person’s excess is another person’s treasure!  2.     Donate gently used clothes to consignment stores like Plato’s Closet.  Dig through your closet and dresser, and look for articles of clothing that you do not wear frequently or that you outgrew. Items to sell also include accessories like belts, hats, shoes, and eyewear. The better the condition and the more current style, the better the payout. Remember, there is a difference between what you have and what you need!  3.     Ask parents in your neighborhood, church, school, family, etc. if they could use a babysitter for date night.  Find a simple résumé template online and market your trustworthiness, responsibility, and relevant leadership experience. Word of mouth advertising through your parents goes a long way as well!  Whether you’re selling your parents on hosting a garage sale or a neighborhood parent to hire you as a babysitter, always  explain your motivation to raise money for holiday gifts. Whatever you decide to do, smile, have fun and learn along the way. The hard work now will make giving next holiday that much more worth it and fulfilling!
 

 48635723 - piggy bank.
 

Summer Break! Save the Bank!

words | Justin Figueredo, Financial Analyst

With summer here and the school year over, it's time to start planning the celebrations! If you’re like most teens, your budget is probably limited. Here are some cost-effective ways to usher in the summer, and still celebrate without breaking the bank!

1. Get outside and enjoy nature for FREE! Many of the parks, including parks with lakes, are open to the public. Whether you're looking for hiking, fishing, biking, or any other outdoor activity, parks are a great way to enjoy the summer sun without paying a dime.

2. Find a dollar movie theater in your area! If that doesn’t exist, watch a matinee movie. Many theaters offer discounted prices for movie showings before 6 pm. Save even more money by eating before you go, then throwing a few treats in your purse.  

3. You don’t have to be old to eat meals at restaurants that provide early bird specials. These typically apply either to specific plates or your entire bill as a percentage discount. 

Whether you want be outside trekking in nature or inside eating your favorite food, the summer celebrations are well deserved and the ideas are limitless. Just do a little research before spending more money than you need to for the same product, service, or experience offered for free, or at least at a discount. Happy summer!

Summer Break. Saving Bank, Luca Magazine
 

Summer Break. Saving Bank.jpeg
 

Giving

words | Justin Figueredo, Financial Analyst

Now that you’ve earned some cash over the last couple of months, what better way to spend it this holiday season than by giving! Here are some holiday spending tips, as a gifter, to maximize the return on your gift investment which is measured by the cost of an item and the giftee’s satisfaction.

First of all, there are four types of giftees:

1. Low Cost: appreciates the thought that the gifter put into selecting a unique gift more than the cost of the gift itself. You’ve probably heard, “It’s the thought that counts,” from these low-cost giftees before. For example, crafts, homemade cards with notes, or a DIY project that you thought of specifically for the giftee go a long way.

2.  Status: prefers premium gifts that most often come with a hefty price tag. Personalization, customization, and name brands are typically highly valued by these giftees. The latest technology, the hard-to-find equipment, or fashionable clothing will hit the spot. Because these are most likely big-ticket items, try corralling other family or friends to pitch in and lower your cost while maximizing the giftee’s satisfaction.

3. Value: in between low cost and high quality, and prefers useful gifts. This giftee appreciates the most “bang for your buck.” Needs are more important than wants; therefore, think of what this giftee needs. New clothes the giftee may have outgrown or everyday gadgets that would make life easier are great ideas. Cash and gift cards suffice as well for this giftee!

4. Time or Service: This giftee doesn’t prefer physical gifts. Instead, he or she just wants to spend quality time together or receive a kind act of service instead of a gift. Offer babysitting services for date night or take the giftee out to his or her favorite restaurant. Personalized “coupon” books with acts of service (washing dishes, vacuuming, dog walking, etc.) for the giftee to redeem when desired is always a hit!

Before deciding on a gift, determine what type of giftee your friend, sibling, parent, significant other, etc. is and think of gifts that would maximize the return on your gift investment. Spread the maximum cheer this holiday season!

 23121996 - piggy bank wrapped in christmas string lights

 

 


 23121996 - piggy bank wrapped in christmas string lights