Over Your Head Financially? Here are your top ten indicators...

 1. Carrying a balance on a credit card. If you are not paying them off, you are paying interest. If you could shift all the interest you paid on your consumer credit cards to your retirement account, how rich would you be? 

2. You use payday loans to make ends meet at the end of the month. Bad consumer! 

3. You’ve been turned down for a consolidation loan. This is a sure sign you are already over-extended and that your debt-to-income ratio is too high. Time to budget your expenses and start paying down what you owe! 

4. You’re hiding your spending behavior from family members. This red flag indicates that you are aware of your personal finance problems, but are unable to acknowledge it. Fighting with your spouse is a related indicator as financial troubles often lead to domestic trouble.

5. You finance your vehicle for more than five years. This may be a clear sign that you’re buying more vehicle than you can reasonably afford.

6. You get more than one late notice per year. On occasion, everybody may let a bill fall through the cracks and forget to pay it. But if you find yourself getting multiple late notices for bills, especially for utilities, then that’s a signal that your finances may be in serious trouble.

7. You get more than one bounced check per year. Again, most folks have had an occasional overdraft of their checking account. But if this happens more than once per year, it’s usually a sign of trouble.

8. You need a co-signer to get a loan. Those without a credit history can ignore this warning sign. However, for everyone else, the need for a co-signer indicates that banks no longer find you credit worthy.

9. You find yourself borrowing from your family and friends. We have heard that borrowing from friends or family is a surefire way to sow the seeds of discontent — especially when you fail to pay the money back.

10. You lack an emergency savings account of at least three months living expenses. Those who are living from paycheck to paycheck can be completely derailed by even the most modest unexpected expenses, such as the need for major car repairs.

Credit: Credit Unions are providing their members and the public with more financial education classes than ever. This is done for free as a community service to their neighbors. Yeah! 

Debit: Over the past year, several national banks have raised fees on their checking overdraft and non sufficient funds transactions. Boo! 

Our Next Financial Workshop:

May 22nd - Preventing Identity Theft -6:30pm
Meriwest Credit Union Main Office at 5615 Chesbro Ave, San Jose CA 95123
RSVP with Greg Meyer at gmeyer@meriwest.com or call at 408-365-6328

The Long Shadow of Bad Credit in a Job Search: How does your credit effect your ability to find a job? This story, from New York Times Business Day section, will give you some insights into how hiring managers view your credit report. Click the link and learn! 

 

Len Penzo - One of the great financial bloggers! Check out his blog here: LenPenzo.com

Benjamin Franklin's Legacy of Money Management

Benjamin Franklin is probably the Founding Father who was most financially aware. I have assembled some of his more memorable lines here and added my own explanation to them. As you read these quips, remember the age in which these were written. Back in the late 1700’s, it was frowned upon when one borrowed. Both Shakespeare and the churches warned people against lending and borrowing money.

Let’s keep in mind, in 1785 there were no consumer lending laws to protect us from predatory lenders. As more than two hundred years have passed since Ben was publishing his thoughts on financial education, there have been numerous changes in how we borrow and how lenders work with us. Today, borrowing to purchase a home or a car is fully acceptable. When credit is granted, it is done through a very careful approval process where a borrower’s income and past credit management is put under scrutiny.

But, just like in Ben Franklin’s time, it is not a good idea to go too far into debt

Let’s consider some of his sayings:

When you run in debt; you give to another power over your liberty. -  And  - The borrower is a slave to the lender, and the debtor to the creditor.

Meaning that when we are in debt, those who hold our debt control us and take away our freedom to a certain extent. While in debt, we are slaves to the monthly payment!

Rather go to bed supperless than rise in debt.

Franklin had a great disdain for being in debt. In those days, if you were in debt, the whole town knew it. He would rather be hungry than owe money.

Tis easier to suppress the first desire than to satisfy all that follow it.

This relates directly to “Wants vs. Needs.” Essentially he is saying, fight the urges to spend money. As you fight those urges, it will be come easier and easier to suppress the desire to spend.

For age and want, save while you may; No morning sun lasts a whole day. 

Save for your retirement and for the things you want. Start now, start early. There is no time like the present to begin. You have a limited amount of time to make a good return on your retirement funds.

Get what you can, and what you get hold; ’Tis the stone that will turn all your lead into gold.  

It seems that Ben Franklin also understood time and money. Saving your money in an appropriate investment can turn a few dollars into many or “what you hold into gold!”

Beware of little expenses; a small leak will sink a great ship.

Little things add up. It’s like two sodas from the coke machine everyday. .75 cents per coke, twice a day, five days a week, for fifty two weeks = $360! Could we find a better way to spend or save $360?

Buy what thou hast no need of, and before long thou shalt sell thy necessaries.

If you buy the stuff you want you may eventually have to sell the important things you need to pay for the stuff you want.

All of these things are as true today as they were 230+ years ago. It is not a good idea to go into debt. It is still a good idea to save. It is still a good idea to invest. It is a good idea to have a budget and adhere to it. This is timeless advice that we can all use.

But let’s also remember that not all debt is bad! There is debt that can help us. A loan on a home allows us to write off the interest that is paid annually, thus saving families thousands of dollars in hosing costs making that home more affordable for them. A car is a personal asset that gets us to work on time. So, a car loan can be considered part of an investment in our personal economic development. 

And for all of you out there looking for our next financial education workshops, your summer wait is over. Our next workshop will be "Reality Based Budgets for Teens" at our Milpitas Financial Center at 6PM on Aug. 22nd. 

Our next "Credit Myths and Repair Workshop" will take place at our Milpitas Financial Center on Aug. 29th at 6PM. 

I hope I will meet you at one of our seminars! Have a great week!

Living at Home Again: Financial Advice for recent Boomerang Kids

Recently I had an email from Bill H. who is a recent college graduate but was unable to find a job immediately in the current job market. He turned up on his parents’ doorstep like many other recent grads. This is often referred to as the Boomerang Effect: students returning home after college rather than striking out on their own right away. Often, this is not by choice; the student would rather be working and on their own.

He wrote:

Dear Credit Union Guy,

After graduating I had to move back home until I find a job. Do you have any tips for managing my finances at this stage in my life?

Bill H.

Dear Bill,

Here are some points for you and other Boomerang Kids:

• Don’t take on any new debt while unemployed! Save your money to make the payments you need to make on any current student loan, car loan debt or credit cards.
• Don’t ever use a credit card for entertainment purposes while unemployed. I have seen far too many pizzas, movies, and concerts on students’ credit cards. They have nothing to show for this debt that they are paying it off at 19%! Ouch!
• Make all your payments on time. Late pays will show up on your credit report and many employers use a credit report to determine the personal responsibility of potential new employees. Current payments mean you will get out of the house soon. 30 and 60 day late payments may cause you to sleep in the bunk bed with your little brother for a while longer than planned.
• Maintain your checking account, make regular deposits to cover your outstanding checks and debit card charges. If your account goes into a negative balance, get it positive quickly. Most financial institutions will only maintain a negative checking account for 30 days. Then they close it for cause and report any losses to a collection agency and ChexSystems, a credit reporting service for financial institutions. If you get reported to ChexSystems by your bank or CU, a ChexSystems record will prevent you from opening a new checking account at a member institution for the next five years! Most banks and credit unions are members of ChexSystems. Trust me, you don’t want your parents seeing mail for you from ChexSystems and collection agencies. That does not make for pleasant dinner conversation.
•  Make sure you have the address of your student loan company and the payment due data for your loan. Generally, six months after you graduate you have to start paying your loan. If you are not employed, you can ask your student loan company for a deferral in payment; this is known as forbearance. Interest will still accrue on the loan and be added to the balance, but payments will be deferred for six more months.

Bill, you are not the first kid to come home after college and you won’t be the last. Returning to home after college can be a stressful situation for students and their families. It is not what you expected to do when you finished your college degree and it is not what your parents expected either. But you can make the best of a difficult situation.

Don’t let your finances become a regular topic of conversation at your family’s dinner table. While living at home and looking for your dream job, don’t overlook getting a part time job to make some ends meet. A little bit of income is better than no income at all and it helps pay your bills. Manage your debt well and keep on top of your checking account. In the end, you will be respected for handling your personal finances in a very mature manner.

Best of luck,

The Credit Union Guy

And for all of you out there looking for our next financial education workshops, your summer wait is over. Our next workshop will be "Reality Based Budgets for Teens" at our Milpitas Financial Center at 6PM on Aug. 22nd. 

Our next "Credit Myths and Repair Workshop" will take place at our Milpitas Financial Center on Aug. 29th at 6PM. 

I hope I will meet you at one of our seminars! Have a great week!