Time magazine recently published an article warning consumers about the pitfalls of the new 8-year auto loan. Although it may seem that the more affordable, lower monthly payments outweigh any risk associated with the longer-term loan, there are several factors to consider. First, how long do you plan to keep your new car? If you typically purchase a new car every 6 years, then taking out an 8-year loan is not a good idea because you would still owe on the car when looking for a replacement.
Second, how much will the car be worth in 5 or 6 years? Car values depreciate every year and you do not want to wind up owing more than what the car is worth. Third, how much can you afford to pay monthly? If you can afford the monthly payment of a 5 year loan, then you should opt for the shorter term loan. In the end, this option could save you thousands of dollars in interest.
Additionally, prepare before shopping for a car. Know how much you are willing to spend, what monthly payment you can afford, and what type of loan you are willing to consider before visiting any dealerships. Research what type of car best fits your needs and budget. Is a new or previously owned car the best option? If buying a used car, be sure to check the history of the vehicle. Is it better for you to buy or lease?
Finally, don’t be afraid to negotiate. Dealers often expect to negotiate with consumers.
The best way for children to grow into adults who practice good habits is for them to learn those habits at an early age. There is a lot of focus from the White House and in the media about teaching healthy eating and exercise habits. Unfortunately, there isn’t as much focus on the importance of teaching children good money management skills.
Children, however, can benefit greatly from learning how to budget and the importance of saving at an early age. Since these skills are not always the most fun to practice, it can be difficult to engage children in learning them. Thankfully, the internet provides us with many resources to help teach money management skills to children in innovative and fun ways. A few fun and free money management apps and online games are:
1. P2K- for IPhone, IPad, and IPad touch
2. Kids Money- for IPhone, IPad, and IPad touch
3. Save! The Game- for IPhone, IPad, and IPad touch
4. Kids Farm – for Android
5. Rich Kid Smart Kid (http://www.richkidsmartkid.com/ )
6. H.I.P Pocket Change (https://www.usmint.gov/kids/games/)
Try these apps and games out and have fun with your kids while learning about budgeting and saving!
If you want to earn a higher interest rate and you don’t need a physical bank for your banking needs, you should consider opening a checking account with an online bank. (All of them allow you to deposit your checks by taking a picture of them with your phone, and allow you to pay bills online.) Here are some of the best online checking accounts being offered now:
- Highest Interest Rate Option for a Low Minimum Deposit: FNBO Direct. Their APY is currently .65% and you can start an account with as little as $1.
- Free Checks: TIAA Direct Interest Checking. Your first order of checks is free, minimum required deposit is $100, and there’s no monthly fee.
- Best ATM Options & Customer Service: Ally Bank. They have no minimum balance to open the account, provide the use of thousands of ATMs nationwide at no cost, and provide live customer service 24/7.
- Best for Overdrafts: Capital One 360. If you tend to overdraft your account at times, this checking account charges less than $1 for an overdraft of $100.
A recent article in the Journal of Financial Counseling & Planning, “The Independent Effects of Savings Accounts in Children’s Names on Their Savings Outcomes in Young Adulthood” (T. Friedline) showed that kids who had a savings account in their name as children tended to save more money and were more likely to have their own savings account when they were in their early 20’s.
Several cities have started local programs whereby kindergarteners are all given savings accounts. San Francisco has the K2C program where all kindergarteners in the city get savings accounts with an initial deposit of $50 put in them. They will also match dollar for dollar up to $100. Cleveland, Ohio currently provides a similar program. These early savings accounts can help children develop strong saving habits down the road.
WalletHub recently conducted a study focusing on which cities had residents with the best and worst money management skills. They looked at 16 factors, including average credit scores, number of bank accounts per household, foreclosure rates, non-mortgage debt, etc. The top five metro areas with the best budgeters were: 1) Fargo, ND, 2), Sioux Falls, SD, 3) Rochester, MN, 4) Minneapolis, MN, and 5) Boston, MA. The bottom five metro areas that had the worst budgeters were: 1) Jackson, MS, 2) Albany, GA, 3) Las Vegas NV, 4) Gulfport, MS, and 5) Columbus, GA.
To view the full article and see where your area ranks, go to: http://wallethub.com/edu/best-worst-metro-areas-for-budgeters/7666/
Have you ever had your credit card declined? It has happened to most people at one point or another for a variety of reasons, including President Obama when he tried to use it at a New York City restaurant this past year.
Credit card companies are increasingly looking for potential fraudulent transactions and will decline any charges they think are suspicious. This often occurs when people are traveling. For example, if you use your card in your home state in the morning and then use it that same day in another state, it can look suspicious. This is particularly true if you are traveling to a foreign country where credit card fraud can be more prevalent. The best way to prevent this from happening to you is to notify your credit card company about your travel schedule before you take your trip so they will not decline these charges.
Another situation that is fairly common is when you funds are on hold by a hotel or other company that has not yet charged your account. These holds can count against your limit and prevent you from being able to use all of your credit. Once again, the best thing that you can do is stay in contact with your credit card company so you know how much available credit you have before trying to make a major purchase, and can prevent your charges from getting declined due to hitting the credit limit.
Take a moment to reflect on what you already know about effective personal finance. Odds are you already know that, if you are living paycheck to paycheck, you shouldn’t buy lattes everyday. And most people think putting 5% of their monthly income into a savings account is a noble goal. In the modern world, where entire libraries of financial advice can be accessed by a few Google searches, the hard part of money-managing is not finding information so much as applying it to our everyday lives. Although many individuals fall short of achieving their personal financial goals, the good news is that effective long term budgeting can be made easy by taking what we already know about human psychology and applying it to our day-to-day financial situations.
These days, a common adage is that we need more willpower if we wish to succeed in life and accomplish our goals. In fact, notable behavioral psychologists such as Daniel Kahneman and Richard Thaler have shown that willpower may be a limited resource. Put simply, we humans have only so much willpower we can spend on any given day and, although this amount varies from person to person, reaching long term personal and financial goals can become easier when we focus on conserving rather than recklessly spending that finite resource of willpower we all possess.
One convenient way to limit the amount of willpower-sapping decisions you make on a daily basis is by automating personal finances. Budgeting tools such as Mint (https://www.mint.com/) can allow you to automatically put a percentage of your income into long term savings accounts or 401k’s, making it unnecessary for you to use willpower to part with that percentage of your income on a monthly basis.
Also, a trick to conserving willpower is found in the creation of effective money-saving habits. Habits are developed over weeks and months rather than hours or days so it can be difficult to immediately change dozens of financially irresponsible behaviors without completely sapping your willpower after a few days and ending up back with the same habits as before. Instead of completely reworking your behaviors, try focusing on changing just one aspect of your day-to-day life (e.g., buying a small coffee instead of a venti latte) for several weeks. You will find it is much easier to maintain this change over time, with successively less willpower being spent on each money-saving decision as you build the habit. Over time, this tactic can increase the amount of money you save on a day-to-day basis.
The road to effective personal financial management doesn’t have to be a long and bumpy one. When you efficiently automate your finances and successfully develop day-to-day money-saving habits, there’s no pothole that can slow your forward momentum.