The vacation game

"I need a vacation."

If you're like me, you've heard and uttered this sentence time and time again. That's why I developed a new workshop called "Budgeting - Planning Your Vacation". I can't tell you how many times I've spoken with people who have referred to budgeting as boring. See, that's the problem: Budgeting is a state of mind, and if you have the wrong state of mind, you will never be able to budget successfully.

When I ask people what their financial goals are, it's always Paying off Debt and Building an Emergency Fund. Great! These are very important goals, and listing them and working towards them is vital. However, very few people get a sparkle in their eye when they're talking about six month's worth of money saved in the bank. Important? Yes. Exciting? No. It's when I start pushing people to talk about fun things they want to do that I get the answers that people get excited about: Buying shoes or electronics, or traveling.

Enter the vacation game. The premise is simple: If you don't plan to go on vacation, or do some other fun thing, you will end up taking a vacation from budgeting. The end result is that you don't accomplish your goals and you may end up racking up a nasty credit card bill in the process. However, if you do plan a vacation, you'll have the time you need to save up enough money to take a nice vacation without having to sacrifice your other goals. This leads to happiness, fun, and financial security. How could you ask for more?

For help planning your vacation, check out our Vacation Planning Checklist. It's never too late to start playing the vacation game, and winning!

Smart Used Car Shopping

When my wife told me it was finally time to get her a new car last year, as most people do, I cringed at the thought of the whole car buying process and having another car payment.  She knew she wanted an SUV but wasn’t sure what make or model. That was some sigh of relief because the process of narrowing your decisions can be endless!

Once you have decided on a type of transportation you should do your homework. Consumer Reports (www.consumerreports.org) offers a great website that gives you information about different vehicles with an unbiased opinion – it’s simply their facts and findings. We read dozens of reviews before she decided on a particular model and also test drove one to be sure it rode to our liking. We started our search on the web because there are some great sites available that allow you to view inventory, prices, and other vehicle information like Auto Trader (and you don’t have to deal with the annoying salesman until it’s truly necessary!) UMassFive also offers an online inventory listing of our preferred dealers on our website here. When you are shopping for a vehicle you should consider:

• The number of previous owners
• Whether the car has been involved in an accident
• Any previous mechanical problems
• The maintenance history of the car

After we viewed several vehicles in our area that we were interested in we decided to take a trip to see it in person and test drive it – after all there is only so much you can see in a picture.  After road-testing the vehicle if you are interested in pursuing it further you should do a walk-around in-side and out of the vehicle to make note of any imperfections, dings, or scratches. Ideally the vehicle should be in good shape, but sometimes minor flaws are inevitable – but that can be used to your advantage when negotiating the price!

You should have the vehicle inspected by your mechanic to ensure the vehicle is in proper operating condition and that there is nothing wrong present. Any reputable dealer will be more than willing to allow this. (if they don’t that’s a red flag and I wouldn’t buy the vehicle just because of that alone.) I had a similar experience after the purchase when the car salesman asked if I wanted to have the car inspected at their facility. While this seemed like a convenience, it’s was my last chance to see if something was wrong. For that reason, I actually opted out of that offer and took it to my normal inspection station. If for nothing else you have the peace of mind that someone without an interest in the car is looking at it. Getting a vehicle history report to see if it was in an accident, stolen, recalled, etc. is a good idea too. You can get them free and easy at Car Fax – www.carfax.com. The dealership I purchased my vehicle from actually did this for me and printed it out. – a good sign they have nothing to hide about the vehicle.

When it comes time to financing the vehicle do your best to negotiate the rate and term – as most dealers use several financial institutions to fund their vehicle sales. If you have decent to good credit, there is even more of a case for you to negotiate and leverage your positive credit.

At the end of the day you need to be prepared and do your homework. The process can take longer than you want, especially actually finding the one you want – but if you follow these steps  you will be on a better path that you should be happier with and your wallet may thank you too! To read more about used card buying, visit our online Resource Center at umassfive.coop.

Tips that help pay bills on time with ease!

When I have facilitated our Budgeting workshops at the Credit Union a frequently asked member question is “when and how often should I pay my bills during the month?”

My answer is simple; don’t do it randomly, but set up some type of schedule. What I mean is you should work out a schedule that best fits into your lifestyle and is easy enough that it becomes part of your routine. Here are a few things to consider:

What does my monthly cash flow look like?
Are there bills that need to be paid at a specific time of the month?
What other circumstances are in my life that could affect when I pay my bills?

Remember 35% of your credit score is based on paying your bills on time so having a solid routine for paying bills is critical to keeping a good credit rating.

For most people cash flow is the driving force when it comes to paying bills. The key is to match your cash flow to your bills so you have the cash when it’s needed. If you are the only one in the household with an income and you are paid the same amount every month on a weekly, bi-weekly or monthly schedule it becomes much easier. But if there is other income coming in from other sources you will need to coordinate that a little. Many folks match certain paychecks to certain bills using payment dates as a guide. That way you can ensure you will cover those big bills like a mortgage or rent, or other important payments like a car loan. Having a calendar showing when certain bills come due is a great way of mapping out your payment schedule.

It’s important to note that you should treat savings just like a bill…meaning “Pay yourself first”. So work in your regular savings into your bill paying equation. I find using payroll deduction into my savings account is the easiest way to ensure this is accomplished on a consistent basis.

One of the ways I have found to keep up with my bills is to find a set time to pay them each week. For some it might be every other week. I’m lucky because I have a paycheck each week so my cash flow is the same week to week. I have also found if I pay bills once a week they don’t pile up and I am never late. In the past when I would wait and randomly pay bills I would always open one up and realize it’s due TODAY! So paying weekly helps me avoid those late fees. Another good idea I found with paying credit cards is to have the minimum payment on auto pay and when the bill comes I make a second payment to lower the balance. I’m always on time and paying down the balance each month.

What I wish I knew about paying for college

I want to start by sharing that, like many, I never felt like college was optional. My mother struggled to get me through middle school, and by High School I had caught the college bug and really did want to get accepted into a decent school. This gave my mother no end of relief, and had it not been for the fact that I also had a fifteen-year old sister, she probably would have become significantly less stressed out. As it was, I like to think I was able to prevent her from getting high blood pressure. You’re welcome, Mom!

The point behind that little anecdote is that within a month of my college graduation, my mother was talking on the phone with me about my student loans, and how she had heard on NPR that someone who never went to college would often end up better off than someone who went to college for your average liberal arts BA – the very degree I got. Don’t get me wrong, I appreciated my college degree and have no end of gratitude for the effort my mother expended to make sure I got it. I know that it was one of the things she had pictured and strived towards for both of us since we were born. Still, there’s something to be said about timing.

To be fair, I graduated in 2009; a year and a half after most job prospects had dried up. Had we had a crystal ball, I might have done things differently. And, for me, it worked out, as I got a great job at UMassFive and was able to begin paying off my mountain of debt. Had I had a crystal ball, I might have done a couple of things differently.First, I might have taken a gap year. After showing my mother the crystal ball I am sure she would have sent me away with her blessing. After getting accepted into college, I might have deferred in order to save up some money for my first year’s tuition. After all, any loans you take out are going to cost quite a bit over the long run, and a tax benefit doesn’t cancel it out, but just softens the blow.

Second, I might have taken more advantage of scholarships. If I had known what I know now that I choose semi-finalists for our League Scholarship, I would have applied for more scholarships, comforted to know that my odds were probably not nearly as bad as I thought they were at getting a scholarship. After all, if I spend 10 hours applying for a $500 scholarship, I just made $50 an hour. Not bad!

Finally, I would have informed my mother that PLUS loans are an option made appealing due to their fixed rate, but that some private loans are more attractive in the long run. I would have shared with her the knowledge that it would have been a joint loan rather than one she was saddled with herself, and that, in a persistently low interest rate environment, it’s practically a steal!Of course, that would have involved understanding the difference between Prime and LIBOR rates (the latter is lower), and what floors and ceilings are (can’t go under or over a certain rate, respectively). But that’s yet another thing I would have done, had I had my crystal ball – I would have asked someone at UMassFive to demystify the process for me, and I would have checked UMassFive's Resource Center as a launchpad to find additional resources.

If you’re on your way into college and have questions about your best choices, and want someone to tell it to you straight, don’t be afraid to ask away. UMassFive and CU Student Choice are here to help.

Financial Goals

Budgeting without goals is like driving without a destination: you feel like you’re going somewhere, but you don’t know where, and you’re not sure why. Sure, it can be nice, but how long are you going to stick with it before you wonder what the point is, go home, and order takeout?

On the flip side, budgeting with goals in mind allows you to keep your eyes on the prize. Are you going to shop ‘til you drop? Not unless you feel like pushing that winter trip to the Bahamas out until next year. Do you want to grab that second latte every day? You’ll think twice when you remember that loan you’re trying to pay off by the end of summer. A good financial goal makes short-term sacrifice easy, because it is for a purpose that brings you long-term satisfaction.

So what makes a good financial goal? The acronym “SMART” summarizes it well.

Specific: There is a big difference between a plan to pay off “A lot of debt” and a plan to pay off your car loan. Getting specific is the first step towards making a good goal.

Measurable: How much is your car loan actually valued at? Keep in mind that there are costs associated with interest, so make sure you use our loan calculator to figure out how much you’ll really need. Thinking of vacationing? Use our vacation budgeter to figure out how much you’ll be spending over the cost of hotels and lodging. You’d be surprised at how much it adds up.

Attainable: The easiest way to quit on a goal, and often to quit budgeting entirely for a time, is to set a goal that is unattainable. Meaning, if you want to be a millionaire, you might want to set a goal to save ten thousand dollars first. And if a goal you thought was attainable turns out not to be, don’t despair! You can always adjust your goals later to make them work.

Relevant: Is this something you really want? After looking through all of your goals, you may find that some don’t quite fit your needs at this time. If you’re saddled in debt and you have to make a judgment call about whether to pay down your debt or go to Hawaii, you may decide that paying down debt is more relevant to your financial wellbeing. A modest trip to Maine may be more up your alley, and you’re setting the stage for prosperity that will make your Hawaii trip more relevant in the future.

Time-bound: We have a saying, that a goal is a dream with a deadline. If you want to do something, you’re only making dreams, until you set a time frame. Setting a time frame not only allows you to make regular payments towards it every paycheck and every month, but it also helps you to figure out how attainable your goal is. Again, if it turns out that it’s unattainable, you can push the deadline further out!

Try our Financial Goals Planner today to help you get started. With automatic, detailed calculations that even allow you to determine how loan interest and savings interest rates help or hinder your goals, you’ll be up and running in no time!

Is it a Good Time to Buy a Car?

People seem to be hanging on to their cars longer and longer during these challenging times. But at some point it makes sense to upgrade to a newer vehicle. A late model car will have less costly repairs and possibly better gas mileage, saving you money in the long run. With the annual spring sales upon us and car lots full of vehicles, dealers are moving into high gear to make deals and move their inventory. Now may be the ideal time to buy.

Here are a few things to remember to get the most car for the fewest dollars. First, you should determine how much you can afford to spend. Your overall monthly budget should include: your loan payment, insurance costs, gas, maintenance, and repairs. To figure out your monthly loan payment, you can use the “Calculators” on our website at umassfive.org.

Second, call or visit UMassFive to get your auto financing in place. Being preapproved can help you negotiate with the dealer about the price of the car, not a monthly payment. What good is getting a great deal on a car if your financing is costing you hundreds of dollars more in interest charges? In addition, we can tell you the true trade-in value of your current car so the dealer doesn’t underestimate your trade in.

This also would be a great time to “shop” for auto insurance. The market has become very competitive in recent years and you may be surprised by how much you can save. Just remember when you comparison shop, use the same types of coverage between policies. A policy may seem really inexpensive, but when you look closer it may offer limited protection and coverage or high deductibles you may not be able to afford. Also ask about discounts, as insurance agents use these as incentives to get your business.

Once you have found your vehicle, there are a few things you need to do before you sign on the dotted line to avoid a costly mistake. First, run a vehicle history report to determine if it was ever salvaged, stolen, or recalled, or if someone has altered the odometer. This is free and easy at Car Fax: http://www.carfax.com/. Most dealers will provide this report. Second, have your own mechanic put the car on a lift for a full inspection. This may cost you a few hours of his time but uncovering a major repair issue could save you hundreds of dollars and avoid a costly purchase!

Remember to give us a call when you are ready to buy because we have the experience to help you avoid mistakes and provide an auto loan that fits your budget.