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Learn to make smart financial choices while you're in college. Find out more about budgeting, minimizing debt, applying for financial aid and even planning for the future. PNC has tools and information to help you be smart about your money.
It doesn't matter if you're new to campus, heading to grad school or making the leap into the real world, Money 101 can help you stay on top of your spending, saving and investing. Ready to get started?
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Tips for managing your money at school. (Even though you'd rather be managing parties.)
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It's time to take charge. Now that you're more independent, and making your own way, you've got to make some tough decisions. Like figuring out what comes first – groceries or graphic novels? Pizza or the movies? The latest tunes or money for the parking meters? So how can you make sure you've got the cash to keep on keeping on? First, you've got to admit that the "B" word (aka budget) isn't a bad word. Because when you budget your money, you're basically keeping track of how much money you have or don't have and what you're spending it on. Good news is there are a lot of smart tools to help you get a handle on your spending. Like checking and savings and mobile banking. Check it out.
No doubt you're smart. The key is to also be savvy.
Now could be the perfect time to get one. Not only is it a safe place to keep your money, it's a smart tool for managing your cash flow. Why? Because with a checking account you get an electronic record of what money you have, what you spend it on and exactly how much you spend. You'll know what you paid for tuition, books, food and the occasional new outfit. In fact, every transaction creates a record of payment.
Once you're ready, you can simply go online to your bank's website and open up a basic checking account in about 10 minutes. It's fast, easy and secure. You'll need to supply information about who you are, where you live and when your birthday is. To protect against identity fraud, the bank will ask for some sort of verification to make sure you are who you say you are, so have your driver's license on hand. Not sure you want to apply online? Just go to your local branch or call your bank's 800 number.
You get access to all kinds of smart tools for managing your cash. Like access to hundreds of ATMs. And a debit card – which works just like writing a check – only easier. Online and mobile banking make it super easy to check in on your account whenever you want. You can also pay your bills online and if you're working, you can get direct deposit for your pay checks. It also makes it a whole lot easier for your parents to transfer money to you — you know, just in case. Electronic banking is a smart, simple way to stay on top of all your transactions, with:
You can use it to withdraw money from your account like at an ATM, or to make a purchase. When you use it to pay for something, the amount is deducted from your checking account. For all practical purposes it's like using cash, so in order for the card to work, you have to have the money in your account to cover it. Some debit cards have a monthly or per-transaction fee, so read the cardholder agreement carefully.
Some benefits of debit cards:
If you spend more money than you actually have in your account, it's called an overdraft. And when that happens you're usually charged a fee. The good news is you can get overdraft protection from your bank. There may be a fee charged to sign up for it, but generally speaking, it's well worth it.
Bottom line: A checking account provides the cornerstone for your personal money management and opens the door to a lot of other banking services.
Seriously. You don't have to have a lot of cash to start a savings account. For example, if you were to give up one extra shot, vanilla latte a week you could save $20 a month without breaking a sweat. Be creative. Chances are you can think of a few other ways to start saving. Look at it this way — a savings account lets you set aside money for things you dream about having. It also provides easy access to your money in case of an emergency. Meanwhile, you may earn interest on the money you deposit. Just follow the rules for your account — like maintaining a minimum balance — and you’re on your way to helping your money grow.
No ifs ands or buts about it, security is a big advantage to having a savings account. In fact, the Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that insures all savings accounts in its member banks up to the maximum amount permitted by the law. In other words, put your money in a bank that's an FDIC member in an FDIC-insured account, and you're covered.
Find it hard to hold onto your cash? Can't figure out where all that money went? You may want to consider developing a monthly budget and use a savings account as a tool to help you do it. Basically a budget is a plan for how to spend the money you take in each month. But the reality is, stuff happens and some of it you just can't plan for. That's when it's savings to the rescue. So try to spend less than you take in, and put the extra money in your savings account. Remember, the more you have in your savings account the more prepared you are for any of those curve balls life might throw you.
Think smart. Think savings. Think about which savings account option is right for you. Need help figuring it out? A bank representative can help.
As long as you have a computer or a cell phone with a mobile application, any time is the perfect time to do a little banking. You can bank online 24/7, so there's really no excuse for not taking charge of your money. There's no traffic to deal with. No lines to stand in. No need to fret about getting to the bank two minutes after it closes.
All you typically need is your secure user ID and your password and you're good to go. You can do mobile banking, text banking, global banking, traditional banking; you get the picture. Whatever kind of mobile device you have, you can get access to your online account. Some accounts come with an exclusive smart phone app with lots of additional features that make it easy to bank, budget and rule your world.
Different banks have different tools to help you manage your money, which could include:
Simply log onto your account through your bank's website, complete a simple online payment form that indicates the payee, amount of payment, and the date you want the payment sent. Then just click to process the payment. That's all there is to it. You can pay bills one at a time, or set up recurring payments for regular bills like your rent, car and school loans.
Seriously. The most common form of identity theft is paper documents, not online information. Online banking and bill pay actually reduces the amount of sensitive, personal information that goes through your mailbox and your garbage. Chances are, if your bank offers online banking it has an advanced security system in place.
With mobile banking you not only can access most online banking features, you can receive notifications via email or text message about your current checking account activity. Some notifications can be:
Online and mobile banking are safer, more convenient and better for the environment. It's kind of a no-brainer, when you think about it.
*Source: Javelin Strategy and Research, 206
So how do you pay for all that additional brainpower? Paying for college — whether it's undergraduate or grad school — involves more than just paying for tuition. A lot more. There are textbooks, fees, everyday expenses, and all kinds of other expenses. Fact is your everyday decisions and habits can have a huge impact on the costs of attending college. Drink this in: a daily latte could add over $5,000 to your college debt, so making it a TGIF treat could save you big bucks. So while you'll probably have to take out a student loan to help pay for college, you do have control over how much it will ultimately cost you. Remember, keeping a budget is a good thing.
Figure out ways to be smart about money, from lattes to loans, and wake up to a much brighter future.
FAFSA (Free Application for Federal Student Aid) is the application used by nearly all colleges and universities to determine eligibility for federal, state, and college-sponsored financial aid, including grants, educational loans, and work-study programs.
A lot of families avoid filing because they don't think they'll qualify for federal aid. But here's the deal: the FAFSA does more than determine your eligibility for federal student aid (student loans, grants and federal Work-Study programs). Most schools also use the FAFSA to help decide your eligibility for scholarships and non-federal student aid. States often use the FAFSA to determine state aid. So as you can see it's the smart place to start.
Some colleges and universities require additional forms such as the CSS/Financial Aid PROFILE; so always check with your school to see if information is required in addition to the FAFSA.
You can file a FAFSA on paper or electronically — but it's usually faster and easier to fill out online. Filing the FAFSA online lets you complete, submit and track your application, and can reduce processing time by one to two weeks. Because your data is checked before being transmitted to the processing center, there's less chance of making an error.
You can download or fill out the FAFSA online at fafsa.ed.gov. If you plan to complete and submit your FAFSA online, we recommend getting a U.S. Department of Education PIN. The PIN will serve as your electronic signature, and gives you the fastest way to submit your application. Fill out the brief PIN application at pin.ed.gov.
You can file the FAFSA after January 1. Try to file as early as possible because award deadlines vary from school to school and state to state. Pay attention to your colleges' financial aid deadlines and other required financial aid forms
About four weeks after you file the FAFSA, you'll be mailed a Student Aid Report (SAR) that confirms the information you filed. Check carefully for errors — any problems with your SAR can make a big difference in the aid you receive. Keep a copy of the SAR for your records.
If you haven't received your Student Aid Report four weeks after completing the FAFSA, you should contact the Federal Student Aid Information Center at 1-800-433-3243.
Your SAR will include an amount known as Expected Family Contribution (EFC). Your EFC is the amount of money the government determines your family can contribute to your education. This figure is sent to your state's scholarship agency, as well as to the colleges you listed on the FAFSA so they can determine the size of your aid award. You can still get certain loans without a FAFSA, such as private loans, but you could miss out on some of the best loan deals and other aid if you don't file.
The next part of the financial aid process begins when you receive your financial aid award letters from your top schools. Award letters indicate how much funding and what types of aid you're eligible to receive from each school.
An award letter is typically made up of the following sections:
Within two weeks of receiving an award letter, you should inform your school whether you are accepting or declining the awards. You don't need to accept everything offered, but if you decline anything, the school typically will not replace it with other types of aid. Occasionally, Work-Study and loans are negotiable, but grants and scholarships are not.
If you or your parents' financial circumstances have changed since the completion of the FAFSA, it's very important to inform the financial aid office.
Federal Student Aid Information Center (FSAIC)
Monday through Friday: 8 a.m. to 12 a.m. ET
Saturdays: 9 a.m. to 6 p.m. ET
FAFSA on the Web
The government offers a detailed, question-by-question guide to filling out the paper and online FAFSA. The FAFSA can be downloaded in English or Spanish at: http://studentaid.ed.gov/students/publications/completing_fafsa/index.html.
Remember: Think of the Free Application for Federal Student Aid (FAFSA) as Financial Aid's First Step Always.
Going to college or graduate school may require a little sacrifice on your part, and it may mean you have a college loan to pay off, but in the end the long-term benefits could be substantial. On average, a college graduate earns $1,000,000 more over his or her lifetime than a high school graduate. Factor in an advanced degree like a Master's or Doctorate, and your earning potential goes up even more.
Let's take a quick look at the different types of financial aid available to you.
There are a variety of specific college savings plans with tax advantages, where the money is usually invested into mutual funds. These are generally accounts parents invest in early on, and the type of plan depends largely on income, your age, and your chances of qualifying for financial aid.
The more "free money" you get for college, the less you have to pay back, and grants and scholarships are two forms of financial aid you should check into. Grants are given through the government. To apply, you must file a FAFSA each year. Scholarships are available from a variety of sources. Again, you need to apply for each individually.
Federal Pell Grant
A Pell Grant provides monetary assistance to undergraduate students who exhibit financial need and have not yet earned either a bachelor's or a professional degree. Both full-time and part-time students are eligible. Unlike loans, Pell Grants are not repaid. They are a financial incentive to advance your education. Awards may range from $400 to $5,350 annually. To apply, you must complete the FAFSA.
Federal Supplemental Educational Opportunity Grant (FSEOG)
This grant provides monetary assistance to undergraduate students who exhibit exceptional financial need and have not yet earned either a bachelor's or a professional degree. Both full-time and part-time students are eligible. Like Pell Grants, this grant does not have to be repaid. Awards may range from $100 to $4,000 annually. To apply, you must complete the FAFSA.
These grants and their awards vary by state. You should contact your high school guidance counselor or your state's higher education authority for details and application deadlines.
There are literally thousands of scholarships out there, so the sooner you start looking the better. The first place to start is with the financial aid professionals at your school(s) of choice. Simply ask them what type of aid is available – they'll be happy to give you detailed information, required applications and deadlines. Public libraries, professional organizations and the web are also good places to look. You should also ask your parents if their employers offer any type of scholarships.
Which type of loan is right for you?
Federal Stafford Loan: Stafford Loans are a cost-effective source of education funds. Eligibility is based on cost of attendance and Expected Family Contribution.
Federal PLUS Loan: A federal loan for parents of dependent undergraduate students.
Federal Graduate PLUS Loan: A loan for students pursuing a graduate or professional degree (e.g. masters, doctorate, law, medical)
If you are looking for federal loans for the 2011-2012 school year, please contact your financial aid office or www.studentloan.gov.
Covering all of your expenses can be a challenge, especially when federal loans and financial aid aren't enough. Once you've exhausted your federal loan options, a private loan can help cover additional costs. Check with your bank, since they may offer a competitively-priced private loan that is fast, easy to apply for and suited to your unique needs as a student. To find the best private loan type and rate for your situation, contact a student loan specialist at your bank. Private loans are subject to credit approval.
The right loan from the right lender can help you head in the right direction – the rest is up to you.
Actions speak louder than words. Do you turn your term papers in on time? Are you on time for a date? Did you pay your friend back when you said you would? These simple acts demonstrate how reliable you are. The same principle applies to your credit history — which is basically a record of what you borrow and how consistent you are at paying it back. It all comes down to your credit reputation, and it will have a huge impact on your ability to borrow money down the road, especially for big-ticket items like buying a car or renting an apartment. Bottom line: it pays to be smart about credit.
When it comes to getting credit, your reputation precedes you.
Used wisely, they are a convenient way to make purchases, and provide cash in an emergency situation. BUT if you're not careful they totally slash your finances and leave your credit history in ruins.
Before you get a credit card, whether it's from a credit card company or a department store, you need to find out:
If you exceed your credit limit or miss a payment, your credit card company could automatically increase your interest rate, which means it will be way harder to pay down the balance. Making a purchase on a credit card is always easy, but if paying it off in a timely manner isn't, don't give in to the temptation. The rule of thumb should be to only use your credit card if you can pay the balance in full every month. Otherwise, just keep it for those unexpected situations when you have no choice but to use a credit card.
When you apply for credit – from a credit card to a loan – don't forget to request all information about interest rates, the amount of your expected payments, and any possible fees. You have rights under the Consumer Credit Protection Act if you feel you have been unfairly treated.
Give yourself credit where credit is due. Just don't overdo it.
You can start building credit by having your apartment utilities in your name, paying for your cell phone and car payments, or getting a co-signed loan with your parents. An established credit history will work to your advantage if you have a positive track record. If you can manage the payments, by all means start building a credit history. If not, wait until you can. Remember, your reputation is everything.
When you sign up for a credit card or loan, you're making a promise to pay it back — a legally binding promise. The bank charges interest on what is owed, so don't look at credit as free money. On some cards the interest rate is 20 percent or more, so consider your purchases based on the real cost once the bill comes in the mail. That's especially true if you can't pay your balance in full.
Before giving you credit, a lender will want to see proof of financial stability – they're not going to just take your word that "you're good for it." Once you have a utility bill, credit card, contract or loan to your name, your credit history and credit score will determine your ability to borrow money and may even dictate the interest rate you are charged if you are considered a higher risk candidate. There are many factors which help determine how much interest is charged on a loan — some of them are:
Ultimately, bad credit leads to a higher interest rate, meaning you pay more for your purchase(s). Here's a perfect example of what that means in dollars and cents.
Let's say you financed a $20,000 car for 60 months
Good credit = $415/month at 9% interest
Bad credit = $486/mo at 16% interest
The impact of a higher interest rate: $4,721 more over the life of the loan.
A good credit history is priceless, but a bad credit score can cost you big bucks.
The truth is, want and need are not the same, so be honest with yourself when it comes to spending. As you've already discovered, college calls for many "needs" like books, class materials, food, etc. These should come before those weekend jaunts, the latest tunes or that new outfit you "just have to have."
If you have a current credit card or loan, make your payment on time or even early. Remember, activity on your credit report is retained for up to seven to ten years, so stay ahead of your budget and your payment promises to creditors.
You know the saying, "If it sounds too good to be true, it is?" Remember that when you go to get a credit card. There are bound to be offers and incentives that will tempt you to sign up — which is great if you know what you're signing up for. So read all the introductory offer information closely, and pay special attention to the details regarding interest rates and fees. The introductory interest rate (sometimes even zero percent) is temporary and may increase after a six-month or one-year term.
From specialty retailers to department stores and beyond, any activity on any open card account will impact your credit history. Before giving into that special one-time discount or gift to sign up for another card, ask yourself if you really want to add another creditor to your history. Especially since these cards usually carry high interest rates.
You have a right to review your credit report and to see if anyone else has requested it in the past year. If you find anything wrong on the report, correct it with the credit bureau or creditor directly or add your own explanations so that everything is on track and accurate.
Guard your personal and financial information closely and when checking your credit report, look for any account activity that is not yours. If you feel you have been a victim of fraud, contact the three major credit bureaus and request a fraud alert on your name and social security number.
Social Security Administration (fraud line)
Use your college-smarts to protect your credit, your reputation, your identity and your future.
Are you ready to go for it? Trying to figure out how you're going to afford that advanced degree? Thinking about consolidating your debt? Just want to get a handle on things? Whether you're heading off to grad school, the real world, or both, this is where things really start to get interesting. So you'll need to keep up those good money habits and pick up some new ones — whether it's keeping a budget, protecting your identity or learning how to read all that teeny tiny print to figure out the real story. Now that you've gotten a handle on the basics, it's time to take a giant leap into that exciting zone known as your FUTURE.
Want to bring things into perspective? Focus. Focus. Focus. And then focus some more.
As we mentioned earlier, a budget is a spending and savings plan based on your expenses and income. Expenses are anything you spend money on. Income is any money you have coming in, for example, from a job, a school loan, or the homefront. So what's the point of a budget? Basically, the goal is to avoid spending more money than you actually have available. Since most students can't avoid college debt, the goal is to reduce any unplanned spending. Track your spending over a couple of weeks, and you'll get a pretty good idea of where your money is going. Most likely, you'll find that a lot of your "expenses" are really can-live-without luxuries.
When you're planning a budget, a good place to start is to figure in fixed costs like utility bills, phone bills, tuition, and parking. Then add in those things you do on a regular basis, like getting coffee every day, ordering pizza once a week, shopping for clothes once a month. This way you have a place to start. Be really honest about what's coming in and what's going out. And once you create a budget make sure you stick to it. If you've budgeted for two lattes a week, five lattes a week aren't going to cut it. Remember, the goal of a budget is to have your income exceed your expenses.
Making a budget is as easy as:
Don't be tempted to charge major purchases on your credit card. Interest rates can range from 10 – 20 percent, which means that you need to factor in that additional COST to any purchases. Credit card debt can sneak up on you and make it hard to keep your budget positive.
Here are some other simple ways you can economize if you need to:
Don't know what the big deal is? If you can save even $20 a week ($2.85 a day), you'll have saved $1,040 a year, plus interest. In four years, that's $4,160 PLUS interest that you could have in the bank when you graduate!
If you treat budgeting like a game you seriously want to win at, instead of a chore you avoid you could come out way ahead.
Identity theft is when someone tries to assume your identity for criminal purposes. According to the 2010 Identity Theft Survey Report†, 11.1 million adults in the United States were victims of identity fraud in 2009.
If someone gets a hold of your Social Security number or your driver's license number they could open a bank account in your name, get a credit card, take out a car loan or mortgage, buy a cell phone or open utility accounts. In other words, they could create an alternate reality with an alternate you that could leave the real you holding the bag. The key to protecting yourself is to be vigilant about guarding your identity.
Do not hesitate or think you're overreacting or just being paranoid. Take action immediately because if ever there was a case of ‘better safe than sorry,' this is it.
Call the fraud hotlines of all three national credit bureaus to report the problem and to request a fraud alert. Then ask for a free copy of your credit report.
You'll also want to call the fraud departments of your creditors – from credit cards to banks to phone companies and utilities. Once you do that, you'll want to follow up with a letter. The FTC Fraud Hotline number is 877.ID.THEFT.
When it comes to protecting your identity there's no such thing as playing it too safe.
†Report published by Javelin Strategy and Research
Track your transactions and balance your balances — from check card purchases to ATM withdrawals to those occasional checks. And don't forget — if you check your balance online, you can't just look at transactions that are "posted" and already deducted from your account. You also need to look at those that are "pending" (made recently, but not yet deducted). Ditto for recent transactions or checks you've written. Even if you rarely use checks, you still need to balance your checking account to make sure your bank records are accurate. And always cross reference online banking activity with your own paper trail of check card receipts, ATM receipts and your check copies or registry.
An ATM isn't a cash-maker, so always be aware that the available account balance shown at an ATM may not reflect recent transactions or checks that you've written. Since check card purchases may still go through even if you don't have sufficient funds, you could end spending more than you want. Your bank isn't going to know about checks you've written for tuition, etc until they come through, so if a purchase goes through on your debit card, you could still end up being overdrawn if you're not careful.
Check with your bank for online services they offer that can help you manage your money anywhere, any time. Some banks will send you email alerts to help you stay on top of account activity. Many offer mobile and online banking so you can take care of all of your banking on your terms. And another really smart thing to check for is overdraft protection. That way you're covered just in case you accidentally overspend.
Make sure you read the fine print on your credit card agreement, because the first time you're late on one payment that introductory 0% rate could become a much higher rate. And if a late fee puts you over your spending limit, your interest rate could go up again. OUCH. The smartest way to avoid late fees is to pay your bill in full before it's due - every month, all 12 months of the year. And the easiest way to do that is to arrange for automatic bill pay online.
AND if you’re late with a payment for any lender – not just your credit card – your credit card lender has the right to raise your credit card Annual Percentage Rate (APR).
Want to avoid all those crazy fees? Pay your bill in full every month.
Prepare for the leap. Know how you're going to manage your student loan? Have additional debt? Figure out what you owe and how you're going to pay it. Then, if you're going into a job instead of, say, moving onto grad school, find out if your new employer offers a 401K and sign up for it. Seriously. A 401K is one of the smartest things you can do for your future. Of course it's not the only thing. Let's take a look at some steps you can take to make the future a place you actually want to be.
Figure out your roadmap for that leap into the future, and get ready to go where your dreams take you.
The decision to rent or buy is an important one. And the truth is the right decision is the one that makes the most sense to you. Sure there are benefits to buying, IF you're ready to buy. But based on your current situation, it might not be the best option for you right now.
For one thing, buying a home is a long-term commitment and while the value of a home usually appreciates over time, it doesn't happen overnight. And with all the costs associated with buying a home, you'll probably lose money if you sell your house in less than five years. You also have to think about the upkeep of the house – things you don't have to think about when you rent. So the pros to renting are this: You generally have a smaller monthly payment; you have lower maintenance costs, and if you plan to move in the near future, it could save you a lot of money.
When you rent, you can take the money you save and put it into a CD or a high-yield savings account. Bottom line, buying a home will affect your personal finances for many years to come, so before you buy, it's smart to educate yourself about the realities of home ownership. Then weigh those realities against the benefits of renting to really decide which move is right for you right now.
There's nothing quite like the feeling of someone handing you the keys to your first home, and hearing, "It's all yours." And there are benefits to owning your own home:
With joy comes responsibility and cost. You have to pay off a loan with interest. You also have to pay for homeowner's insurance, property taxes, and depending upon how much money you put towards the mortgage when you buy your home, Private Mortgage Insurance (PMI). And don't forget you'll have to pay all your own utilities, too.
When you buy a house, you generally have to put something down upfront. This amount will be deducted from your actual mortgage, and will affect how much you pay each month. The more you put down, the less your monthly payment. In reality, you need to save at least 5% for your down payment. More money down would actually be better.
You can reduce some of those stomach flips by knowing how much you can comfortably afford to pay each month, and then don't look at anything outside your price range. You'll be tempted, but don't do it, even if the realtor tells you he's found the perfect place that's just a wee bit over your budget.
Next step: go to your bank and get pre-qualified for your loan. That way you can begin your search knowing you can actually buy a place, and it shows sellers you mean business. The negotiating and approval process will also go a whole lot smoother.
Buying a home is a big decision with big rewards and big responsibilities, so think before you leap, because if you're not ready it could be a really bad move.
Please Note: Materials presented in Money 101 are prepared on PNC's behalf. Although every effort is made, the accuracy, completeness and timeliness of the content cannot be guaranteed. The information is for educational purposes only and is not intended to provide legal, financial, or tax advice. PNC Bank, National Association is a Member FDIC and an Equal Housing Lender.
So you get your first job, and they ask you if you want to participate in their 401(k). The answer is, "Yes, yes, yes!" Truth is, it's one of the smartest and simplest ways to save for the future, without a whole lot of effort. For starters, a 401(k) is a tax-deferred savings plan that you don't touch until you retire. Your contributions are automatically taken from pre-tax salary, and are typically invested in a wide variety of mutual funds of your choosing, and grow tax-free until withdrawn. A lot of time employers will put money into your 401K, too, so it's like you're getting free money. Some employers even match your contributions, which makes them twice as sweet.
In case you’re wondering, CD stands for Certificate of Deposit. It’s insured by the FDIC up to the maximum permitted by law, and it usually offers a higher rate of return than a regular savings account or a money market account. You can buy CDs with different maturity dates, from three months to six years. Like any investment with a maturity date, generally the longer the term you invest for, the higher the interest rate. Of course, if you withdraw money before that date, you’ll pay a penalty.
CDs are a smart way to earn a little more on your investment, and a 401(k) is a super SMART thing to do because you could have a bundle when you retire.
Maybe you're planning on going to grad school, so you're really focused on investing in an education. Or maybe you're ready to start your first job and dive into the great unknown. Either way, you need to start laying down a solid foundation so your future isn't built on quicksand.
Putting together a comprehensive financial plan can be challenging, but so was getting a college degree and you mastered that, right?
The first thing you want to do is figure out your investment style. Do you like taking risks? Are you risk-averse? Are you somewhere in the middle? You also need to figure out your needs and goals. Think about it. And then diversify, diversify, diversify.
It's one that combines investments in stocks, bonds and cash, and that helps you achieve your financial objectives over time. Selecting the right investment mix based on your specific goals and risk preference is an important step in the planning process.
These are investments for the long-term, like planning for your kids' college education or your retirement. Even though these things seem like a long way off, it pays to be prepared. Remember that stocks tend to fluctuate in value, so if you don't have a stomach for roller coasters, they may not be right for you.
These include bonds, money market mutual funds, and government and corporate securities. All of these are more conservative than buying a specific company stock, and can provide steady monthly or quarterly income. Your return on investment may not be as high as stocks, but neither is the risk.
Mutual funds are a good way to diversify your portfolio – you can invest in funds that invest in U.S. and international stocks, bonds, real estate, and money market instruments or a combination of all of them.
An annuity is a contract between you and an insurance company and is really a long-term investment designed as a source of retirement income. Think about your risk tolerance because annuities can also be tailored to fit your investment style.
OK, so you're probably thinking, "I'm way too young to get an Individual Retirement Account. They're for old people." But the sooner you start investing, the less of a big deal it will be when you are old. Anyway, think about it. There are traditional IRAs, Roth IRAs, or if you're self-employed a SEP-IRA, which lets self-employed individuals and small business owners contribute to a retirement plan.
We've basically just skimmed the surface, so it would be a good idea to talk with a financial advisor at your bank to see what type of investments are best for you.
Any Non-Deposit Investment Product mentioned: NOT FDIC INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.
There are all kinds of investment vehicles – those that stay in the slow lane, those that head for the race track, and those that coast along in the middle lane. A good key to success: A little of each.