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Consumer Archive

Consumer

Students: Easy ways to cut costs

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McLEAN, Va. (4/21/15)--College students are gaining confidence in personal finance management but unfortunately also have become less competent. A survey conducted by High One and Everfi recently found that in 2014, college students were more likely to use more than one credit card than they did in 2012 ( USA Today April 6).
 
Considering that nearly two-thirds of undergrads take out student loans, and college seniors are graduating with an average loan balance close to $24,000, if students aren't careful about spending, the first financial steps they take after college might send them in the wrong direction.
 
While college expenses may seem limitless, students can learn to manage them by avoiding these common money drains, according to CUNA's member education department:
  • Carrying a credit card balance. Many credit card companies lure borrowers with enticing offers, and then hit them with a hefty monthly interest charge on their accrued balance. According to Forbes , the average student graduates with $4,100 in credit card debt. Using a credit card is not a bad thing and actually can improve a credit score, but the key is to pay off the balance every month. If you don't already have one, consider getting a credit union credit card. Credit union cards typically carry lower interest rates and fees than credit cards from other financial institutions;
  • Going out to eat--a lot . Say you spend about $5 on a coffee and bagel for breakfast each morning and $8 on a sandwich or fast food for lunch and dinner. That means you're spending more than $100 for five days of food--and these examples are modest. While it may take a few extra minutes each day, buying $100 worth of groceries and cooking at home will stretch your dollar, and can be healthier too;
  • Buying new textbooks. According to the College Board, the average student at a four-year public college spends $1,200 on books and supplies annually. You can't eliminate the cost completely, but there are ways to trim your textbook budget. Consider purchasing used textbooks online. You also can resell your textbooks via sites like Amazon Marketplace or Half.com after classes end. Textbook rentals also have become popular. Some colleges offer free book rentals to their students. Anyone can rent though. Try sites such as Chegg , BookRenter , CampusBookRentals and CollegeBookRenter ; and
  • Not using campus resources . Most colleges assess fees, which help provide a range of student services beyond those covered by tuition. Since you're already paying for these services, don't waste the money elsewhere. For example, use the campus gym instead of paying for an additional gym membership and use campus technology resources instead of paying an offsite repair shop.
For related information, read "Understanding College Financial Aid Awards" in the Home & Family Finance Resource Center .
 

Make saving for retirement regular routine

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ENGLEWOOD CLIFFS, N.J. (4/14/15)--While many Americans might feel confident in their ability to support themselves after they retire, thousands will reach the age of 65 without adequate financial preparation (CNBC, April 2).
 
It's never too early--or too late--to focus on retirement savings. The Center for Retirement Research at Boston College estimates that you need about 70% of preretirement income to maintain your lifestyle in retirement.
 
If you're in your 20s, the center advises that you start saving 10% of your pay annually and gradually increase that percentage over time.
 
If you start at age 45 and hope to retire at 65, the center estimates that you'll need to save 27% of your income each year. If you can put off retirement to age 70, that number drops to 10%.
 
For those who are starting even later, there are different ways to attain a worry-free retirement: work longer, start a small business, freelance, look for less-costly living situations and/or locations, and find ways to reduce other expenditures.
 
Here's another way of looking at it, from the National Foundation for Credit Counseling (NFCC):
  • Between the ages of 21 and 30, the cost of education is the major hurdle as the long process of student loan repayment begins. Focus on saving and debt management to keep financial stress out of the picture;
     
  • Between the ages of 30 and 45, home ownership allows you to build equity as you pay down your mortgage. In addition to building equity in your home, focus on growing your retirement savings; and
     
  • After the age of 45, increase contributions toward retirement savings while reducing budget expenses. Downsize your credit card debt as well.
To stay on track, seek advice from a credit union certified financial counselor or from counselors at the NFCC. For online tools, search "sharpen your financial focus" and "my retirement paycheck."
 
Follow the NFCC on Facebook and Twitter for daily tips during Retirement Planning Week, which runs through Friday.
 
For related information, read "Who Goes First? For Couples, Retirement is all About Timing" in the Home & Family Finance Resource Center.

For a happy marriage: Budget

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NEW YORK (4/7/15)--A loss of a job is one of the leading life events that can lead to a divorce, but any money problems can put stress on a marriage.

Learning to communicate with a spouse or partner about money--how it's spent and how it's saved--is one of the most crucial skills for a healthy marriage.

An April 1 Business Insider article proposed that one of the five statements to consider in order to determine if your financial picture is a happy one is, "I communicate regularly and effectively with my spouse/partner about money."

Talking about money openly not only helps couples avoid festering resentments, it can clarify joint financial goals. The first step is to develop a budget that both can agree on and stick to--which means building in some elasticity.
  • Set up a modern envelope system. Most online banking platforms allow you to open multiple accounts and give them names that correspond with the different categories you're budgeting for--an update of the tried-and-true method of putting cash in different envelopes earmarked for specific expenses. Having multiple accounts allows you to easily shuttle money back and forth between them;
     
  • Have a "spend on whatever I want" category. In order to avoid arguments, agree on a set amount that each of you get to spend on whatever you want. As long as you're setting aside enough for expenses, savings, and needs, this gives you some financial freedom and avoids arguments over indulging guilty pleasures; and
     
  • Keep the budget minimal. If you're just starting out with a budget, making it as simple as possible will help you stick to it. In her book "All Your Worth: The Ultimate Lifetime Money Plan," now-U.S. Sen. Elizabeth Warren (D-Mass.) recommends allocating your paycheck--assuming taxes and retirement savings have been automatically deducted--accordingly: 50% to needs (bills and groceries), 30% to wants (clothes and entertainment), and 20% to saving or paying down debt.
These guidelines can help making budgeting easier and feel less punitive, but they also assume you're doing relatively OK financially and have a steady income. If you're drowning in debt or your income is irregular, your priorities will need to adjust accordingly.

Regardless, sit down and talk about money solutions that work for both of you.

For related information, read "Couples and Money: Reconciling a Spender-Saver Money" in the Home & Family Finance Resource Center.

Don't take on student debt just because all the kids are doing it

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NEW YORK (3/31/15)--Student debt is now so common that the stigma once attached to owing tens of thousands of dollars is starting to evaporate.

In a recent interview young Hollywood actor Miles Teller admitted to having not paid off his student loans yet, and politicians from Ted Cruz to President Barack Obama have spoken about how late in life they still carried student debt (MarketWatch March 27).

More and more Americans, in fact, are not only carrying student debt into their 30s and 40s, they're taking on more of it. Student debt held by those 65 and older jumped to $18.2 billion in 2013 from $2.8 billion in 2005, according to the Government Accountability Office (The New York Times March 19).

Student debt isn't necessarily a trend you want to be a part of. If you're going to pursue continuing education, consider the following before you take out a loan:
  • See if your employer will chip in. Many employers will help pay for your graduate degree, especially if it will make you a more valuable, effective employee.
     
  • Evaluate your education as if it were an investment. Look at how much your salary is likely to increase after you complete your education--is it enough to justify the time and money you will devote to the degree? Make sure you're not overpaying for an education that won't advance your career.
     
  • Be wary of for-profit institutions. They market heavily to older Americans, and last year the Consumer Financial Protection Bureau sued one of the biggest for-profit schools, Corinthian Colleges Inc., for steering students into private loans with bad career advice and false promises of potential jobs.
     
  • Only borrow the amount you really need. When money is offered, it can be difficult to turn it down. Do some cost and income projections, and only borrow the amount you need to cover your expenses.
For related information, read "Many Colleges Can Be the 'Right Fit' for Your Student" in the Home & Family Finance Resource Center.

Protect yourself against credit-rating agency errors

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ARLINGTON, Va. (3/24/15)--After more than a decade of filing complaints about errors--and getting nowhere--consumers are about to get relief. Under a new agreement, credit rating agencies will be required to conduct independent reviews of complaints, correct the reports and change the way they treat medical debt (PBS News Hour March 9).

The three largest credit rating agencies (CRAs)--Equifax, TransUnion and Experian--were relying on lenders to provide data, without conducting independent reviews. Consumers would find errors in their credit reports and submit documentation of proof to the Federal Trade Commission (FTC), but nothing would change.

The new agreement, which begins in six months and lasts three years, brings the changes consumers have been waiting for: The agencies will be required to use specially trained employees to conduct an independent review of every complaint.

In addition to independent reviews, consumers can expect:
  • Help with complex issues. A special team of people will deal with issues like identity theft or file mix-ups.
     
  • Improved data quality. Lenders, credit-card issuers and collection agencies will use consistent standards for reporting credit data, monitored by the CRAs. 
     
  • Help with tickets or fines. The CRAs will stop reporting debts such as tickets or fines that do not arise from an agreement to pay.
     
  • More time to deal with medical debt. Consumers will have more time--180 days--to resolve conflicts over unpaid medical debt. Medical debt accounts for 52% of all debt on credit reports.
     
  • Favorably resolved medical debt will disappear from reports. After an insurer pays a medical debt, the CRAs will remove the debt from the consumer's credit report.
     
  • Expanded educational material. Consumers visiting annualcreditreport.com to obtain an annual free credit report will see expanded educational material and, if they dispute a report, no longer will have to wait a year for another free report.
The FTC estimates that 10 million Americans have errors significant enough to affect the cost of borrowing.

Request your free credit report from all three agencies once a year. Always make your requests from annualcreditreport.com, the only site sanctioned by the FTC, or, call 877-322-8228. Better yet, monitor your credit report year round by making one request every four months in rotation among the three CRAs.

For related information, read "Six Slam-Dunk Ways to Trash Your Credit Score" in the Home & Family Finance Resource Center.

Free up cash in 30 days

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McLEAN, Va. (3/17/15)--If you have a tight budget, the thought of finding any extra money can seem unrealistic. But with a few minor tweaks, it might be easier than you think to curb spending (USA Today March 8).
 
Scrutinize your spending patterns and obligations and you might find simple ways to cut down on debt and actually save money in the long run:
 
Consolidate debt. Sometimes the key to paying down debt can be as simple as combining it. By consolidating your loans, you might be able to save on interest rates, simplify monthly payments, and actually start saving money. Debt consolidation isn't for everyone--if you know you will use it an opportunity to run up more debt, consolidation is not for you. Talk to a credit union loan specialist to see if consolidation is a good move for you and your finances.
 
Refinance your house and car. Refinancing your house or car can free up money that you can put toward other bills or put into savings. A credit union loan officer can determine if you qualify for lower rates.
 
Revisit insurance policies. Compare policies. Check the National Association of Insurance Commissioners website for price comparisons and Insurance Information Institute for advice about picking reputable companies. Consider raising deductibles. Ask about discounts for kids away at college and not using vehicles, and about good student discounts for kids in high school.
 
Go green. Be environmentally conscious and save money while doing so. Programmable thermostats, fluorescent and LED bulbs, and window coverings are options that can help you save energy--and money. Go green at the credit union as well. Signing up for automatic loan payments might qualify you for lower loan rates. Using automatic bill pay will help you make consistent progress toward financial goals and help avoid late fees. Choosing e-delivery of statements, newsletters and other correspondence is a great "green" option as well.
 
For related information, read "Practical Ways to Save Money" in the Home & Family Finance Resource Center.
 

When discount warehouses aren't a good deal

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NEW YORK (3/10/15)--Buying in bulk: It's a no brainer, right?

If you can afford to do it, and the product is something you're going to use and have room to store, it makes sense to buy a lot of it at a steep discount. This is why warehouse clubs like Costco and Sam's Club are popular.

Last year, for instance, an extensive survey by Consumer Reports found that products as disparate as bacon, car batteries, coffeemakers, ice cream and laundry detergent are some of the best deals at Costco.

But while warehouse clubs can offer great deals, not everything is (MarketWatch March 5). Here are some products to consider buying elsewhere.
  • Media. Warehouse clubs still offer books, DVDs and CDs for their impulse-buy appeal, but these items can be found much cheaper online.
     
  • Perishables. Bulk items are affordable because it's less expensive to offer products at wholesale quantities. But if you're throwing vegetables away or finding that huge jar of mayo expired with only half of it used, you may be paying for products you're not using. 
     
  • Disposable diapers. These are something you're going to use a lot of, obviously, but they often can be bought as cheaply at stores like Target, Wal-Mart or even Amazon, which offers a discount for a diaper subscription and will deliver to your doorstep.
     
  • Laundry detergent. After six months detergent starts to become less effective, so it might make sense not to buy in bulk unless you're doing a lot of laundry.
     
  • Paper products. According to shopping experts, these tend to be some of the items most discounted at stores--particularly if you use coupons--with prices that often best the warehouse clubs.
Additionally, Consumer Reports makes the point that even if a discount warehouse has the lowest price, the product may not be of sufficient quality to make the savings worth it. The consumer review publication found that some of the Costco mattresses, gas grills, gel dishwasher detergents, facial tissue and toilet paper were not up to par.

For related information, read "Ironclad Couponing: Right Coupon, Right Store, Right Time" and "Is This Still Good? What Those Dates on Food Really Mean" in the Home & Family Finance Resource Center.