New Article from Practical Money Matters: Can Your Family Afford College?

By Jason Alderman with Practical Money Matters

Find the original article here courtesy of Visa, Inc.’s Practical Money Skills

I’m a firm believer that the more knowledge you acquire, the richer your life will be. But as college tuition and fees continue to skyrocket, students and parents increasingly are asking, “Is a degree really worth the cost?”

For many people it certainly is: On average, college graduates earn $550,000 more than high school grads over a lifetime, according to a Pew Research Center study. Not only that, the current unemployment rate among college grads is only half that of high school grads.

So, assuming your kid is interested in college, ask yourself, “How much can we afford to spend without digging ourselves into a hole?” Unless you started socking away money long ago or Junior can count on a full-ride scholarship, you’ll probably need to take out student (and parent) loans to pay for that degree.

Tread carefully so you’re not saddled with too much debt. Here are a few factors to remember:

Not all degrees are created equal. The average college graduate now carries roughly $25,000 in student loan debt, but many families rack up far more, especially if they have several children. Students should follow their passions – in education and in life – but remember, someone with a degree in engineering or computer sciences will probably garner much higher pay and more easily pay off loans than graduates in lower-paying fields like education.

In other words, don’t take on debt that will overwhelm your future ability to pay it off. To save money, many students start out at a community college then transfer to a four-year institution.

Calculate college’s true cost. As with buying a car, when tallying a college’s true cost there’s the sticker price – the stated full cost for tuition, fees, room and board, etc. – and there’s the net cost you’ll actually pay after subtracting grants, aid, work study and other adjustments that may apply.

Thanks to a new federal law, all post-secondary institutions must post a “net price” calculator to help families more accurately estimate the true costs of attending, based on the student’s individual situation. Colleges may either use the Department of Education’s basic calculator template or develop their own if they require additional information.

Although you won’t be able to do exact comparisons, the new calculators do provide a good starting point for estimating the true costs of various colleges. Indeed, some students find that because of financial incentives offered, such as grants, merit-based scholarships and low-income subsidies, they can actually afford schools they’d previously ruled out. Expensive private schools sometimes end up cheaper than comparable state schools.

Another good comparison tool is the Department of Education’s College Navigator, which lets you search for details about colleges throughout the U.S., including tuition and housing costs, majors and degrees offered and typical SAT scores of students attending. You can even build a list of schools for side-by-side comparisons.

Fill out a FAFSA. Even if you think your income’s too high to qualify for financial aid, you still should fill out the Free Application for Federal Student Aid (FAFSA), since it’s also required by virtually all institutions for access to federal student loans. Federal loans generally have more favorable interest rates and repayment terms than private loans so it’s best to exhaust those alternatives first.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

Build Your First Budget

Congratulations! You’ve got your first place, a new job and money coming in each month. There’s only one problem: It’s never quite as much money as you’d like, is it? Managing your own income and finances for the first time can seem overwhelming, but it’s essential to get off to a smart start. Creating a “plan to spend” instead of spending without thinking is the key to long-term happiness and short-term calm.

To build your first budget after graduation, list your income from all sources first. Next, record your monthly and yearly expenditures, starting with your biggest items, like rent, student loan payments and car payments.

Be honest with yourself about the difference between needs and wants, and categorize them appropriately by listing your needs first when you budget. Elizabeth Warren, White House adviser and co-author of “All Your Worth,” advocates a 50-20-30 strategy to allocate income. Put 50% toward needs such as rent and transportation, 20% to savings for retirement and emergencies, and use 30% wants such as travel and entertainment.

While using resources like online websites Mint.com, Quicken, or a spreadsheet can be helpful, they aren’t necessary. It’s more important to keep the budget simple, to be realistic and to adjust it regularly as needed. Allow for budget busters like car maintenance and fees that only need to be paid yearly instead of monthly.

Give your budget time to work. You might find it difficult to meet your saving goals immediately but, over time, you’ll make progress as you continue to track income and spending. Finally, keep your bigger financial goals in mind as you work to stick to your budget each month.

Copyright 2011 Credit Union National Association Inc. Information subject to change without notice. All other rights reserved.

New Article from Practical Money Matters: Talking Finances with Your Valentine

By Jason Alderman with Practical Money Matters

Find the original article here courtesy of Visa, Inc.’s Practical Money Skills

As you and your spouse celebrate Valentine’s Day over a candle-lit dinner, you may want to avoid romance-killing topics like, “Honey, let’s talk about our financial future.” But you really should have that conversation sooner rather than later to keep your relationship on a healthy footing.

Major life changes may require you to reassess how you manage the family finances. Unfortunately, many couples don’t make time to plan ahead and are later caught off guard around issues like having children, aging parents, planning for emergencies and changing career and retirement goals.

If you haven’t had a financial heart-to-heart lately and aren’t sure what to do next, here are a few suggestions:

Make a financial “date.” Even if you’re in complete agreement on money matters, the family “accountant” should keep his or her spouse in the loop – if nothing else, so they can easily take over in an emergency. Set up regular meetings to discuss bill payments, progress or setbacks regarding savings goals, budgeting for upcoming expenses, and strategies for coping with unforeseen expenses.

Don’t postpone uncomfortable discussions. Should one of you accidentally bounce a check or miss a payment, don’t wait until your next powwow to address it or try to hide the problem. You’ll only make matters worse and create an atmosphere of mistrust. Fess up and deal with the issue right away – you might even save yourself additional late fees or penalties.

Be united. When the news isn’t good – say your 401(k) balances tanked last quarter or one of you got laid off – communication is all the more important. Whether you need to temporarily tighten the budget or make a major life-altering decision like postponing retirement, talk it through and be prepared to compromise so neither party becomes the bad guy.

Reaffirm your goals. Couples often start out with one game plan but then life deals an unexpected hand and goals change. Touch base periodically on how you both feel about such major issues as family size, home ownership, career changes, financing college for your kids (or yourselves), financial risk appetite, when and where you’ll retire, and taking care of elderly parents.

Update legal documents. Make sure your legal and financial documents are up to date and reflect your current wishes, including wills, financial and medical powers of attorney, life insurance policies, retirement accounts, investment funds and any other accounts where beneficiaries or people who control your health or finances are named.

Follow your budget. Some of the worst marital disagreements occur when one or both parties sabotage the family budget. If you don’t already have a budget, many free tools are available. Check out the U.S. Treasury Department’s http://www.mymoney.gov, www.mint.com and Practical Money Skills for Life, a free personal financial management site run by Visa Inc. (www.practicalmoneyskills.com).    

Seek help. If you discover that you’ve gotten off track or need help realigning your financial goals, a number of outside resources are available:

• The NFCC can help you locate a free or low-cost credit counselor.
• You can find a financial planner or advisor through the Financial Planning Association (www.fpnet.org), the Certified Financial Planner Board of Standards (www.cfp.net), or the National Association of Personal Financial Advisors (www.napfa.org).

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

Common Financial Resolutions

Resolutions can be a powerful motivator to help you change your bad habits in the New Year, but the resolutions you think you should have aren’t always the best choice for your financial plan. Our partner, On Your Way, lists three of the most common resolutions, and considerations you should make before you commit to them:

• Spend less. It’s great to have the goal of lowered spending, but if you want to succeed then you need to be specific about what spending you want to reduce. You can start by deciding how much you want to cut your spending, but you should follow that decision with specified reductions in specific areas.
• Save more. Everyone wants to save more money, but for some the idea isn’t a good one. Every individual should dedicate some portion of their income to saving, but for those with a lot of high-interest debt, keeping your savings steady and dedicating more money to paying off debt might be a better choice.
• Pay down debt. Paying off debt is a good idea for many, but in some cases, increasing the rate at which you pay off your debt might be a bad idea. For example, if you focus only on paying off debt, but don’t reserve some funds for savings, then you could easily see your debt increase again after just one unexpected car repair or other emergency. Also, if you have low to no interest debt, then it can sometimes be better to focus on savings and making just minimum payments—especially if you get a tax write-off for some of the debt.

Financial decisions may seem simple on the surface, but often each one is tied to many layers of collateral effect that you should consider first. Pay attention to all the details of your resolutions and the domino effect that the decisions could have before you start holding yourself accountable.

Be sure to visit On Your Way to find more helpful tips on managing your finances and reaching your financial goals. When you log on to the site, you’ll also increase your chances to win rewards such as a Nintendo Wii or SpaFinder gift cards!

Make Each Day Better

Find this original article on AACFCU’s On Your Way site. Be sure to log on to the site daily for helpful tips and for your chance to win prizes and monthly giveaways.

Every day we face a myriad of choices — from where to eat lunch to what to wear to work to where to attend college or university. Some of these questions don’t seem important, but most of them really are. For example, you might think the question of where to eat lunch is unimportant — but let’s say you only have $50 in your checking account and you decide to eat at Denny’s instead of eating the lunch you brought in with you. After eating, you end up with only $42 to last you until payday. An unexpected charge comes in between now and then and you no longer have enough to cover it, and you get an NSF fee. Your easy decision just became a major expense.

Or, let’s say you have $500 in your account, so an $8 lunch isn’t a big deal. After five of those lunches, however, you’ve taken $40 out of your account that could have gone into savings or toward a credit card bill.

Reducing the fallout of an impulsive or indulgent decision creates a residual effect that helps make everyday life better — and it’s easy to do. Each day that you go out to face the world, don’t just focus on what will make you happy right now, think about the long-term effects of even the simplest decision and weigh the potential consequences against the gains.

Know Your Priorities to Make Holidays Special

Whether you celebrate Christmas, Hanukkah, Kwanzaa, or the solstice the holiday season can be stressful—with financial stress often playing a large role.
Figure out what makes the holidays special for you and your family and allocate most of your spending to those things. Maybe there are other, less important things you can scale back or skip.

For instance, if you love hosting a lavish holiday dinner but are ho-hum about festive holiday clothing, don’t buy that new outfit. Budget more for your dinner instead. The key is to set priorities and identify the important things.

And remember that handmade or homemade goodies, charitable gifts or the gift of time can mean much more to recipients than presents.

Here are some ideas:

• Give loved ones a framed photograph of a place or event that is special to both of you.
• Make a charitable contribution in someone else’s name. Give to a fund that person believes in. 
• Offer to help with a project around the house, take a friend to lunch or just go for a walk together.
• Give baked goods or premade dinners to family or friends. 
• Offer to pet sit or babysit free of charge.

The holidays are about being focused on others, which actually makes it easier to budget. The less self-centered you are, the less likely you are to have financial issues from spending every nickel on yourself.

Generally the holidays require some gift buying. To help get ahead on next year’s shopping, consider starting a Christmas Club account where you save all year long for holiday expenses. Give us a call or email us at cuinfo@aacfcu.com to find out more.

Practical Money Matters: Budget Now for Holiday Spending

By Jason Alderman    

It’s tough sticking to your budget any time of year, but the holiday season presents special challenges with so many unexpected expenses and temptations. If you sometimes fall prey to holiday overspending, you might want to look for year-round small spending cuts in other areas of your life that, when added together, can result in big savings.

Here are a few suggestions:

Personal finances:

• If you have low-deductible homeowners, renters or auto insurance, ask how much your premiums would drop by raising the deductible to $500 or $1,000 – it could be 15 to 30 percent or more.
• Cancel underutilized phone and cable services, magazine subscriptions, gym memberships and other “extras” you’re not using.
• Before shopping at chain stores, check with online gift card resellers like Plastic Jungle and CardWoo where you can buy gift cards at a discount. Combine the gift card with a coupon or discount code to save even more.
• Kick bad habits. Smoking one $6 pack of cigarettes a day costs about $2,200 a year, not to mention additional medical and lost-work costs.

In the home:

• By lowering your thermostat 10°–15° for eight hours you can reduce your home heating bill by 10 percent or more. For a $400 monthly bill, that’s $40 in savings.
• Insulate your water heater and outgoing pipes to reduce heat loss and save 4 to 9 percent in water-heating costs. Also, try lowering the temperature to 120° for additional savings.
• Beginning January 1, 2012, traditional incandescent light bulbs will begin phasing out (starting with 100 watt bulbs) in favor of more efficient models that use 25 to 80 percent less energy. By upgrading 15 bulbs, you could save about $50 a year on utilities.

In the car:

• Aggressive driving (speeding, rapid acceleration and braking) wastes gas and can lower gas mileage by 33 percent on the highway. By driving sensibly, you could save about $1.20 for each $3.65 gallon of gas.
• Fuel economy drops rapidly at higher speeds. For each 5 mph you exceed 60 mph, it’s like paying an additional $0.29 per gallon of gas.
• Avoid keeping unnecessary heavy items in your car – each extra 100 pounds reduces your mpg by up to 2 percent.
• Use websites like GasBuddy.com (which has free smartphone apps) and GasPriceWatch.com, where motorists share up-to-the-minute tips on where to find low-priced fuel.

Health care tips:

• Consider generic vs. brand-name drugs; copayments are usually much lower. Medtipster.com lets you search for generics by cost, by local zip code.
• Ask whether your insurance offers quantity discounts for mail-order prescriptions. Often, the copayment for a 60- or 90-day supply is the same as a 30-day supply at a regular pharmacy.
• Ask your doctor about pill-splitting. Many drugs come in double-dosage tablets that cost the same as a lower dosage. (Caution: Some pills should never be split, so always ask your doctor or pharmacist first.)

For more cost-saving ideas, check out AARP’s “Save Money on Everything,” www.americasaves.org, and Practical Money Skills for Life, a free personal financial management program run by Visa Inc. that offers savings and budgeting tools, including a Holiday Budgeting Center.

By trimming a few dollars here and there you’re suddenly saving hundreds or thousands of dollars a year – enough to tide you through the holidays and start a vacation fund for next summer.

Jason Alderman directs Visa’s financial education programs. Find this original article and more from Jason Alderman at Practical Money Skills for Life and Practical Money Matters.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Sending Kids the Right Money Message

Money does not grow on trees. Okay, you know this – but do your kids? Teaching children the meaning of money is vital to ensuring they know how to survive in a world full of financial hazards.

There are many ways to instill healthy habits, but the most important method is to teach by example. If your children see you using credit cards to pay for what you can’t afford, it won’t be long before they believe that depending on loans is the only way to make ends meet. If they hear you argue or fret about bills, they are likely to have a negative association with money management. As a parent, coming to grips with your own financial mishaps will not only benefit you, but will have a tremendous and lasting impact on those who are watching you. And they are watching.

Teach early
How young is too young to learn about money? This question has been much debated, but even toddlers can and should be introduced to certain rudimentary ideas. Rather than giving formal lessons (that are sure to confound and bore a three-year-old), make your outings together fun learning opportunities. By the time he or she knows numbers and the concept of less and more, hit the world together and begin the learning process.

Teach good shopping habits
When shopping, teach your child to be a selective consumer. Discuss price versus product. For example, when you are at the supermarket, pick up a couple of boxes of cereal and say, “this one costs $2.50, and this $4.50. Which should I buy?” In age-appropriate language, discuss why you would – or wouldn’t – choose the less expensive box.

At the checkout counter, hand your child the bills and allow him to pay for what you’ve chosen together. That action will help him understand that things don’t magically appear, but are bought. If you use a credit card for purchases, make sure you explain that there will be a bill at the end of the month that must be paid by a specific date.

Teach the work-income connection
Before heading off to work, take a moment to explain that you are going not just because you like your job (associating work with enjoyment and fulfillment is also an important lesson), but to earn an income so you can pay for the things you need to buy for the household. Keep it simple, light, and positive. 

Bump-up the lessons
As your child gets older, keep the lessons up but increase their complexity. Read the business section of the newspaper together and discuss the basics of economics. If you are fuzzy on the details of how the stock market works or the impact of taxes in our lives, make a commitment to learn more – and to share that knowledge with your child.

Talk about marketing and advertising too. While it may not change the fact that your daughter wants a hundred dollar pair of jeans, she will at least be aware of why she desires them.

Allow them the opportunity to make mistakes and have successes
Giving money to children is a very hot topic, and there are a great many philosophies about how and when to do it. Each family has their own way, and what works for you and your kids may not for the family down the block. However, learning how to handle money is best done with cash in hand. 

Whether you give an allowance that is based on chores, is freely given, or you provide a “base salary” with an opportunity to earn bonuses, make sure you give your child the chance to make mistakes. Made on a small scale, a mistake such as blowing a months’ allowance on a toy that immediately breaks can be the most effective learning device around.

Emphasize Saving
Many children are natural savers; stockpiling coins like squirrels hoard nuts. Others have to be taught to sock money away. But whether saving is innate or learned, it should always be encouraged and praised. Once again, the best way to teach is to lead by example. Talk about saving – what you do, how you do it, what you are saving for. Your excitement and commitment will be transferred to your child.

Teaching children about money – how to earn, use, and save it – can be a very enjoyable experience for all involved. However, to be the most effective instructor, you may have to change some of your own notions and habits, or learn a little more than you know now. The end result will be children who are more apt to survive the lean times – and maybe teach you a thing or two when they get older!

Sending Kids the Right Money Message

Money does not grow on trees. Okay, you know this – but do your kids? Teaching children the meaning of money is vital to ensuring they know how to survive in a world full of financial hazards.

There are many ways to instill healthy habits, but the most important method is to teach by example. If your children see you using credit cards to pay for what you can’t afford, it won’t be long before they believe that depending on loans is the only way to make ends meet. If they hear you argue or fret about bills, they are likely to have a negative association with money management. As a parent, coming to grips with your own financial mishaps will not only benefit you, but will have a tremendous and lasting impact on those who are watching you. And they are watching.

Teach early
How young is too young to learn about money? This question has been much debated, but even toddlers can and should be introduced to certain rudimentary ideas. Rather than giving formal lessons (that are sure to confound and bore a three-year-old), make your outings together fun learning opportunities. By the time he or she knows numbers and the concept of less and more, hit the world together and begin the learning process.

Teach good shopping habits
When shopping, teach your child to be a selective consumer. Discuss price versus product. For example, when you are at the supermarket, pick up a couple of boxes of cereal and say, “this one costs $2.50, and this $4.50. Which should I buy?” In age-appropriate language, discuss why you would – or wouldn’t – choose the less expensive box.

At the checkout counter, hand your child the bills and allow him to pay for what you’ve chosen together. That action will help him understand that things don’t magically appear, but are bought. If you use a credit card for purchases, make sure you explain that there will be a bill at the end of the month that must be paid by a specific date.

Teach the work-income connection
Before heading off to work, take a moment to explain that you are going not just because you like your job (associating work with enjoyment and fulfillment is also an important lesson), but to earn an income so you can pay for the things you need to buy for the household. Keep it simple, light, and positive.

Bump-up the lessons
As your child gets older, keep the lessons up but increase their complexity. Read the business section of the newspaper together and discuss the basics of economics. If you are fuzzy on the details of how the stock market works or the impact of taxes in our lives, make a commitment to learn more – and to share that knowledge with your child.

Talk about marketing and advertising too. While it may not change the fact that your daughter wants a hundred dollar pair of jeans, she will at least be aware of why she desires them.

Allow them the opportunity to make mistakes and have successes
Giving money to children is a very hot topic, and there are a great many philosophies about how and when to do it. Each family has their own way, and what works for you and your kids may not for the family down the block. However, learning how to handle money is best done with cash in hand.

Whether you give an allowance that is based on chores, is freely given, or you provide a “base salary” with an opportunity to earn bonuses, make sure you give your child the chance to make mistakes. Made on a small scale, a mistake such as blowing a months’ allowance on a toy that immediately breaks can be the most effective learning device around.

Emphasize Saving
Many children are natural savers; stockpiling coins like squirrels hoard nuts. Others have to be taught to sock money away. But whether saving is innate or learned, it should always be encouraged and praised. Once again, the best way to teach is to lead by example. Talk about saving – what you do, how you do it, what you are saving for. Your excitement and commitment will be transferred to your child.

Teaching children about money – how to earn, use, and save it – can be a very enjoyable experience for all involved. However, to be the most effective instructor, you may have to change some of your own notions and habits, or learn a little more than you know now. The end result will be children who are more apt to survive the lean times – and maybe teach you a thing or two when they get older!

Create a Financial Disaster Plan

Home safety books often recommend that you prepare a map of different escape routes from your home to use during a fire or other emergency as part of your disaster preparedness plan. Financial emergencies often require a quick escape from spending as well as a new way to generate income, so why not create a financial disaster plan with financial escape routes and plans?

To create this plan:

• Make a note of the bills or services you would cut during a financial disaster (such as Netflix, cable, etc.) along with the customer service number you need to call in order to make the cut.
• Put together an emergency grocery list based on the least expensive meal plan you can create. Write down the prices of the items and the stores where you would purchase them.
• List the items in your home that you could sell to raise some quick cash. 
• Develop a plan for rationing your emergency savings to make your money last as long as possible.

Challenge yourself to create your own plan so you’ll know that no matter what happens — to the economy, your job, or your finances — you’ll be ready.

If you would like to see more helpful articles like the one here, visit AACFCU’s partner, On Your Way. Log in daily to earn rewards and have a chance at winning several prizes!