Investing for Beginners: Money Smart 2013

Unbiased Investor Information Freely Available

This week I want to focus on fundamental investment information that everyone should know, whether or not they are currently investing. Because many people go beyond a traditional savings account for their long-term financial planning, educating yourself on some basics will be an asset if you decide to speak with someone who invests for a living, a Certified Financial Planner (CFP), for example. These investment professionals can be verified through BrokerCheck, which will be discussed below. Whether you decide to employ a professional to offer investment advice, or opt to self-manage your money, the unbiased financial information found through the Financial Industry Regulatory Authority (FINRA) is a great place to start. Again, this organization regulates financial institutions and is it not an investment firm. The advice they publish can be trusted!

Before looking further into investment information, be sure to read through the FINRA's page discussing Bank Products. It explains how savings and checking accounts operate, how your money is secure with federally-backed insurance, and other savings tips. This is great information at any age, and would be particularly useful if you're looking to speak with children or teens about money. 

Before you decide what and where to invest I highly recommend the Getting Ready to Invest page through FINRA. It takes a step-by-step approach and highlights aspects to consider. What are your goals? What are your monthly expenses? What impact does your credit score have on your finances? Why do I need an emergency fund? FINRA recommends that if your net worth is positive (you own more that you owe) it is safer to invest than if your net worth is negative. Figuring your net worth is step two of "Getting Ready to Invest" and a sample worksheet is available. The Securities and Exchange Commission also has a useful page entitled Beginners' Guide to Investing where they list numerous SEC publications available online, including questions every investor should ask.

 Both the SEC and FINRA suggest checking the background of a financial professional before you invest with that person. BrokerCheck, a FINRA tool, can be used to locate individuals and firms in your area and ensure they are licensed and in good legal standing. 

Clicking the "BrokerCheck" link above will take you directly to this resource. As you can see from the screenshot, you can locate an individual or firm and limit the search by a given radius to your location. Once the search is completed you can view a profile of the individual, where they are permitted to do business and possibly see a background report. If you're in a position where you're not sure the credibility of an individual or a company that offers investment advice, this is a way to put your mind at ease before you hand over any money.

In addition to these free online resources, the Business Center has a wide range of print resources focused on helping you get your finances in order, including "Finding a Financial Advisor," 332.024 J. Looking to create a budget or find ways to save money around the house? We have books which will help with that, too. With the vast amount of information available to you involving your finances, please take advantage of it and pass the information along to those who might benefit from it.

Be sure to mark April 23rd on your calendar, as we will join a live webcast of "Be a Money Smarty" at 6:45 PM here at the Grand Blanc branch. It will include financial tips from a range of professionals. All are welcome1

College Savings & Loans: Money Smart 2013

Admission Decision Season is here!

Whether or not someone should attend college continues to be a hot topic of discussion. While some opportunities are closed to those who have not completed a four-year degree, there are many individuals (NBC's Brian Williams & Facebook CEO Mark Zuckerberg come to mind) who are immensely successful despite not completing college. A few weeks ago I posted an article by Forbes contributor John Tamny where he said, among other things, that "college doesn't make you smart or hard working as much as smart and hard working people often go to college." While he says no job requires a college degree, and I think he's on to something here, the fact remains that many employers require it.

This morning I happened upon another article from Onlineuniversities.com that gave me pause while researching information regarding college savings. The article gives 10 reasons not to save for your child's college expenses, and they should be considered. Among them, the reality that not all parents can afford to set aside this money, and that one's retirement should not be jeopardized to pay college tuition. Investigating college savings plans, and student loans policies and procedures well in advance will better prepare you and your student should s/he decide higher education is right for them.   

Know the Cost of College Loans 

The best way to reduce the cost of higher education is through scholarships. These could be scholarships separate from the college or university, or directly from the school via merit (academic) or athletic scholarships. Doing well in high school is worth big bucks. Not only will this alleviate the burden parents face, but the student will be in a better position to save income post-graduation.

In addition to academic or athletic "full-ride" scholarships (which sometimes only cover tuition, not room & board), schools often offer lower scholarships which can be just as competitive. This is where student loans become necessary. If your student will need some additional funding, the federal government offers student loans, which are always preferable to private loans, due to their flexible repayment options and lower interest rates. Click the highlighted link above for more information. Each year, your family's financial need will be calculated using the Federal Application for Federal Student Aid (FAFSA), which you or your student completes online. It is not unusual for a tax return to be requested to verify information you provided. Depending on your financial need, you will qualify for either subsidized (the interest is deferred until graduation), or unsubsidized (interest is not deferred) loans, or both. These are the federal borrowing limits for traditional undergraduate students: 

1st Year: $5,500

2nd Year: $6,500

3rd & 4th Year: $7,500

 Student must be considered dependents to borrow these amounts, and might qualify for additional money if their parents are not qualified for Parent PLUS Loans. Notice that these loans cover only $27,000 of the total 2 or 4 year cost. For some perspective on this amount, consider that two semesters (one full year) for an in-state student at Michigan State University is currently $21,200. While tuition will surely rise over time, a college savings plan can help pay for school after federal student loan options are exhausted. 

Smart Saving for College

The Financial Industry Regulatory Authority (FINRA) has a great deal of impartial information about college savings plans, and should be used when considering your options. The "Smart Saving" link above it a portal into the college savings information available from FINRA. Be sure to click on the college savings plan comparison chart, for a quick summary, and read FINRA's tips when browsing your options. Types of college savings plans include:

529 Savings Plans

(be sure to use the 529 Plans Fees & Expenses Analyzer)

529 Prepaid Tuition Plans

Coverdell Education Savings Account (ESAs/Education IRAs)

Custodial Account

Series EE & I Savings Bonds

Please take advantage of all the information freely available as you prepare for the future. FINRA's site is easy to navigate and full of financial information of all kinds. With some hard studying on the student's part, and armed with quality information, college can be a manageable financial obstacle.

Check back for the next Money Smart post soon!

Savings & Loan Calculator: Money Smart 2013

Prepare for Your Next Loan & Save for the Future

In this first post in a series discussing the many financial tools freely available, I want to focus on two simple online resources which will better prepare you for your next loan. Most of us have loans of some sort: car loans, mortgages, student loans, and the most expensive of loans, credit card balances. But, before you walk into a lending institution you can do some homework and have a good idea a) how much you need to save in advance of the loan, possibly to lower your payment, and b) your desired loan duration based on the monthly payment the bank or credit union will expect. 

Now, it is certainly true that not everything will be under your control during the process, but at the very least, you will go into the meeting with reasonable expectations. While a loan with a longer duration might seem more affordable in the short term (lower monthly payment), it is in fact more expensive, as more interest will accrue as time passes. However, an exception of this is interest-free financing (remember all the auto dealer commercials...), and if it corresponds with a need you have, is certainly a great way to save money. 

Savings Calculator

Both of these highlighted resources are provided by FINRA, the Financial Industry Regulatory Authority, a company you've probably never heard of, but is responsible for the monitoring of financial institutions across the country. Click the "Savings Calculator" link above to give it a try, a screenshot of it appears below.

 

This calculator can be used to plan toward a savings goal, whether it be for your next car, home improvement project, or family vacation. I have imputed a $500 monthly savings goal with a starting amount of only $1,000. You can see that in three short years of consistent saving you can easily save the recommended 3-6 month emergency fund, depending on your income, or have a significant down-payment for your next loan. This is a great motivational tool!

Loan Calculator

The second of these resources is the loan calculator. Say you need a new car, and it costs around $25,000. You've been diligently saving and intend to pay $10,000 of it in cash to lower your monthly payment. The Loan Calculator can be used to determine exactly how much you can afford to finance, by way of the ultimate monthly cost of the loan.

I researched a local credit union's best interest rate for an auto loan and inserted that information and the loan amount into the calculator. How long do you want to pay for your car? This might be determined by the monthly payment, so you can try several different loan terms. I settled with an manageable payment just over $300/month over 4 years for this example. 

This could also be a great learning tool for children and teens, too. Please pass along this information to others who might find it useful, financial literacy is too important for us to neglect!

Stay tuned for another post soon!

Money Smart Week is coming!

 

Over the next several weeks, in preparation for Money Smart Week, a financial literacy program sponsored by the Federal Reserve Bank of Chicago and the American Library Association, I will be highlighting some of the financial, investment, and career resources the GDL Business Center offers and how it can better your financial future. Financial Literacy is a basic life skill, and yet even the most basic information can be difficult to find among the legions of results in an online search. We want you to be successful, so please return often and take advantage of the (free!) resources at your disposal. 

 Look for 1-2 posts a week, each spotlighting a resource, online database, or tool that you can immediately put into practice.

GreenPath Event Rescheduled

Our seminar with the Flint office of GreenPath Debt Solutions has been rescheduled!

Date: Thursday, April 18

Time: 6:00 - 7:00 PM

Location: Grand Blanc - McFarlen Branch

515 Perry Road

 

These debt experts will be discussing why your credit score is important to watch, and how to interpret your score when you request a copy. Please bring your questions, there will be time for a Q & A session at the end of the presentation. Click HERE to make a reservation. 

New Arrivals!

338.766 K

 

650.108 C

640.73 L

330.973 B

650.1 B

Estate Planning Event - March 5th

Free Estate Planning Seminar

McFarlen Library

Tuesday, March 5th

6:30PM

As part of their ongoing speaker series, the Genesee County Bar Association will conduct an informational seminar here at the library regarding estate planning, wills, trusts, and the death of a loved one. While this can be a difficult issue to discuss with friends and family, it is nonetheless important to have your wishes known. 

Please take advantage of this free opportunity to speak with an attorney.

Bring Your Questions!

We will have time for Q &A

Event should last 1 hour.