What I Wish I Learned in School About Money Management 8 of 12: The Basics of Investing

Everyone dreams of becoming an investor but taking that first step into the market can feel overwhelming. Where should you begin? Which investments align with your goals?

So many questions, and we’ve got answers! Here’s what you need to know about investing to get started.

What is investing?

At its core, investing means putting your money into something with the expectation that it will grow in value over time. Investments can take many forms, including:

Stocks-shares of ownership in a company.
Bonds-loans you give to governments or corporations in exchange for interest.
Mutual funds-pools of money from many investors used to buy a mix of stocks and bonds.
Exchange-traded funds (ETFs)-similar to mutual funds but traded like individual stocks.
Commodities-like gold or oil.
Real estate-whether commercial or residential

Why invest?

Investing is crucial for long-term financial growth. Here’s why:

Beat inflation. Investing helps your money grow at a rate that can outpace inflation.
Build wealth. Consistent investing — even in small amounts — can add up over time thanks to compound interest, where you earn returns on your original investment and the returns you’ve earned.
Reach financial goals. Whether you’re saving for retirement, a home or your child’s education, investing can help you get there faster than by saving alone.

Types of investments: the big three

Stocks. When you buy a stock, you’re buying a piece of a company. If the company performs well, the stock’s value may rise, and you will likely get dividends, or a share of the company’s profits. Stocks can offer high returns, but they come with higher risk.
Bonds. Bonds are generally more stable. When you buy a bond, you’re essentially lending money to a company or the government. In return, they promise to pay you back with interest.
Mutual funds and ETFs. These are collections of investments managed by professionals (mutual funds) or following an index (ETFs). They offer diversification, which spreads out your risk by investing in several companies or sectors at once.

Risk and reward: finding the balance

Every investment carries risk, which means you can lose money. Generally, the higher the potential reward, the greater the risk. Your risk tolerance depends on factors like your age, financial goals, time horizon (when you’ll need the money) and your personal comfort with market fluctuations.

The power of compound interest

One of the most powerful forces in investing is compound interest. Let’s say you invest $1,000 and earn a 7% annual return. After one year, you’ll have $1,070. The next year, you earn interest on $1,070 — not just your original $1,000. Over time, that snowball effect can lead to massive growth.

Getting started

Here’s how to jump into the world of investing in five easy steps:

Clarify your goals.
Build an emergency fund first with three to six months’ worth of expenses saved.
Start with tax-advantaged accounts, like a 401(k), IRA or Roth IRA.
Choose a platform. You can invest through a brokerage account like Fidelity, or a robo-advisor like Betterment.
Start small and stay consistent — even $50 a month adds up.

Investing tips for beginners

Diversify. Spread your investments across different asset classes and markets.
Think long-term. Expect fluctuations in the market and don’t panic over short-term drops. They rarely affect your overall net gain.
Avoid trying to time the market. No one can predict exactly when to buy or sell. Time in the market usually beats timing the market.
Stay educated. Read books, follow financial blogs and/or listen to podcasts on investing to deepen your understanding.

Start now, stay steady and watch your money grow.

What I Wish I Learned in School: How to Manage Debt

Carrying ongoing debt can bring many challenges. The person is often stuck paying high interest rates. This, in turn, can prompt the debtor to only pay the minimum amount due each month. And that means making little headway on the actual balance. As time passes, they’ll keep acquiring new debt and keep falling deeper into the trap.

The good news is, it doesn’t have to be this way. With the right tools and information, you can learn to manage, and ultimately, eliminate your debt.

Here are nine steps for managing your debt and paying it down.

1. Organize your debt

First, list all your debts. Include credit cards, student loans, auto loans and any other outstanding balance you may carry. For each debt, note the following:

Total amount owed
Interest rate
Minimum monthly payment
Due date of monthly payment

Tally up your total debt monthly payments. Then, list your debts in order of interest rates, and then in order of outstanding balances.

2. Create a realistic budget

Track your income and expenses for several months. Then, set aside a reasonable amount for each spending category, ensuring you can adequately cover all of your monthly expenses. Finally, review your spending and look for ways you can increase your income and/or trim your expenses in any manner. Allocate these extra funds toward your debt payments.

3. Choose your debt payoff strategy

You have two primary choices here:

The avalanche method. Here, you’ll start with the debt that has the highest interest rate or highest balance, and maximize payments toward paying it off, then move on to the next until you’re debt-free.
The snowball method. In this method, you’ll pay off the smallest debt first, and then work through the rest in ascending order.

Review each strategy carefully and choose the one that best aligns with your lifestyle.

4. Consider debt consolidation

If you’re dealing with a large amount of debt, you may want to consider debt consolidation. This involves combining multiple debts into a single loan with a lower interest rate. Doing so will simplify debt management by giving you just one monthly payment to manage, and can potentially lower overall interest paid, too.

5. Avoid accumulating additional debt

Limit the use of credit cards and refrain from financing new purchases while working on paying off debt. It may be helpful to destroy your credit cards and have your personal devices “forget” your credit card information so you don’t spend mindlessly.

6. Seek professional advice

If managing debt becomes overwhelming, consider consulting a financial advisor or credit counseling service. It’s important to verify any service you use by checking for an online presence, reading customer reviews, demanding complete transparency and being wary of any service that demands upfront payment and/or promises outrageous results.

7. Monitor your credit

It’s wise to review your credit usage on a regular basis, and this is especially relevant when you’re working toward paying down debt. You can obtain free credit reports once a year from each of the three major credit bureaus and check your score on sites like CreditKarma. It’s also important to review your monthly credit card statements for fraud.

8. Build an emergency fund

Having an emergency fund can prevent the need to incur additional debt during unforeseen circumstances. Aim for a fund amounting to three to six months’ worth of living expenses.

9. Stay committed and patient

Celebrate small victories along the way to stay motivated. Consistency and perseverance are the keys to achieving financial freedom.

Follow these tips to learn how to manage and pay down your debt for good.

What I Wish I Learned in School 6 of 12: Avoiding Lifestyle Creep

Most people assume that they’ll start saving and investing a lot more money if their income were to increase. But, what actually happens after that raise is that their savings percent doesn’t budge and they have no idea where the extra money is going. This is usually due to lifestyle creep. Let’s take a look at this phenomenon, why it happens and how you can avoid it to maintain a life of financial fitness.

What is lifestyle creep?

Lifestyle creep, also known as lifestyle inflation, is when people’s monthly expenses increase along with their income. Unchecked lifestyle creep can ruin long-term financial goals, leaving people in a cycle where higher earnings don’t translate to increased savings or financial security.

Recognizing the signs

Here are some signs that you may be caught in lifestyle creep:

Stagnant savings. Despite earning more, your savings or investment accounts aren’t growing.
Increased debt. You’re consistently taking on more debt to finance a more lavish lifestyle.
Frequent upgrades. You’re constantly upgrading things even though the current model is fully functional.
Tight budget. You’re always running low on money by the end of the month despite an increase in income.

Strategies to avoid lifestyle creep

Follow these tips to stay financially fit under any circumstance:

Establish clear financial goals. Long- and short-term financial goals will help keep you on track.
Create and stick to a budget. Develop a detailed monthly budget that assigns a dollar amount for each spending category. Review and adjust your budget regularly.
Limit your revolving credit. It’s best to keep your credit limit down, even with an increase in your income.
Automate savings and investments. Set up automatic monthly transfers to your savings account.
Mindful spending. To avoid buyer’s remorse, implement a waiting period for significant purchases, such as a 48-hour rule, to determine if the expense is really necessary.
Regular financial audits. It’s a good idea to review your financial statements on a regular basis to see where you may be overspending.
Resist social pressures. Instead of trying to match or outdo online personalities, create your own personal and financial goals, a realistic plan for achieving them and then go and get ‘em!
Live below your means. Even with a higher income, it’s best to spend less than you earn.

Use these tips for active steps you can take to prevent and avoid lifestyle inflation.

What I Wish I Learned in School 5 of 12: The Importance of an Emergency Fund

Everyone knows it’s important to create and stick to a budget, but many people neglect to plan for the unexpected. Without proper planning, any surprise life event can send you spiraling into long-term debt.

The best way to plan for these events is by building an emergency fund for just this purpose.

Let’s take a closer look at why an emergency fund is so important and how to begin building your own.

Why is an emergency fund essential?

Financial security. Unexpected expenses can arise at any time. An emergency fund provides the financial buffer needed to handle these surprises without throwing off your financial stability.
Debt prevention. Having savings set aside can help you avoid resorting to debt when the unexpected happens.
Less stress. Knowing there’s a financial cushion in place to help you navigate almost any financial reality, can help you sleep better at night. In addition, when an emergency strikes, the fund can help alleviate the financial anxiety typical of uncertain times.

Common uses for an emergency fund

Job loss. An emergency fund ensures you can manage essential expenses while seeking new employment.
Medical emergencies. Savings can help cover deductibles, treatments or medications that are not covered by insurance.
Home or car repairs. An emergency fund allows for timely car and home repairs without financial strain.

How much should you save?

Financial experts typically recommend setting aside three to six months’ worth of living expenses in an emergency fund. However, the exact amount should be tweaked to individual circumstances.

Building your fund

Here are some tips for getting started on building your emergency fund today.

Assess your expenses.
Set realistic goals.
Automate your savings with a monthly transfer to your savings account.
Trim your spending.
Use windfalls to boost your emergency fund.

Where to keep your emergency fund

Accessibility and safety are crucial when choosing where to store your emergency savings. High-yield savings accounts are often recommended due to their balance of liquidity and interest earnings. These accounts allow quick access to funds when needed while offering better returns than standard savings accounts.

Maintaining and replenishing your fund

It’s important that you use your emergency fund only for genuine emergencies. If you need to withdraw from it, prioritize replenishing the fund as soon as possible.

An emergency fund is more than just a financial safety net; it’s a foundation for long-term financial well-being. Build yours today!

What I Wish I Learned in School 4 of 12: Taxes Demystified

Taxes can seem daunting, especially when you’re just starting out. Here’s everything about taxes you wish you’d learned in school.

1. Taxes are inevitable

The first thing to know is that taxes are a part of life. Whether you’re earning a paycheck, running a business or investing, you’ll interact with the tax system. The key is to be informed and organized.

2. Your paycheck doesn’t show the whole picture

If you’ve ever wondered why your take-home pay is less than your salary, taxes are the answer. Employers withhold income taxes, Social Security and Medicare from your paycheck. This is called “pay-as-you-go” taxation.

Review your W-4 form when you start a new job or when your financial situation changes. This form determines how much federal income tax your employer withholds. Claiming too many allowances could lead to a big tax bill in April, while too few may mean you’re overpaying.

3. Tax deductions and credits are your friends

One of the most confusing aspects of taxes is the difference between deductions and credits:

Deductions lower your taxable income, which reduces the amount of tax you owe.
Credits are even better because they directly reduce the amount of tax you owe.

Learn which deductions and credits you qualify for.

4. Filing isn’t as scary as it seems

Gather all your important documents:

W-2s from your employer(s)
1099s for freelance work or investment income
Receipts for deductible expenses
Records of charitable donations

Next, choose a filing method. You can use tax software or hire a professional.

5. Keeping records is crucial

The IRS recommends keeping tax-related documents for three years. This includes:

Pay stubs
Bank statements
Tax returns
Receipts for deductions

Keep these documents in a safe place for easy access.

6. Understand the difference between a refund and a bill

Getting a tax refund may feel like a bonus, but it means you paid more in taxes than you owed. On the flip side, owing taxes at the end of the year can be stressful. To avoid surprises, adjust your withholding or make estimated tax payments if you’re self-employed.

7. Retirement accounts offer tax advantages

It’s important to know how powerful retirement accounts are for saving on taxes. Contributions to traditional IRAs and 401(k)s are often tax-deductible, reducing your taxable income. Roth IRAs don’t offer an upfront deduction, but your withdrawals in retirement are tax-free.

Taking advantage of these accounts can help you build wealth while lowering your tax burden.

8. State taxes matter, too

Most states have income taxes, and each state has its own rules and rates. Research your state’s tax laws to avoid surprises and plan accordingly.

9. Deadlines are non-negotiable

The IRS tax filing deadline is typically April 15, but it may vary if on a weekend or holiday. Missing this deadline can result in penalties and interest on any taxes owed.

Use this guide to learn all about taxes.

What I Wish I Learned in School 3 of 12: Credit Card Smarts

When it comes to life skills, managing credit cards is one of the most important lessons. But mastering the ins and outs of responsible credit card management can be the key to a lifetime of financial wellness. On the flipside, irresponsible credit card usage might trigger a downward spiral toward long-term debt and not being able to get larger loans later on. Here are the basic credit card smarts to know.

Understand how credit cards work

A credit card is a short-term loan. So, there is an expectation that you’ll pay it back — ideally on time and in full. Many first-time credit card owners don’t realize that paying only the minimum balance can lead to a lot of interest charges, and thus, make every purchase more expensive over time. Know the annual percentage rate (APR) on each of your credit cards and understand how interest accrues for times when you must carry a balance on your card.

Build credit early

Your credit score plays a pivotal role in your financial life. It can impact everything from your ability to rent an apartment to securing a car loan or even landing a job. It’s also super-important to start building your score as early as possible because the length of your credit history makes up a large percentage of your credit score. Paying your bill on time and keeping your credit utilization low are key factors in keeping a healthy credit score.

Use your credit card like a debit card

Credit cards make it easy to spend money you don’t have. As a teenager or college student, the temptation to swipe for meals, new clothes or gadgets is hard to overcome. It’s important to remember, though, that every swipe adds up. Losing track of your spending might bring a balance that’s difficult to pay off. Budgeting and tracking expenses are crucial habits to develop early on to avoid credit card debt.

Never miss a payment

Never miss a credit card payment, even if you can only afford to pay the minimum payment. Missing just one payment can have a bad impact on your credit score, in addition to late fees and penalty interest rates.

Understand rewards and perks

Credit cards often come with rewards programs, cash-back options and perks, like travel insurance or purchase protection. While these benefits can be valuable, they shouldn’t drive your spending. Make sure you weigh the potential costs of using your credit card for purchases before deciding to whip out the plastic.

Avoid credit card traps

Credit card companies don’t always make their terms crystal clear, and that’s no accident. Before signing up for a new credit card, read the fine print. For example, an enticing 0% APR offer might revert to a much higher rate after the promotional period.

Learn about credit utilization and its impact

Credit utilization refers to the ratio of your credit card balance to your credit limit. This percentage significantly impacts your credit score. It’s best to keep your credit utilization (across all your cards) below 30%.

Use these tips to learn how to manage your credit cards responsibly.

How to Set SMART Financial Goals (and Actually Reach Them!)

Setting goals for your money might sound boring, but it’s like creating a game plan to get what you want and feel awesome while doing it. Whether you’re saving for new sneakers, a new phone or your future, using the SMART goals system can help you get there. SMART goals aren’t just “smart” (like genius-level smart)—it’s a simple way to make your goals clear and achievable. Let’s break it down!

What are SMART goals?

SMART stands for:

S – Specific

M – Measurable

A – Achievable

R – Relevant

T – Time-bound

These five steps will turn any big idea into a goal you can actually reach. Let’s see how it works!

1. S is for Specific

First, make your goal as clear as possible. Don’t just say, “I want to save money.” Instead, get specific, like: “I want to save $50 for a pair of headphones.” Being specific helps you know exactly what you’re working toward.

2. M is for Measurable

You need to know when you’ve hit your goal, so give it a number you can measure. In this case, your goal would be to save $50. You can track your progress—$10, $20, $30 … all the way to $50!

3. A is for Achievable

Make sure your goal is realistic. Can you really save $50 in a few weeks? To find out, check how much you earn from allowances, chores or part-time work. If you earn $10 a week, and can put all your earnings into savings, saving $50 is possible in 5 weeks. If that feels too long, think about smaller goals—like saving $20 first.

4. R is for Relevant

Is this goal important to you? Saving for something you care about makes it easier to stick to your plan. Ask yourself: Why do I want these headphones? Will they make me happy? If the answer to the second question is yes, you’ve got a goal worth chasing!

5. T is for Time-bound

Set a deadline for your goal. Deadlines keep you on track and give you something to target. For example: “I’ll save $50 in 5 weeks.” Now you have a finish line — and a game plan!

How to reach your SMART goals

Here are some tips to make it easier:

Break it down: If saving $50 feels big, focus on saving $10 at a time.
Track progress: Use a savings chart or a jar to see your money grow.
Cut back on spending: Skip small things like snacks or apps to save faster.
Earn more: Ask for extra chores or find ways to make money (like walking a neighbor’s dog).

Setting SMART financial goals is like creating a map for your money. By being Specific, Measurable, Achievable, Relevant, and Time-bound, you’ll know exactly what you’re saving for, how to do it and when you’ll get there. Start small and stay focused—you’ve got this!

What I Wish I Learned in School 2 of 12-Budgeting Basics: A Step-by-Step Guide to Taking Control of Your Finances

Managing your money doesn’t have to be hard! Here’s how to budget in seven simple steps.

Step 1: Know your income

Before you can plan your spending, identify exactly how much money is coming in. List all sources of income in your household, including:

Salary after taxes
Side hustle earnings
Investment returns
Any other regular inflows

Be realistic and stick to consistent, reliable income sources when calculating your monthly total.

Step 2: Track your expenses

Now you’re ready to track your spending. Keep a log of every purchase you make over 30 days. Divide your expenses into the following categories:

Fixed expenses, like rent or mortgage, insurance and car payments.
Variable expenses, like groceries, dining out and utilities.
Discretionary spending, like subscriptions, hobbies and shopping sprees.

Step 3: Set financial goals

Having a clear financial goal will motivate you to stick with your spending goals. For example, you may want to pay off high-interest debt, save up for a large purchase or prepare for retirement. Clarify your goals before moving on.

Break your goals into short-term goals (saving $500 in three months) and long-term goals (paying off $20,000 in student loans over five years).

Step 4: Choose a budgeting method

Choose the budgeting method that aligns with your personality and lifestyle:

Zero-based budgeting. In this traditional form of budgeting, every dollar is assigned a job. If you earn $3,000 monthly, allocate it to cover all expenses, saving and debt repayment until there’s no money unaccounted for.
50/30/20 rule. In this plan, you’ll allocate 50% of your income for needs, like housing, food and utilities; 30% for wants, like entertainment, dining out and hobbies; and 20% for savings and debt repayment.
Envelope system. This plan involves putting cash for each category into labeled envelopes. When the money’s gone, the spending in that category stops.

Step 5: Trim your spending where needed

Budgeting can show you where you’re leaking money. There’s no need to sacrifice all indulgences, but trimming unnecessary expenses can free up money for savings or debt repayment.

Here are some tips for trimming expenses:

Cook your favorite foods at home instead of dining out.
Cancel subscriptions you don’t really use.
Shop smarter with sales, coupons and cash-back apps.
Choose free or low-cost entertainment.

Step 6: Build an emergency fund

Without an emergency fund, any unexpected expense can throw off your budget and set you back with your financial goals. Aim to save up at least $1,000, then gradually work up to 3-6 months’ worth of living expenses.

Step 7: Review and adjust

Life is unpredictable, and so is your budget. Review it monthly to ensure it reflects your current income, expenses and goals.

Tips for sticking to your budget

Follow these tips to stick to your budget:

Automate your savings.
Track progress and celebrate small wins.
If one method isn’t working, try another.
Use apps to help you.

Use this guide to get started on budgeting today!

What I Wish I Learned in School 1 of 12: Compound Interest

If there’s one financial concept that has the power to change lives, but is underappreciated, it’s compound interest. For most of us, compound interest wasn’t covered in school, leaving us to stumble upon its magic later in life. And it’s sometimes too late for us to fully benefit from its power. Here’s why understanding compound interest early could make all the difference.

What is compound interest?

Compound interest is the process of earning interest on both the initial principal of an investment and the accumulated interest over time. In other words, your money makes money, and that money makes more money, too. Compound interest has tremendous potential to grow wealth when applied consistently over time.

An example of compound interest

Imagine you invest $1,000 at a 5% annual interest rate. If the interest is simple (not compounded), you earn $50 annually. After 10 years, you have about $1,500. But, with compound interest, you earn interest on the $1,000 in year one, then on $1,050 in year two, and so on. After 10 years, your $1,000 grows to $1,628.89 — not because the rate is higher, but because of the compounding effect.

Why timing matters

Compound interest thrives on a single crucial element: time. The earlier you start saving or investing, the more exponential the growth.

For example, investing $200 a month at age 25, with an annual return of 7%, will net you nearly $480,000 by age 65. If you start the same plan at age 35, you’ll only have approximately $227,000 by age 65,

Lessons on compound interest you wish you’d learned in school

Here are the most important principles of compound interest:

1. Start early, even with small amounts. Compound interest needs time to work its magic, and even a small amount of investing early in life could lead to significant returns over time.

2. The Rule of 72. Divide 72 by your annual interest rate, and you’ll get the number of years needed for your investment to double. Learning this trick early can inspire better saving habits.

3. Compounding works for debt, too. Credit card debt, for example, compounds at alarming rates, turning small balances into financial nightmares.

4. Harness the power of automation. Setting up automatic transfers to savings or investment accounts ensures consistent contributions and removes the temptation to spend.

Why understanding compound interest can be life-changing

Understanding the concept of compound interest can truly be life-altering. Here’s why:

Increased financial freedom with robust investments.
Less stress in emergencies, thanks to fast-growing savings.
Early start on retirement savings, ensuring years of growth.

How to make up for lost time

It’s not too late to start harnessing its power. Here are a few steps to get going:

Open a high-yield savings account or start investing.
Take advantage of employer-matched funds in retirement accounts.
Automate your savings to ensure consistency.
Educate yourself to better understand how compounding works.

Learning to harness the unique power of compound interest can make all the difference to your financial health.

The Hidden Costs of Buying a Home

Buying a home is a big milestone, but there are many hidden costs that can quickly add up, catching many first-time homebuyers by surprise. Here are some of the hidden costs of buying a home.

1. Home inspection

Cost: $300-$500

A home inspection isn’t always a required part of the homebuying process, but having your future home inspected by a professional can save you thousands of dollars in future repair costs by identifying problems before you close.

2. Appraisal fees

Cost: $300-$600

Most lenders require an appraisal to confirm that the home is worth the purchase price. If the appraisal comes in lower than the agreed purchase price, you may need to renegotiate the price or cover the difference out of pocket.

3. Closing costs

Cost: 2-5% of the home’s purchase price

Closing costs might be the most substantial hidden expense in the homebuying process. They include various fees, such as:

Loan origination fees. Lenders charge this fee to cover the administrative work that’s involved in processing your loan.
Title insurance and title search. Title insurance protects both you and the lender from potential ownership disputes. The title search is conducted to ensure there are no existing claims on the property.
Recording fees. Local governments charge these fees to make your ownership official in public records.
Escrow fees. An escrow company manages the transfer of funds and important documents between buyer and seller.

4. Property taxes

Cost: varies

Property taxes are an ongoing expense that can vary significantly depending on where you live. While most people understand they’ll pay property taxes, it’s easy to dismiss how much they can cost each year.

5. Private mortgage insurance (PMI)

Cost: 0.3-1.5% of the loan (annually)

If your down payment is less than 20% of the home’s purchase price, most lenders will require you to pay for private mortgage insurance (PMI). PMI protects the lender if you default on the loan, and it typically costs between 0.3% and 1.5% of the loan amount annually.

6. Homeowners insurance

Cost: $800-$1500 (annually)

Homeowners insurance is a necessary expense that protects you in the event of natural disasters, theft, or accidents. Many lenders require buyers to pay for the first year’s premium upfront at the time of closing.

7. Professional cleaning

Cost: $120-$325

Most sellers will deep-clean their home before putting it on the market, but they may not be as detailed when they actually move out. Real estate contracts generally require the home to be “broom-clean” before the seller moves, but this only means a very basic cleanup, with floors swept and trash removed. You may choose to have your home professionally cleaned and sanitized before you move in for a real, fresh start. Be sure to budget for this cost.

8. Immediate repairs

Cost: Varies

Unless you’re buying a new construction home, your new house will likely need some repairs. From a fresh coat of paint, to new window treatments and light fixtures, to replacing carpets and appliances, this can cost just a few hundred dollars to several thousand or more.

9. Moving

Cost: $500-$3000

The cost of moving itself is often overlooked, but can add up quickly, especially for long-distance moves or if you need professional movers. Moving expenses include packing supplies, rental trucks or a moving company. The cost of this can run anywhere from a few hundred to several thousands of dollars.

Don’t let the hidden costs of moving take you by surprise! Use our guide to be prepared for the true cost of moving.

Anatomy of a Car Payment

When you get a loan to buy a car, you’ll get a new set of keys — and a new monthly payment. It may have you wondering how this payment is determined and how it’s calculated.

So many questions, and we’ve got answers! Let’s break down the parts of a car payment, explain how monthly payments are calculated and offer tips for managing your payments well.

What are the components of a car payment?

Principal

The principal is the amount of money you borrow to purchase the car. For example, if you buy a car priced at $35,000, and you put $5,000 as a down payment, the principal of your loan is $30,000.

A portion of each monthly mortgage payment will go toward paying down the principal balance of your loan.

Interest

Interest is the cost of borrowing money from a lender. It’s calculated as a percentage of the principal amount and is added to your monthly car payment. The interest rate on your loan will depend on a handful of factors like your credit score, the length of the loan term and the current market conditions.

Loan term

While this is not really a part of the loan, you’ll likely see this referenced on your monthly statement or loan bill. The loan term is the length of time you have for repaying the total loan, typically expressed in months. Common auto loan terms range from 36 to 72 months, with some loans extending even longer. The longer the term is, the lower the monthly payments will be, but the more interest you’ll pay over the life of the loan.

If you’ve rolled additional costs into the loan, they may also be part of your monthly payment. This can include:

Taxes and fees

If you choose to finance taxes, registration fees or other upfront costs of the loan, these will be included in your loan amount and will increase your monthly payment. These costs are not itemized separately; instead, they’ll be incorporated into the principal.

Add-ons

Optional add-ons like extended warranties, gap insurance and other products you choose to finance will also be included in your loan principal, thus increasing your monthly payment.

Additional costs of car ownership

While not included in your monthly loan payment, these expenses are an inherent part of owning a car:

Insurance. Lenders typically require you to carry comprehensive and collision coverage as part of your financing agreement, ensuring the car is protected if in an accident.
Maintenance. Your car will need regular maintenance and upkeep, which you’ll need to budget for.
Fuel or electricity. Of course, you won’t be able to drive a car without gas or springing for electricity to power it.

How are car payments calculated?

To calculate your monthly payment, the lender will take the principal of the loan along with any add-on costs, and the interest amount due, and divide this number by the months in your loan term. This is the amount you’ll need to pay each month.

Managing your car payment

Managing your car payment well requires careful planning and budgeting. Here are a few tips to help you stay on top of your payments and minimize the overall cost of your car loan:

Compare offers from multiple lenders to find the best interest rates and loan terms.
If possible, make a larger down payment to reduce the amount you need to finance.
Choose a shorter loan term.

High Point FCU auto loans offer great terms, easy eligibility requirements for qualifying members and a quick application process. Call, click or stop by today to learn more.

Beware of Auto Repair Scams

Unless you’re an auto mechanic or self-professed expert on cars, you likely don’t know all there is about the inner workings of your car. This can make you vulnerable to falling for an auto repair scam, which can be challenging to spot.

Here’s what you need to know about auto repair scams, and how to keep yourself from falling victim.

How auto repair scams play out

Auto repair scams can come in many forms, but they generally follow a similar pattern. Here are a few common scenarios:

The mystery problem scam. You take your car in for a simple issue, like an oil change or tire rotation and the mechanic “discovers” a more serious, often vague problem requiring immediate attention.
The bait and switch scam. Here, a repair shop advertises a low price for a common service. Once your car is in the shop, they’ll find additional “necessary” repairs that inflate the final bill. The shop may even perform the extra work without your consent, leaving you with no choice but to pay.
The used parts scam. In this scam, a mechanic charges you for new parts but installs used or refurbished ones. The parts may be of inferior quality, leading to more frequent breakdowns and the need for additional repairs..
The endless repairs scam. After completing a repair, the mechanic tells you that another unrelated issue needs fixing. This cycle continues, with one repair leading to another, making it seem like your car is constantly in need of service.

Red flags to watch out for

Look out for these warning signs that you may have been targeted by an auto repair scam:

1. Unsolicited repair suggestions.
Vague or confusing explanations for repairs that are allegedly necessary.
High-pressure tactics.
Refusal to provide written estimates.
Unexplained charges on the invoice.

Protect yourself

Here’s how to protect yourself from falling victim to an auto repair scam.

First, before hiring a mechanic or heading to an auto repair shop, do your research. Look up reviews online, ask for recommendations from friends or family and check the shop’s credentials. It’s also recommended that you familiarize yourself with your car’s basic maintenance needs and how it functions. The more you know, the less likely you are to be taken advantage of.

Next, get a second, or even third opinion on any major repairs before agreeing to have work done. Comparing estimates can help you determine if a shop is overcharging or recommending unnecessary work.

Keep detailed records of all repairs and services performed on your vehicle so you can track its history and identify any inconsistencies if a mechanic claims something needs repeated attention.

Finally, if you find a mechanic you trust, stick with them. Building a long-term relationship can help ensure that your car receives honest, high-quality service over time.

Auto repair scams can be a nightmare for car owners, but by staying informed and vigilant, you can protect yourself from falling victim. Stay safe!

The Anatomy of a Mortgage Payment

Trying to understand your mortgage payment can be like trying to decode a secret language. At the very least, you may be wondering what all the lingo means.

No worries; we can help! Let’s take a look at the different components of your mortgage payment, explain how it’s calculated and offer tips for managing payments effectively.

Principal

The principal of your mortgage is the amount of money you borrow from your lender when buying your home. A portion of each payment goes toward paying down this principal. In the early years of your mortgage, a smaller portion of your payment goes toward the principal while most goes toward interest. As time goes on, though, this balance shifts, and more of your payment goes toward principal.

Interest

Interest is the cost of borrowing money from your lender and is calculated on the outstanding principal balance. It’s typically expressed as an annual percentage rate (APR). The interest rate you get depends on several factors, including your credit score, your down payment amount and current market. There are two main types of interest rates: fixed and variable. A fixed-rate mortgage keeps the same interest rate for the life of the loan, while a variable-rate mortgage can change over time based on market conditions.

Property taxes

Property taxes are levied by local governments and are based on the assessed value of your property. These taxes fund essential services in your community, like schools, police and fire departments and road maintenance. The amount of property taxes you’ll pay varies widely by location.

Homeowners insurance

Homeowners insurance protects your property and belongings from damage or loss due to events like fires, storms and theft. Most lenders require borrowers to carry homeowners insurance, so your choice will not be whether to get insurance, but how much coverage to purchase.

Private mortgage insurance

If your down payment is less than 20% of the home’s purchase price, your lender will likely require you to carry private mortgage insurance (PMI), which protects the lender in case you default on your loan. The cost of PMI varies, but typically ranges from 0.3% to 1.5% of the original loan amount per year. Once you have built up 20% equity in your home, you can usually request to cancel PMI.

Tips for managing mortgage payments

Budget for your payments: Create a budget that includes your mortgage payment and other homeownership costs.

Refinancing: If interest rates have dropped since you got your mortgage, consider refinancing. Refinancing can lower your interest rate and/or monthly payment. It’s also a way to switch from a variable to a fixed-rate mortgage.

Extra payments: Making extra payments toward your principal can help you pay off your mortgage faster and save on interest paid over the life of the loan.

Understanding the anatomy of a mortgage payment is essential for managing your finances. Use this guide to learn about the components of your mortgage and how to manage your payments effectively.

How Can I Save on Energy Costs This Summer?

Q: Summer’s here, and my energy bill is burning right through my budget! How can I save on energy costs?

A: It’s hot out, but you can keep your cool with our energy-saving tips! Follow these hacks to save on energy costs this summer.

Have your HVAC system professionally inspected

First, you’ll want to make sure your home is being cooled efficiently. You can do this yourself, but it may be worth hiring a professional to check your HVAC system for leaks and other problems.

Use your AC efficiently

Don’t waste any of that cold air! In addition to regular maintenance, ensure you’re using your AC system as efficiently as possible. Avoid placing lamps or large TV screens near your thermostat, clean your air intake vents regularly and keep doors and windows closed when running the AC.

Get smart

If you haven’t already done so, consider using smart technology to keep your home cool and your costs down. Connecting your thermostat to a mobile device will enable you to control it from a distance and avoid cooling an empty home. You can also use smart technology to set your thermostat on a schedule that suits your family’s needs.

Get grilling

Your oven and stovetop can heat up much more than your food this summer. Make it a habit to take your cooking outside and keep your home cooler.

Time your chores

Using large appliances, like a washing machine and dishwasher, can add extra heat to your home, especially if you live in a small space. Use these machines after dark, when it’s generally cooler.

Use appliances efficiently

Only wash full loads of laundry. If possible, use cold water.
Use glass pans in the oven when possible since they retain heat better and can shorten cooking time.
Use appropriately sized pots and pans on your burners.
Only run your dishwasher when it’s full.
Unplug small and medium-sized appliances when not in use.

Use these tips to learn how to save on energy costs this season so you can keep your cool, and your budget, too.

What’s the Difference Between ACH and Wire Transfers?

In 2024, there’s no shortage of ways to electronically transfer funds between accounts. Let’s take a look at two popular methods: automated clearing house (ACH) and wire transfers.

What is ACH?

ACH utilizes a clearing house to transfer funds between accounts. ACH transfers can take several days to complete.

ACH transfers include:

Direct deposit for paychecks
Direct deposit for government benefits
Automated and one-time bill payments
International payments
P2P payments
B2B payments

What is a wire transfer?

A wire transfer moves funds from one account to another. Wire transfers can be domestic or international and can generally be sent through a bank or credit union. They can also be sent using a wire transfer service, like Western Union or MoneyGram. The individual sending the transfer will have to pay a fee. Once a transfer has been accepted by the receiver, it cannot be reversed.

Wire transfers are commonly used for these transactions:

Down payments
Federal tax payments
Car purchases

What’s the difference between ACH and wire transfers?

There are several important distinctions between ACH and wire transfers:

1) Speed and timing

ACH transfers are usually scheduled for deposit between one to three business days after the request is sent. Same-day processing is available for a fee, and daily deadlines are generally later in the day or evening.

Wire transfers are typically processed the day they arrive, often in just a few hours. The transfer will need to be initiated before the insitutions’s or service’s established deadline, which is typically 3 p.m., to benefit from same-day processing. Also, international transfers will take longer to clear, up to 10 days.

2) Cost and fees

ACH transfers made from your own bank or credit union will usually come at no cost. Sometimes, a nominal fee will be charged. However, if you attempt to make an ACH transfer from an account having insufficient funds, you may be charged an overdraft fee of up to $35 for each attempt made.

Wire transfers, on the other hand, have high fees attached to them. Domestic wire transfers typically cost between $25-$30, international wire transfers can cost up to $50, and internal wire transfers (being on the receiving end of a wire transfer) can cost you $15.

3) Limits

ACH transfers are typically limited by day, month, account and/or method of transfer. You may not be able to send more than a few thousand dollars via ACH each month.

Wire transfers have much higher limits, and you can usually send hundreds of thousands of dollars through a transfer. You may be able to send an unlimited amount by visiting your bank or credit union, or by seeking their assistance over the phone.

4) Security

ACH transfers can be hijacked by scammers to divert the funds to their own accounts. Be sure to track any ACH transfers you make and request a reversal of funds if you notice any suspicious activity.

On the other side of the table, wire transfers are notoriously favored by scammers for their irreversibility and lack of traceable evidence. Once a wire transfer has been accepted, there’s usually no way to reclaim the lost funds. It’s also difficult to identify the recipient of the transfer once it has been made.

It’s crucial to verify the identity and account information of a wire transfer recipient before agreeing to send funds. Never wire money to an unverified contact or new retailer.

Use this guide to learn how ACH and wire transfers work so you can make an informed decision about transferring your funds.

Building Financial Resilience: Strategies for Overcoming Financial Stress

In today’s fast-paced world, we face many financial challenges as we juggle a lot of responsibilities. The constant pressure to earn enough for covering day-to-day expenses while remembering to put away money for your financial goals never lets up. To make it even more difficult, life only gets more expensive as time goes on. However, despite the inherent hurdles, overcoming financial stress and living a financially fit life is very doable. Let’s take a look at key strategies for building financial resilience.

Manage debt

Debt can be a big source of financial stress. To effectively manage debt and gain control of your finances, take a proactive approach:

Assess your debts and choose which to prioritize.
Create a repayment plan, like the snowball or avalanche method.
Maximize debt payment until you’ve paid them all off.

Build an emergency fund

Building an emergency fund is important for creating financial resilience. Here’s how to do it:

Start small. Gradually increase the amount you regularly save over time.
Automate your savings. Make saving automatic by setting up regular transfers from your checking account to a separate savings account.
Aim for three to six months’ worth of expenses. While this can take time, make this amount your ultimate goal so you can weather any surprise and keep your finances intact.

Set financial goals

Setting clear financial goals will empower you to take control of your financial well-being and build your financial resilience. Follow these steps to successfully set financial goals:

Identify your short-term and long-term goals.
Make your goals specific and measurable.
Break goals into actionable steps.

Practice self-care

Taking care of yourself is a vital part of reducing financial stress. Find time to pursue your interests and to take frequent breaks from the daily grind. And it doesn’t have to put you into debt, either. You can go for a walk alongside a beautiful lakefront, learn a new language, visit free galleries showcasing your favorite art or develop a hobby by watching free DIY videos.

Managing money responsibly in current times is super-challenging, but financial resilience is within reach. Use the tips outlined here to achieve and maintain financial resilience.

Practical Budgeting Made Easy

With the right tools and information, building a budget can be quick and easy. Here’s how to create a simple and practical budget for the time-strapped consumer.

Review your income and expenses

Most budgeting plans recommend tracking income and expenses for three months. If you’re pressed for time, though, you can choose to look at one month and review your spending and income throughout this time. Review your checking account details and credit card statements to see where your money went and what funds came in.

Compare income and expenses

Hold up your two numbers from the previous step and see how they compare. If your income outweighs your expenses, you’re doing great! If it falls short, you’ll need to trim your expenses in the next step or look for ways to boost your income. If the numbers balance each other out, it’s still a good idea to trim expenses to leave some budget wiggle room.

Assign a dollar amount to every expense category

Next, review the ways you spend your money and assign a dollar amount to each category. Include fixed and changing expenses as well as savings contributions.

If you’re pressed for time, you can make your categories more broad. For example, instead of setting a separate number for groceries, work lunches and dining out, you can set a larger number for all monthly food expenses.

If your income does not cover your expenses or just barely covers them, look for ways to trim the fat however possible.

Jot down your dollar allocation on paper, or create a digital version of your budget and upload it to your personal devices for easy access.

Use technology

Harness the power of technology to help you track and manage your expenses well. A budgeting app can make tracking your monthly spending super-easy. You can upload your budget to the app and track expenses throughout the month. The app will let you know how much you’ve spent in each category and warn you when you’re approaching the limit.

Live with your budget

You’re ready to live with a budget! Remember to keep your monthly expense categories in mind as you spend throughout the month.

If you find it too hard to keep track of your spending throughout the month, the money envelope system can make it easier. Simply withdraw cash amounts for each non-discretionary expense category in your budget at the start of the month and only use the money in these envelopes to pay for these costs throughout the month.

Review and adjust

Your budget is up and running! Review your spending plan regularly to see if it’s still working for you and adjust as needed.

Budgeting doesn’t have to take a lot of your time or be overly complicated. Use this guide to learn how to create a practical, easy budget that works.

Which Purchases Should I Charge to My Credit Card?

Q: I’m reevaluating my credit card use and wondering if I’m doing it right. Which purchases should I charge to my credit card?

A: Your credit score, which is the key to long-term loans at favorable rates, employment opportunities and more, depends on your credit card usage. To build credit, you need to use credit. You want to make sure you use your cards, but you don’t want to spend more than you can pay. In addition, there are some purchases that are best off being made with a credit card.

Here are six purchases you may want to charge to your credit card:

1. Electronics and appliances

It’s a good idea to pay for big-ticket items, like electronics and appliances, with your credit card. This will provide you with an insurance of sorts on these purchases, such as doubling up on the offered warranty. Some cards also offer price protection, which covers the difference if the price of an item drops after you’ve bought it.

2. Car rentals

Here, too, paying with a credit card can provide you with a level of insurance on the car. The insurance likely won’t be as robust as temporary insurance you might buy through the rental service, but it will probably offer some collision coverage at no extra charge.

3. Purchases made abroad

When traveling and making purchases abroad, a credit card is usually your best way to pay. Cash has the risk of loss or theft and debit cards may have fees for transactions that are made outside the country. They may not even be accepted at some vendors. Credit cards from well-known issuers, on the other hand, are accepted almost everywhere and are a lot safer to carry than large sums of cash. In addition, many credit card companies offer a favorable exchange rate.

4. Fixed monthly bills

If you’re looking for an easy way to build credit, pay a fixed monthly bill, such as a subscription or payment for phone or internet service, on your credit card each month. This will ensure regular transactions are made on your card. As long as you’re paying your credit card bill on time or early each month, you will show a pattern of responsible credit usage!

5. Online purchases

When shopping online, you’re usually best off paying with a credit card. Unlike other forms of payment, credit card transactions are always traceable and provide some coverage for fraud.

6. Mobile phone bills

Another good candidate for credit card payments is your monthly mobile phone bill. Many credit card companies offer some coverage for phones that are lost, damaged or stolen if the card was used to pay a specific number of bills and the cardholder is up to date on their bills.

6 Financial Resolutions for the New Year

It’s a brand-new year, so now is a great time to set budget-friendly resolutions to pave the way toward a more financially fit future. Here are six financial resolutions to get you started.

1 – Create (and stick to!) a budget

If you don’t have a monthly budget, let’s get one started! Track your spending and income over several months, and then make a list of all expenses and all monthly income streams. Assign a dollar amount to each expense category. If your columns are equal, or your income is more than your expenses, you’re doing great. But, if your expenses are more than your income, you’ll need to trim your spending or find ways to increase your income.

After you’ve created your budget, or if you already have one, resolve to actually stick to it each month. You can use one of the many budgeting apps, like YNAB, to help.

2 – Build an emergency fund

An emergency fund is your financial safety net. Experts recommend having three to six months’ worth of living expenses in your emergency fund. Resolve to build an emergency fund this year by setting aside a small sum of money each month until you have a nest egg that can get you through virtually any emergency.

3 – Trim your expenses

Have your expenses started trickling upward in any area(s)? Identify your weak points and brainstorm for ways to start spending less. Small change today adds up to big bucks tomorrow.

4 – Pay down debt

Make this the year you pay down debt, or at least make real headway toward getting rid of it for good. You can choose to prioritize high-interest debts, or work on paying off your smallest debt first to keep your motivation going. Maximize payments on your chosen debt until it’s paid off. Then, keep on rolling to the next debt on your list until you’re completely debt-free.

5 – Automate your savings

It’s all wonderful to resolve to put more money into savings each month, but how do you turn those good intentions into reality? Set up automatic monthly transfers from your checking account to your savings so you never forget to feed your savings.

6 – Expand your financial education

Invest in your financial education this year by reading books, taking online courses, listening to podcasts or attending seminars on personal finance.

Your Complete Guide to Santa Shock Recovery

The holidays are over, and with the start of a new year, we are often dealt a case of “Santa shock”. Its main symptoms are the result of the house and daily schedule being in disarray as well as those first post-holiday credit card statements haunting you as the ghosts of purchases past!

The good news is, all it takes is some self-care and planning to make a full recovery from Santa shock. Here are four ways you can bounce back from the post-holiday slump.

Declutter and reorganize

Get your house organized! To ease the overwhelm, move all the holiday clutter into one area. Then make a list of all you need to do to get your home looking liveable. Finally, enlist the help of all household members to divide and conquer it all. In no time, your living space will be looking neat and organized again.

Reestablish routine

Getting back into a normal post-holidays routine can be challenging, but the sooner you start, the easier it’ll be to get back into real life. Set a regular sleep schedule, plan balanced meals and reintegrate exercise into daily life. Returning to a structured routine will help you feel more grounded and reduce the disorientation that often accompanies the post-holiday season.

Help your budget recover

Get your budget back on track after the holidays with these tips:

Consider a no-spend month. Resolve to only spend money on what you truly need for an entire month after the holidays. This will help your budget get back on track quickly.
Assess your holiday spending. Take a look at how much you spent so you have an idea of how much you’ll need to pay off sooner than later.
Make a plan for any carryover debt. If you put a bit too much on credit (meaning “borrowed money”) during the holidays, make a plan to pay it off as soon as possible.
Consider opening a Christmas Club Account for next year. A Christmas club account will allow you to spread the cost of the holidays across the rest of year to help pay for all of the season’s expenses without taking on debt.

Prioritize self-care

The holidays can leave you feeling drained. To fully recover from Santa shock, prioritize self-care in the weeks after the holidays. This may mean reading a book, meeting friends for coffee or indulging in a spa day. Whatever revives you!

Follow the tips outlined here to recover from Santa shock and transition smoothly back into real life.