Friday, July 26, 2013

5 Things New College Grads Should Know About Money and Credit


Let’s start with five things every new college graduate should know about money and credit. We will end with a few words of advice for new grads facing an uncertain economic future.

  1. Everyday, more and more employers are now looking at credit reports as a condition of employment. If you are responsible with your personal credit, you will likely be a responsible employee. Manage your credit well and enjoy the low rates and easy availability of money good credit management brings. You will want this when you buy a car or a new home.

  1. Review your credit report annually! Reviewing your report annually for free at can keep you abreast of your personal credit situation and help you spot Identity Theft.

  1. Paying Bills: Very simple, your utilities need to be paid on time just like your credit card bills. Sure, you can let your light or water bill float for a couple of months and paying them 30 or 60 days late won’t count against you. As a matter of fact, you have 89 days to make your payment and have your account reinstated. However, if you wait to that 90th day, you are now delinquent. Your water, light, or phone bill amount will now be placed in collection and exist as a negative item on your credit report for seven years whether you pay it or not. (Paid collections remain on our credit reports for the balance of the seven years after payment as a reminder to others that you were irresponsible once or twice or repeatedly depending on how many collections one has.)

  1. Social Security: Social Security will exist in a very different format for these Gen Y students. They need to be self dependent and plan for their retirement early. No one will do it for them. In my workshops, I often ask who wants to retire with a million dollars in their retirement account. Of course, multiple hands go up. The point: When your employer offers you a 401k, pension, or any other type of “qualified” retirement plan, simply say “YES!” Start contributing to the retirement account. Put in at least 6%. You won’t miss it, you will save a few dollars on your taxes, and you will be pleasantly surprised when you get your retirement account statements and see it growing. This is especially gratifying if your employer matches your contribution or provides pension plan contributions from profit sharing.

  1. Social Media: Restrict your personal information that is shared over the internet. Too many young adults share too much as it is and do not take proper advantage of privacy controls in websites like Facebook. If you don’t want your next potential employer to see your spring break photos of drunken debauchery in Palm Springs or Palm Beach, tighten up your privacy controls, Dude!

I think following these five ideas can save you from living in your Mom’s basement forever.

In my work with recent college students and grads, one of their greatest fears is that they will never own a house. Recent grads are facing a difficult time in some areas with the homes they may want to buy being priced out of site for them due to the current demand. Don’t worry. The average age of a first time homebuyer is 30 years old. Most people I know did not buy a home until they were well into their 30’s. There is no rush to buy a home despite the increases in overall prices. You have time to save your money. You have time to evaluate where you want to live and whether a house or condo would be best for you. You have time to gauge the economy and pick your best time to buy.

I have noticed it and it has been expressed to me by some students, the financial markets are too volatile. Why would they want to put their money into the stock market? They fear the return of the great recession. When I was 21 in 1981 there was a recession on and it was pretty serious. Interest prime rates had risen over 20%. No one could get a decent interest rate to buy a home. Unemployment was 8% and rose to 10% over the next two years. In the early 80’s, we had many of the same fears today’s grads suffer.

What happened? Eventually, markets went into recovery. Unemployment was under 6% by 1988. The stock market doubled, tripled, and eventually grew to 14 times its size by the present day. This didn’t happen in a nice even fashion. It took a market crash in 1988 (22% drop in the Dow in just one day!) and three recessions in 1992, 2000, and 2008 to get here. Financial markets are cyclic and, historically, have always recovered and surpassed previous high water marks. 

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Friday, July 12, 2013

10 Financial Infographics and a Blogger

Today, we are full of links!

Info graphics have become a big rage on the internet. They can be very useful in explaining fairly complex issues in a series of “Powerpoint” like graphics and text that can be found on one page. Wikipedia says they can improve our cognition by utilizing graphics to enhance the human visual system’s ability to see patterns and trends; a data visualization so to speak. I like them because the read fast and always leave an impression.

Here are ten infographics I found that have some very important information in them that everyone could use. I will comment a little on each…

Love and Finances. How much does love cost? It might be more than you think.

How much do Americans Save? There are a lot of demands on our wallet! As savers, how are we ranked against other countries’ savers?

Protect your Identity Online. These are simple tips anyone can use to protect them from scammers. You are only safe if you take action. No one will do it for you!

What are capital gains? If you are unsure or don’t know at all, this graphic is a terrific explanation. It is better to know now than learn too late. That could be a costly tax mistake!

How finances impact emotional well being. Do you get depressed at the end of the month when your account runs low? Do you ever get the “Day before Pay Day Blues?”

How much can you save with a Roth IRA? This is surprising! Had I started in my 20’s I would have a huge tower of beer or a huge retirement account if I invested in dollars rather than beer. This is a fun and informative graphic.

It is important for us to plan for a long retirement. If you and your spouse were 62 today, there is a 47% chance that one of you will live to age 90. Have you planned your retirement accordingly?

Do financial challenges cause divorce? Earlier, we saw the costs of love in our Love and Finance graphic. But can money also cause a divorce?

What is a credit union? This info graphic lays it out nicely for us.

Credit Unions vs. Big Banks. The battle between the heavyweight champ (big banks) and the flyweight contender (credit unions) goes on. Where would you rather keep your banking?

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Len Penzo is an electrical engineer with a good head for personal family finance. He is a recommended blogger by Kiplinger Reports who named him one of “Kiplinger’s Personal Finance Best Money Blogs.” I like to read Len’s blog weekly.

What I like best about Len’s blog: “Well, my blog is all about being personally responsible – not only for our personal finances, but also for everything else we do in life.  As you will learn from my blog, the great thing about financial freedom is that anyone can attain it — regardless of income level!” Len Penzo - Finance Blogger

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Don’t forget that this weekend is the Summer’s Hottest Car Sale!!!

The parking lot at our main office will be filled with recent model pre-owned cars this weekend. We have some outstanding financing deals for those who qualify.

July 13 - Saturday from 9am – 6pm
July 14 - Sunday from 10am to 5pm

Meriwest Credit Union Main Office
5615 Chesbro Ave
San Jose CA 95123

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