Monday, July 6, 2015

5 Financial Tips for College Grads

5 Financial Tips for College Grads

Graduation may mark the culmination of 16 plus years of studies and hard work, but the relief and joy of college completion barely sets in before the jarring start of  “real world” fiscal responsibilities.

While navigating this time’s “firsts”, freshly minted grads should get back to the books - educating themselves on the financial basics that facilitate independent adult life.

Here are five top tips for every new grad to get started….

Know What You Owe

Remember that money you borrowed to pay for the last four years of your life? It’s time to start paying it back. As overwhelming as that may seem, know that student loans left unattended only become more daunting.

Make a list of what you owe, when and to whom. Work those numbers into a realistic monthly spending plan. If paying down the liabilities still seem unattainable, take the time to research your alternatives - refinancing, consolidating, applying for government programs like Income Based Repayment, etc. The most important thing is to be proactive. Procrastination doesn’t pay.

Track Your Spending

The cost of basic living can be a real shock to the system. Even mundane necessities like paper products and cleaning supplies place surprisingly significant demands on spending.

Get grounded in your day-to-day costs by tracking every dollar spent. Once you know how much it costs to live, you’ll know exactly how much you need to make - at a minimum.

Taking a look at your expenses in this way can also be an illuminating exercise in appreciating value. When you see how much a visit to your favorite salon costs for example, compared to how long it takes you to earn that same amount of money, former “necessities” suddenly become far less important.

Check Your Credit

If you’ve been having trouble being approved for your first non-dorm room apartment or your first solo credit card, you may want to give your credit score a quick check. Even if you have no immediate need for credit, checking your score is good practice as it’s the primary measure of your fiscal responsibility to future landlords, lenders, insurers and in some cases, employers.

Spend some time learning about your credit and what you can do to improve it. Building credit takes time, so get started now.

Think About The Future

With so much happening post-graduation, it’s hard to think 30 to 40 years in advance, but cultivating your long-term mindset will serve you for years to come. If you’re already working with a full-time employer, take the time to understand your benefits and enroll in company health and retirement programs.

If you’re still figuring it all out on your own that’s fine too, but it’s no excuse to defer future planning. Look into individual retirement accounts like a ROTH IRA and start reading up on investment basics or talk to a financial professional that has experience working with young professionals to get a grasp of essential principles.

Have Some Fun

The end of college isn’t the end of all things fun and exciting…if anything, it is the beginning of independence. Learn how to spend on the things you savor. Realizing those priorities early on will set you up for smart, value-based decision making for the rest of your life.

Congratulations and enjoy!

Tuesday, March 31, 2015

Beat the Credit Catch-22

How to Get Credit With No Credit History?

Credit is the ultimate Catch-22. You can’t qualify for credit until you’ve proved yourself worthy with good credit history, but you can’t build credit history until you’ve qualified for credit in the first place. Despite the understandable exasperation these kinds of cyclical realities create, building credit is important and should not be ignored or put off. It’s better to start taking small steps towards building a strong history of responsible borrowing today than wait until you really need it to finance a major purchase like a home or to qualify for an urgent loan.

Despite the Catch-22, there are ways to build credit from scratch. These strategies can also be useful in rebuilding credit after a major credit faux pas, or with a history of poor credit usage.

Apply for a Secured Credit Card. Secured credit cards are easier to get because they are backed by a cash deposit that serves as collateral. Otherwise, the card should be treated just like a regular unsecured credit card. Make payments on time and in full to establish a positive credit history. Once you build up your credit, you can transition to an unsecured card, getting the deposit back on your secured card when closing the account. Note that secured cards come with more fees than unsecured cards, so as soon as you’re able to make the transition to unsecured credit, the better.

Get a Cosigner. If you want to avoid the fees associated with a secured credit card, you may be able to qualify for an unsecured card if you have a cosigner with a strong credit history willing to vouch and take responsibility for you. If you use the card irresponsibly though, you could not only hurt your own credit, but that of your cosigner too.

Become an Authorized User. Becoming an authorized user is another way to enjoy the benefits of good credit built up by friends or family members. As an authorized user, you get your own card and build credit history, but you aren’t personally obligated to pay for the charges. You should, however, come to an agreement with the primary cardholder as to what you’re expected to pay and how those payments will be made. Again, a failure to treat this credit line responsibly could hurt both you and the primary cardholder.

Pay All Bills On Time. The biggest component of a credit score is payment history. Even one late or missed payment can adversely affect your score, and it’s not just limited to credit card payments. If you become delinquent on your utility or cell phone bill for example, the bill can be sold to a collection agency, show up on your credit report, and hurt your credit score. Avoid an accidental oversight by setting up automatic bill pay or putting alternate systems in place to ensure your credit doesn’t suffer the consequences of late or missed payments.

Track Your Credit and Be Patient. It takes time to build a credit score from zero. If you use your starter cards responsibly though, eventually you’ll be able to build up your credit enough to qualify for better deals. Track your credit to stay motivated and ensure that your score isn’t suffering because of a reporting error or oversight. Even once you’ve built up your score to the 700s and 800s, it’s still good practice to keep an eye on your credit to make sure you don’t suffer any incorrect or unnecessary score plummets that leave you back at the start of your credit Catch-22.

Tuesday, March 17, 2015

How Much Can You Save By Switching Banks?

How Much Can You Save By Switching Banks?

You might be a pro when it comes to scouring the circulars for savings on your favorite personal care products, you may even be cashing in on amazing vacation deals by utilizing loyalty points and rewards miles, but are you missing out on savings when it comes basic banking?

Most people don’t associate banks with deals or discounts - an August study by the Wall Street Journal however, proved just how much you can save by banking in the right place. After analyzing fee data at over 6,000 banks, the study found that at the 25 institutions with the highest fees, the average account was charged more than $383 annually. Conversely, the study also found 160 banks where the average account was charged less than $5 in fees each year.  That’s a difference of $378!

In other words, when it comes to your bank - just like your groceries and your travel - it pays to shop around. So, what should you look for to ensure you snag the best deal?

Fee Free Checking. Some banks will charge you a monthly maintenance fee for basic checking if you don’t maintain a minimum balance or set up direct deposit. These fees, typically around $12/month, mean paying the bank $144 each year just to hold onto your money. And that doesn’t even take into account the many other fine print fees that often accompany this most basic of accounts - check fees, paper statement fees, overdraft fees, etc.

Overdraft Policies. Speaking of overdraft fees, take the time to read up on your banks’ overdraft policy. A recent analysis by Magnify Money examined the cost of a single $100 overdraft paid back in 10 days. They found that this scenario could cost the consumer as much as $83.93 and as little as $9 depending on the bank. When looking into overdraft policies, note how many times per day the bank can charge you for your overdraft as well as any extended overdraft fees.

ATM. Believe it or not there are banks that don’t subject you to paying astronomical ATM fees every time you need access to your own cash. Some will even refund ATM transactions worldwide. At $2 or more per transaction, saving on those small withdrawal fees can mean significant savings over the course of a lifetime.

If all of these fee free options exist, why does anyone still pay the price of expensive banking? Well the banks don’t exactly make it easy. A 2012 Pew research study found that the average length of a disclosure statement for a basic checking account was 69 pages - leaving plenty of room for fine print fees to sneak in undetected.


To avoid those fees however, consumers can look for better deals at banks that advertise their free perks. Those that offer ATM rebates and fee free checking typically display those features proudly. For the most part, online banks have the most fee free options. With fewer operating costs, thanks to freedom from typical brick and mortar business expenses, these banks pass along savings to their customers in the form of fewer fees and higher rates.  The end result - better deals on basic banking.

Tuesday, February 24, 2015

Save Up For a Down Payment!

Save Up For a Down Payment!

If, after careful assessment of costs, budget, and future goals, you’ve decided to take the plunge and make the investment in home ownership, it’s time to start designating savings towards a down payment.  Even if you anticipate your official initiation into real estate a few years down the line, you’ll be better off saving aggressively now than financing more of the mortgage later on, or worse, raiding your retirement accounts to make up the difference between what funds you have available and what house you dream to afford.

Here are some simple and smart ways to start planning for a down payment today.

Put It In the Budget.  One of the best ways to realize major financial goals is by breaking them down into manageable pieces and working those intermediary targets into your monthly budget.  See where you have room to cut back in other expense categories and explore opportunities for supplemental income while you fund your future of home ownership. 

Create a line item in your budget that specifically targets this goal, especially as the prospect of buying a home draws nearer. Setting up automatic contributions from your paycheck to a savings or investment account can keep you from preemptively spending those contributions elsewhere.

Plan on 20 Percent.   Estimate your total home buying budget so that you can make a realistic assessment of your projected down payment.  Experts recommend putting down at least 20 percent.  Not only does the 20 percent rule mean lower monthly payments and less interest paid over the life of the loan, it also means having more equity in your home from the start and avoiding costly private mortgage insurance.

Check Your Credit.  In addition to saving up for a sizeable down payment, checking in and, if necessary, improving your credit, can save you a whole lot of interest when it comes time to take on the mortgage.  The better your credit, the better deal you can negotiate with your lenders, saving you thousands over the life of your loan.  Establish a history of in-full and on-time payments and check your credit reports for accuracy to make sure your score isn’t suffering because of an error or worse, fraud.

Shop Around.  Once you’ve zeroed in on a home that falls within your personal and financial criteria, it’s time to start shopping for a lender.  Don’t just walk into your bank and take the first deal you get.  Consider all the factors - the mortgage rate, closing costs, expected down payment, private mortgage insurance, and potential prepayment penalty.  The more you’re willing to put down up front, the better deal you should be able to negotiate with your lender.

Save for the Extras.  You don’t want your 20 percent down payment to totally clear out your savings.  Rule of thumb is that you will need approximately 5 percent of the property value for closing costs.  In addition, many owners like to make renovations onto the new property to make their house their home.  Save up to cover these additional costs of home ownership. 

Preparing for your future down payment with sufficient savings will leave you with ample options come home buying time.



Monday, February 9, 2015

Love and Money

Love and Money: Negotiating Finances as a Couple

According to a 2014 Consumer Services survey by Experian, half of married couples in the U.S. say that credit scores are important to them when choosing a mate.  Participants went so far as to rank “financial responsibility” as more important than “physical attractiveness” or “career ambition”, and “financial compatibility” higher than “sex and intimacy”.  In other words, the ability to communicate openly and honestly about your personal finances has become an essential component of an open and honest relationship.

Getting to that point of full financial disclosure however, can be wrought with uncomfortable moments and highly sensitive conversations. From the first date to the first shared living expenses to the first days as a married couple, negotiating finances together is a constant and important reality of shared financial responsibility. 

Here are eight must-have discussions for navigating the various stages of your relationship and the financial realities that go hand in hand with them…

Dating Discussions

1. What Is Your Financial Reality?  It’s much easier to say you’d prefer to keep things affordable from the first date than it is to come clean about your spending limitations three or four weeks in.  If your potential partner isn’t cool with budget-friendly coffee or dessert dates while getting to know one another, they probably aren’t a good financial fit anyway

2. What Are Your Financial Priorities?  How you choose to allocate your funds says a lot about what you hold most valuable.  Discussing financial priorities is a good way to see whether your life priorities align too. 

3. What Are Your Goals?  If you’re hoping for a future beyond the first few months, talking goals is a must.  Once again, goals are a reflection of priorities - financial and otherwise.  The sooner you find out if and where your priorities overlap, the more informed decisions you can make about your future - whether it’s together or apart.

Shared Living Discussions

If things are getting serious and you’re toying with the idea of moving in together, thereby sharing some of your financial responsibilities, be sure to have these discussions FIRST.

4. What Are Your Money Management Techniques?  If you’re going to be sharing financial responsibilities, you need to dig into the reality of your finances together.  Start talking beyond hopes and dreams, and discover how you each manage your money in the day to day to make those dreams happen - or what obstacles are getting in their way.  This is the time to address any concerns and reveal any financial skeletons - like bad credit or consumer debt - if you haven’t already.

5. What Are The Expectations?  Once both parties have laid all their financial cards on the table, an honest discussion about how to move forward and what kind of expectations of financial behavior is appropriate can commence.  What are the expectations around personal financial troubles- like debt or overspending?  What will expectations around shared expenses be- like rent, utilities, groceries, etc.? 

If these conversations reveal enough common ground, it’s probably a safe bet to move forward with your plans of co-habitation.  But that should not mark the end of your financial discussions.  Continuing the conversation, tracking progress, and coping with financial challenges together will help you decide whether you’re committed to a shared future later down the line.

Shared Life Discussions

Marriage is a legal union, and a financial one.  To commit to someone for life without having had a comprehensive discussion about money, let alone a few years of experience navigating financial challenges together, is a risky business.  In addition to all the conversations you’ve had up until this point, here are a few more to consider before tying the knot.

6. How Will Finances Be Combined?  Make a list of all accounts and all financial obligations and discuss how money will be combined or not combined and how any outstanding debt will be managed.  Every couple will have a different way of approaching their finances together.  What is most important is for the two people in the relationship to be on the same page.

7. What Is The Household Budget?  Creating a budget together is a great way to make sure both parties are getting on that same page - both in terms of present spending and future goals.  Talk about priorities together and build them into the budget in a way that suits everyone’s needs, now and in the future.

8. How Much Is “Too” Much to Spend Without Discussing First?  While marriage is a union and financial decisions of both parties affect the union, it doesn’t have to be the end of autonomy.  Discuss what budget there is for each partner to spend freely and what threshold amount is too much to spend without consulting one another first.

Hopefully, by having these important money discussions and coming to an agreement before getting too deep and financially intertwined, couples can grow stronger through their finances rather than be separated and estranged by them.


Monday, January 19, 2015

Tips for Tackling Your Student Loan Debt

Tips for Tackling Your Student Loan Debt

When I say student loans, one word seems to trump all the rest - overwhelming.  Having thousands of dollars (if not tens or hundreds of thousands of dollars) sit around collecting interest is a heavy burden for any young professional to bear.  Not to mention how tough it is to prioritize paying for your past when you’re just starting to set up your present, and fund your future.

Unfortunately, putting off student loan repayment is a short term deflection that can result in serious long term financial pain including default, destroyed credit, garnished wages, etc.  The best policy, regardless of your financial situation, is to confront your debt head on with these starter steps.

1    Take Inventory of What You Owe and to Whom.

Know what you owe.  It seems simple, but when funding comes from multiple sources, it is easy to lose track of your total.  Once you have a clear picture of the amount that needs to be paid off, make note of the details - terms, deadlines, and interest rates.  Give your lenders a call if you have any questions and while you’re on the phone, don’t forget to flex your negotiation muscles.  Asking for reduced interest rates or lower monthly payments is a far better strategy than letting bills stack up in the corner and keeping fingers crossed for an overnight million.

Once you’ve defined the details of each of your student loans, make a list of all other debts - mortgage, auto loan, credit cards, etc. - and their respective rates as you consider your strategy and select a repayment plan.  

    Consider your Repayments Options.

The general rule of thumb is to pay down the debts with the largest interest as quickly as possible, while maintaining at least minimum payments on the other obligations.  However, the loan repayment option your loan providers may offer you isn’t necessarily the best.  Do your research to see what loan repayment programs you qualify for and which make the most sense for your current circumstances and future goals - for example, the Income Based Repayment and Public Service Loan Forgiveness programs (among others). There are many great resources for this purpose, please contact us to learn more about them.

The more quickly you are able to pay off your debt obligation, the less interest you will be paying on this loan and the fewer total dollars will be spent to reach your goal.  However, you have to be careful to not direct too much money towards your loans because this can drain your cash reserves and leave you vulnerable in case of an emergency.  In this instance you may have to charge the unexpected expenses onto a credit card with an even higher interest rate, which would set you back again and can cause financial and emotional strains.  

As you can see, there is no one course of action that is best for everyone carrying student loans.  Educate yourself on your options and consult other resources to make the best possible decision for your present circumstances and future needs.

    Build Repayment into your Budget.

Financial experts often echo the advice, “pay yourself first”.  While payments toward past debt may not feel like much of a celebratory pay day, they do bring you one step closer to zero debt and financial freedom. 

Build a monthly budget to keep your spending on track and make sure student loan payments are part of it - as non-negotiable as rent, utilities, and other bare bones necessities.

Once you establish a clear plan of action for a specific window of time, schedule your debt payments to free yourself of the burden of regularly sending in payments.  Whether it is a 2-year repayment window or a 15-year repayment window, being on a set schedule will give you financial peace of mind.