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I was sitting at the kitchen table with my son when he noticed a credit card bill addressed to me. He picked it up, looked at it, and thoughtfully asked, “How do you get money onto your credit card?”

Confused by the question I asked, “What do you mean?”

He answered as literally as a child could. “Well, you buy things all the time with your credit card. How do you put money into it in order to buy things?

Now I understood! I took the opportunity to explain that you didn’t send money to the credit card before you buy, but rather the bank kept track of everything that I bought during the month and this was the bill for those things that I needed to pay. I like to use real math examples, so I was able to tie in the concept of budgeting explaining that I knew how much money I could afford to spend in a month, and so as long as I didn’t exceed that amount, I just paid the bill at the end of the month.

That answer seemed to satisfy him, and then he asked an even more valuable question: “What happens if you spend more than you have to pay?”

A valid question and one we all know the answer to. Not wanting to overcomplicate the situation with interest charges, late fees, and the rest, I simply answered, “You pay what you can, but then you still owe more money to the credit card bank. That’s what gets people into trouble; they get into debt.”

My son knows enough to know that being in debt is not a good thing. “So then people shouldn’t buy things if they don’t have enough money to pay for them,” was his answer, matter of factly, and then he was onto the next topic. In his 6-year old mind, that was the best solution and warranted no further discussion.

If only more adults felt the same way!

We all know that growing credit card debt in this country is a big problem. According to NerdWallet, the total U.S. credit card debt is $854.2 billion dollars, with an average credit card debt per household exceeding $15k. Woah! That number is staggering!

While emergency situations arise that warrant the need to accrue credit card debt, many of us – myself included -sometimes use our credit cards to buy things that we want, but don’t necessarily have the money for at that moment (I needed those shoes, really I did!). And while splurging every once in a while probably won’t cause you to be knee-high in debt, it is a slippery slope. As parents, we need to both set a good example for our children by paying attention to our own spending habits, while teaching them the basics of good credit card usage at the same time.

Credit cards may have gotten a bad rap, but used responsibly, they can be a great tool. Think of the free miles and other perks that come along with your own card. I encourage fully the use of credit cards, but with one important caveat:

Always pay off your bill in it’s entirely each month. And don’t spend money you don’t have!

You can help your children develop good financial habits from an early age by turning it into a game. Give them a pretend credit card and a budget, and involve them in the day-to-day household spending. Set up a mock store with their toys and have them go shopping. Older children could even have a real budget for something like their school lunches. Give your child an amount of money and have them accompany you while grocery shopping. They might just be surprised at how much their dollars will actually buy!

The most important thing to remember is that by giving your children a good education in credit card spending, you are setting them up for a lifetime of good habits – and that is invaluable.

 

 

 

 

Congrats! You graduated college and accepted your first full-time position. The transition from college life to “the real world” can be quite challenging and, at times, confusing. However, right before you rush through that HR paperwork, realize that those forms may hold the keys to your first retirement plan.

Namely, your first 401k plan. Even though retirement seems like the last thing a new college grad should be thinking about, your commitment to your future starts now. By enrolling in your new employer’s 401k right off the bat, you are taking a giant step toward complete financial independence.

You might be done with classes, but don’t give up on learning just yet, especially when the subject is your future! Check out this 401k 101:

Look into your enrollment options.

Despite when your first day of work was, your enrollment period might not begin for another few months or even a whole year. Every company operates on a different enrollment schedule.

If you can’t enroll immediately, check with HR on when you will become eligible. Set a reminder on your calendar to revisit the open enrollment discussion when it gets closer to that period.

Why? Letting this slip off your radar will cause you to miss out on a tax break and compound interest (more about this below) — which is like flushing money down the toilet!

Find a happy medium in your involvement.

When it comes to your money, no questions should be off-limits, especially if you are new to your employer’s 401k plan. Take advantage of your plan provider’s representatives who are there to advise you on the nuances of your plan, investment choices and company match options during the open enrollment period.

Don’t discount the power of compound interest.

As you may have learned in your college economics class, those who begin saving earlier will wind up with more cash. This concept is called compound interest. Think about it this way: The earlier you save, the more vacations you will be able to go on in retirement (hello, world traveler)! It might seem like those first few dollars you save are entering a black hole, but your assets, or shall I say “vacation fund,” will build over time.

Don’t give up so easily.

Some companies, unfortunately, don’t have a way for you to save for retirement at work. While that’s a huge bummer, there are still options for you. Don’t shrug your shoulders and give up on your future – there are viable, easy solutions!

Turning to your local bank to begin an Individual Retirement Account (IRA) is likely your best bet. In an IRA, you still have the ability to invest pre-tax dollars. Not only do you give yourself the opportunity to save, but your bank may also be more likely to loan you money in the future because you are establishing positive financial habits from the get-go.

Hopefully you have a better idea of how to go about enrolling in and taking advantage of your first retirement plan. You not only passed college, but you just aced 401k 101.

Handling Heartfelt Hardships

Andrew Answers / 17 Jul 2017 / Personal Finance

When I think of summertime, hardships are not what immediately comes to mind. For many, it’s made for vacations, nice weather, and a more laid back time to celebrate. For others, it means hurricane season. Having grown up on the outer banks of North Carolina, I’ve lived through my share of storms. My grandmother had a magnetic map tracking the various hurricanes and tropical storm paths to plan out how affected we may be.

Sometimes, I look fondly back at the times where my family and I were holed up with candles and games. Unfortunately, this same experience can leave folks with property damage or homelessness, which we’ve seen so much of in the last year. 

Your 401k can come to your rescue if your plan has a hardship provision.

What is a hardship provision and how do you qualify? Here’s how:

  1. Medical expenses
  2. Purchase of a primary residence
  3. Ongoing education
  4. Prevention of eviction from primary residence
  5. Burial or funeral expenses
  6. Expenses for the repair of the damage to primary residence

While this access is great, it’s got its own rules around it. These distributions are taxable in the year money is received along with a 10% penalty for taking out prior to retirement. It’s also important to note that not all 401k plans contain this provision. Loans are much more preferred and come without 10% penalty while allowing you to pay yourself back.

Talk to your controller/HR person/plan sponsor for more information on what kind of access you have. While it’s great to maintain your savings, it’s nice to know it’s got your back when you need it!

Generation X’d Out

Sabrina / 11 Jan 2013 / Personal Finance

I remember once watching a documentary which trekked through the mountainous hills of southeast Asia. It could have just easily been the Philippines as it could’ve been China or Indonesia, though that doesn’t particularly matter. Because the focus of the film was on the rural lifestyles of village people who did not interact with the modern world and did not truly identify with any nationality per se.

What stood out in the simple lifestyle of these mountain people was their funeral tradition. Each person carved his or her own casket. Usually constructed from a single piece of wood, some would take years or even decades to complete their final resting places. One such carpenter who looked to be in his 20’s was asked why he had begun work on his casket at such an early age when surely death was many more years away. His measured response was matter-of-fact. Why would I wait until I am old and feeble, he asked, why not build it while I am young and able?

This young man’s reply has always stuck with me. Though I have forgotten the particular documentary and even the details of the village, I have always remembered the wisdom of those words which revealed such a depth of understanding about the scope of life. This young man understood the inevitability of his death and the necessity to make preparations for it. A stark contrast to American’s his age. So many of us simply set the deadlines on our calendar, but never schedule the time to complete the task.

As Generation X hits their 40’s and 50’s, they are beginning to realize that retirement could be right around the corner. Not. With pensions and social security going by the wayside, Gen X’ers bought their homes in the midst of the housing bubble and their careers have been the hardest struck by the greatest recession since the Great Depression. With personal savings as the only real hope of retirement, many are finding themselves starting from square one at 40+ years of age.

We who are now in our 20’s need to heed this cautionary tale. Though it may seem difficult to save money now at a time when you may be living paycheck to paycheck, the difficulties only increase as you gain more responsibility and your health inevitably becomes a factor. Don’t go out to the club this Saturday. Start bringing your lunch to work instead of eating out. Make the commitment now when it is inconvenient rather than impossible. Because there is a threshold beyond which your efforts will be too little, too late. Bummer, Dude.

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© 2018 Ubiquity Retirement + Savings / Privacy Policy
1160 Battery Street, Suite 350, San Francisco, CA 94111 / Support: 855.401.4357