FSM100_Chapter 9_Money

9-2 The end of money worries

"Most money problems result from spending more than is available. If you are spending more than you have, then increase your income, decrease your spending, or do both. Money management may be based on a simple idea, but there is a big incentive for us to make it seem more complicated and scarier than it really is. "I can't afford it" is a common reason that students give for dropping out of school. Actually, "I don't know how to pay for it" or "I don't think it's worth it" are probably more accurate ways to state the problem. This chapter could help you create financial peace of mind, and can benefit you even during a recession. The strategies are all based on the cycle of discovery, intention, and action that you've already practiced with the Journal Entries in this book. For example, the single habit of paying off your entire credit card balance each month might be enough to transform your financial life. Ways to control money instead of letting money control you."

9-5e Do stellar work at your current job

"Think about ways to become indispensable. Gain skills and experience that will make you more valuable to your employer.

9-8c Save for the last decades of your life

A 401(k) or other retirement plan? If not, then set up your own retirement plan and contribute to it every month.

9-6b Manage student loans

A college degree is one of the best investments you can make. Choose schools with costs in mind. Avoid debt when possible. (borrow only the amount that you cannot get from other sources—scholarships, grants, employment, gifts from relatives, and personal savings. Also set a target date for graduation, and stick to it. ) Shop carefully for loans. (Stafford loan--These are fixed-rate, low-interest loans from the federal government. If you qualify for a subsidized Stafford loan, the government pays the interest due while you're in school. Unsubsidized Stafford loans do not offer this benefit, but they are still one of the cheapest student loans you can get. PLUS loan--There is no income limit, and parents can borrow up to the total cost of their children's education. Repayment Calculator (http://smartoption.salliemae.com/Entry.aspx). Some lenders will forgive part of a student loan if you agree to take a certain type of job for a few years) Repay your loans.

9-6 Take charge of your credit

A credit card is compact and convenient. Credit cards often come with a hefty interest rate, sometimes as high as 30 percent. The result is a poor credit score. To take charge of your credit, borrow money only when truly necessary. Managing student loans as well as credit cards.

9-1 Power Process: Risk being a fool

A master student has the courage to take risks. And taking risks means being willing to fail sometimes—even being willing to be a fool. Don't be upset. All of us are fools at one time or another. There are no exceptions. This Power Process comes with a warning label: Taking risks does not mean escaping responsibility for our actions. The point is that mastery in most activities calls for the willingness to do something new, to fail, to make corrections, to fail again, and so on. In the process, you could learn something that changes your whole experience of money. "Risk being a fool" means that foolishness—along with courage, cowardice, grace, and clumsiness—is a human characteristic. We all share it.

9-3 Make more money

Although there are limits to how much money you can save, your ability to earn is practically unlimited. Among the ways to make more money are these: Get financial aid; Work at a job while you're in school; Ask for a raise; Start a business on the side; Be a high performer; Be a lifetime learner.

9-6a** Common Credit Terms

Annual fee—a yearly charge for using a credit card, sometimes called a membership fee or participation fee. Annual percentage rate (APR). Balance due; balance transfer; bankruptcy; credit score; default; finance charge; grace period; interest rate; minimum payment; payment due date; periodic rate.

9-3d Start a business on the side

Another way to make more money is to start your own business. Consider a service you could offer on a part-time basis. Jobs that can be done from home with an Internet connection. Profit comes from creating value.

9-5i Get help that you can trust

Avoid debt consolidators that offer schemes to wipe out your debt. What they don't tell you is that their fees are high, and that using them can lower your credit rating.

9-6a Take control of your credit cards

Balance the benefits with the real costs. ( credit cards can create a debt that takes decades to repay. Here's an example published by the Federal Trade Commission. ) Pay off the balance each month. Scrutinize credit card offers. (Low rates might be temporary. They are in business to make money by charging you interest.) Avoid cash advances. Check statements against your records. (Check statements against your records. ) Use just one credit card. ( If you do have more than one credit card, pay off the one with the highest interest rate first. Then consider cancelling that card.) Get a copy of your credit report. (A credit report is a record of your payment history and other credit-related items. You are entitled to get a free copy each year. Go to your bank and ask someone there how to do this. You can also request a copy of your credit report online) Protect your credit score.

9-8g Be careful with contracts

Before you sign anything, read the fine print. If you are confused, ask questions. Keep asking until you are no longer confused. After you sign a contract or lease, read the whole thing again. Be particularly careful with long-term purchase agreements.

9-4 Spend less money

Controlling your expenses is something you can do right away. Look to big-ticket items. ( When you look for places to cut expenses, start with the items that cost the most. Choices about where to live, a car. Track your expenses to discover the main drains on your finances. ) Look to small-ticket items. ( coffee shop every day / Do comparison shopping. ) Ask for student discounts. Be aware of quality. Save money on eating and drinking. (Sign up for a shopper's discount card. Cooking for yourself doesn't need to take much time if you do a little menu planning. Create a list of your five favorite home-cooked meals. ) Lower your phone bills. (Lower your phone bills; a family calling plan. Web-based options for turning your voice into a digital signal that travels over the Internet. ) Go "green." ( Leave air-conditioning set at 72 degrees or above. In cool weather, dress warmly and keep the house at 68 degrees or less. In hot weather, take shorter, cooler showers. Unplug any electric appliances that are not in use. Explore budget plans for monthly payments that fluctuate, ) Pay cash. Postpone purchases. Notice what you spend on "fun." ( Blowing your money on fun is fun. You can read magazines for free at the library. ) Use the envelope system. Don't compete with big spenders. (you don't know the whole story.) Use the money you save to prepare for emergencies and reduce debt. Spend less and feel the power.

9-7** Education by the Hour

Determine exactly what it costs you to go to school. Describe your responses to discovering this figure. Also list anything you will do differently as a result of knowing the hourly cost of your education.

9-9c Organize your money files

Doing this will help you pay bills on time and promote financial peace of mind. Start with the following folders and then change them to meet your individual needs: Bank statements for your checking and savings accounts; Bills due this month (check this folder once per week); Financial aid—copies of your applications; records of scholarships, grants, and work-study income; records of loan repayments; notes on your conversations with people in the financial aid office; Insurance—copies of life, health, car, and renter's policies; Major purchases—receipts and warranties related to major expenses, such as appliances and cars; School—copies of transcripts and other records of courses completed, credits earned, and grades received; Taxes—W-2 forms, paycheck stubs, and copies of tax returns. The Internal Revenue Service recommends that you keep these records for seven years.

9-7 Education pays off—and you can pay for it

Education is one of the few things you can buy that will last a lifetime. Once you have a degree, no one can take it away. That makes your education a safer investment than real estate, gold, oil, diamonds, or stocks. Education is a good deal for you and for society. It's worth investing in it periodically to update your skills, reach your goals, and get more of what you want in life. Financial need equals the cost of your schooling minus what you can reasonably be expected to pay. Start with Student Aid on the Web at http://studentaid.ed.gov. Remember to keep applying for financial aid every academic year, even if you didn't get any for the previous year.

9-5k Cope with stress in positive ways

Exercise, meditation, and a sound sleep can do wonders. Social support is one of the best stress busters. Turn healthy habits such as exercising and preparing healthy meals into social affairs.

9-5f Think about your next job

Find time to build your network, go to job-related conferences, and stay on top of current job openings in your field. "There are no jobs," maybe what they really mean is "My current job hunting method is not working." There's a world of difference between those statements. The first one kills options. The second one creates options. Go to your school's career planning office to learn new strategies for job hunting.

9-9e Protect your money

Guard your private information, including your social security number and bank account numbers. Watch out for identity theft.

9-5h Get health insurance

Health insurance can pick up all or most of the costs instead. Another option is private health insurance. This can be cheaper than extending an employer's policy if you lose your job.

9-5c Pay off your credit cards

If you have more than one credit card with an outstanding balance, then find out which one has the highest interest rate. Put as much money as you can toward paying off that balance while making the minimum payment on the other cards.

9-3b Work at a job while you're in school

If you work while you're in school, you earn more than money. You gain experience, establish references, interact with a variety of people, and make contact with people who might hire you in the future. Also, regular income in any amount can make a difference in your monthly cash flow. Some jobs are just made for students. See whether you can find a job related to your chosen career. Even an entry-level job in your field can provide valuable experience. Once you've been in such a job for a while, find out how to get promoted.

9-8d Invest carefully

Investing in individual stocks, corporate bonds, or mutual funds is risky. Even then, only invest money that you can afford to lose. Keep the grocery money. One option for safer investing is an index fund. you invest $500 in an account that earns 8 percent interest. In 30 years, that investment will grow to $5,031. Given the same interest rate and number of years, a $1,000 investment will grow to $10,063.

9-5l Choose your money conversations

Keep financial news in perspective. Recessions can be painful. And they eventually end. Talk about what gives your life meaning beyond spending money. When tough times happen, use them as a chance to embrace the truth about your money life rather than resist it. Learning to live within your means is a skill that can bring financial peace of mind for the rest of your life.

9-5j Put your plan in writing

List the specific ways that you will reduce spending and increase income.

9-9d Automate your personal finances

Make an appointment with a personal banker to find out how you can make these transfers happen automatically on a specific day each month. Add an option to protect your checking account from overdrafts as well.

9-9a Learn spreadsheet software

Microsoft Excel. Many organizations use spreadsheets to track their finances.

9-7** A financial aid package includes three major types of assistance:

Money you do not pay back (grants and scholarships); Money you do pay back (loans); Work-study programs. Many students who get financial aid receive a package that includes all of the listed elements.

9-9b Explore other applications

Most Web-based applications allow you to download transactions from your checking and savings accounts, sort those transactions into categories, create budgets and projections, and keep other financial records. Or download an application to your computer, smartphone, or tablet.

9-3e Be a high performer

Once you get a job or start a business, make it your intention to excel at what you do. A positive work experience can pay off for years by leading to other jobs, recommendations, and contacts. Make yourself indispensable. Look for ways to excel at your job by building relationships, becoming a rock-star collaborator, and consistently delivering results. Whenever possible, exceed your work-related goals. Suggest ideas that can increase revenue, decrease costs, solve problems, and make processes more efficient. Finally, keep things in perspective. Almost any job can support you in becoming a master student and reaching your educational goals.

9-8b Save for long-term goals

Once you have an emergency fund in place, start saving for long-term goals such as your retirement or a child's college education.

9-6a** Protect your credit score.

Protect your credit score: Pay all your bills on time. Hold on to credit cards that you've had for a while. Avoid applying for new credit cards. Pay off your credit card balance every month—especially for the cards that you've had the longest. If you can't pay off the entire balance, then pay as much as you can above the minimum monthly payment. Never charge more than your limit. Avoid using a credit card as a source of cash. Avoid any actions that could lead a credit card company to reduce your credit limit.

9-8h Save on insurance

Protect your financial future by insuring your car, home, health, and life. Some schools offer health insurance for students at bargain rates. Insurance brokers' services are usually free to their clients. To make sure, ask about this up front. Health insurance is a way to be prepared and protect more of your money for the future.

9-3a Get financial aid

Student grants, scholarships, and low-interest loans can play a major role in your college success by freeing you up from having to work full-time or even part-time.

Save for an emergency fund"

Take some percentage of every paycheck you receive, and immediately deposit that amount into a savings account. Start by saving 5 to 10 percent of your income. Have money on hand for surprises and emergencies. To begin saving, deposit your money into a savings account. Be sure to choose an account from a bank that belongs to the Federal Deposit Insurance Corporation (FDIC). For peace of mind, have an emergency fund equal to at least six months of living expenses.

9-5b Make sure that your savings are protected

The Federal Deposit Insurance Corporation (FDIC) backs individual saving accounts. The National Credit Union Administration (NCUA) offers similar protection for credit union members.

9-5 Managing money during tough times

The biggest factor in your long-term financial well-being, though, is your daily behavior. If the economy tanks, we can benefit by telling the truth about it and ourselves. The first step to changing such behaviors is simply to admit that they don't work.

9-5a Spend less and save more

The less you spend, the more money you'll have on hand. Author Suze Orman recommends three actions to show that you can reduce spending at any time: (1)Do not spend money for one day; (2)do not use your credit card for one week; and (3)do not eat out for one month.

9-8f Be a wise car-shopper

The minute that you drive a car off the dealer's lot, it loses value. The trade-in value on a car is often not enough to pay off a car loan. If you borrow money to buy a car, then keep the costs as low as possible. Reduce interest by sticking to a three-year loan rather than four or five years. Also check into certified, pre-owned cars. Buy a car with loans rather than leasing.

9-8c** Plan to Pay for Your Degree

The purpose of this exercise is to ensure that you will have enough money to pay for your entire degree. Complete the Money Monitor/Money Plan exercise first. Make copies of the blank worksheet that follows. Complete the worksheet: ( Use the Figures from Your Most Recent Money Monitor/Money Plan as a Starting Point. Fine-Tune Those Figures. Note Surpluses and Deficits. Write Discoveries and Intentions. ) Share the results of this exercise.

9-5d Invest only after saving

The stock market is only for money that you can afford to lose. Before you speculate, first save enough money to live on for at least six months in case you're unemployed. Save for these expenses before taking any risks with your money.

9-8e Consider home ownership carefully

The traditional American dream includes owning a house. Yet home ownership can turn into a nightmare if you can't really afford it. Buy a home only if you can make the down payment in cash and afford the monthly mortgage payments with room to spare.

9-2** There are three main steps in money management

There are three main steps in money management: Tell the truth about how much money you have and how much you spend (discovery). Commit to live within your means by spending less than you earn (intention). Experiment with suggestions for earning more money, spending less money, or both (action).

9-3c Ask for a raise

There are two situations in which you could ask for a raise. One is while you're interviewing for a job that you want to get. Another is during a performance review with your supervisor in a job that you already have: Consider the potential rewards. Think about your thinking. ( Remember that many interviewers and supervisors use a standard negotiating tactic, regardless of the state of the economy: They come to the interview with a salary range in mind. Then they offer a starting salary at the lower end of that range. There's an important message here: Salaries are often flexible. You do not have to accept the first offer. Also keep in mind that salary negotiation is a skill that anyone can learn. ) Find out the salary range for the job you have or want. Know how much money you want. (be prepared to state a desired salary range rather than a fixed figure.) Save the discussion for an ideal time. Let the other person name a figure first. ( I am open to discussion. What figure did you have in mind? I think we're within range. What would it take to get to ...? ) Request a performance review. (First, you're confident that you can create value for your employer. Second, you're willing to meet at a specific date in the future to evaluate what you've done.) Talk about benefits. ( These might include health insurance, life insurance, disability plans, use of a company car, reimbursement for travel expenses, retirement plans, and tuition reimbursement.)

9-2** The Money Monitor/Money Plan

To discover how money flows into and out of your life. The goal is to record all the money you receive and spend over the course of one month. Keep Track of Your Income and Expenses: ( Save All Receipts and File them. Use Money Apps for Your Smartphone. Use Personal Finance Software. Use Online Banking Services. Experiment with Several of the Provided Options. ) Remember to split expenses when necessary. Review each category of income and expense.

9-3f Be a lifetime learner

To maximize your earning power, keep honing your job-hunting skills. Look for ways to gain additional skills or certifications that lead to higher earnings and more fulfilling work assignments.

9-5g Research unemployment benefits

Unemployment benefits have limits and may not replace your lost wages. However, they can cushion the blow of losing a job while you put other strategies in place.

9-9 Use tools to tame your money

You can use technology to track the details of your money life and gain more financial peace of mind. The following tools—both digital and paper-based—offer ways to begin.

9-6b** If You Get into Trouble ...

You might face obstacles to meeting your financial goals. Money problems are common. Solve them in ways that protect you for the future: Get specific data; Be honest with creditors; Go for credit counseling; Change your spending patterns; Keep your money secure. (Use websites with an address (URL) that begins with https:// rather than http://. The extra s stands for secure, meaning that any data you send will be encrypted.)

9-10 Your money and your values

You might not think about values when you pull out a credit card or put cash on the counter. For example, the amount you spend on fast food shows how much you value convenience. Think of any value as having two aspects. ( One is invisible, and the other is visible. The invisible aspect is a belief about what matters most in life. The visible aspect of any value is a behavior. Sometimes we live values that are not our own. —bigger houses, bigger cars, better clothes. All that stuff costs a lot of money. Money gives us plenty of opportunities for critical thinking. One way to align your behaviors with your beliefs is to ask one question whenever you spend money: Is this expense consistent with my values? ) Keeping track of your income and expenses allows you to make choices about money with your eyes open. With the financial facts at hand, you can spend and earn money in ways that demonstrate your values.