July 2009 Archives

Barbara

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When I opened my inbox today, I found a message from the bank. My automatic transfer had gone through, adding another chunk of change to my savings account.

Recently, I dedicated one of my savings accounts for a specific goal: new windows for my house. When I purchased the house more than two years ago (wow, time flies!), I knew the windows would need to be replaced eventually. My house has been around a while and still has its original windows...from the 1960s. And after estimating the cost to replace them, I decided it'd be better to start saving now, even if they'll last a few more seasons.

Saving for a specific goal has really helped my savings stay in savings. Plus, I can track my progress and set up recurring transfers to help me keep the right amount going in each month (I just divided the total amount I need by the months I have to get there, and make sure at least that amount goes into savings automatically each month).

Thinking about my own savings goal got me wondering: What are all of you saving for?

For me, it was important to find a balance between saving for the things I needed and still focusing on repaying my debt. Saving versus paying off debt  is, in my opinion, something you need to decide for yourself. Each person is different — everyone saves for different goals and deals with different debts.

Have you been managing saving while paying off debt? If so, tell us: How did you find a good balance between the two?

Delenie

Like many college students, I fall under the category of being an uncontrollable spender when it comes to wardrobe enhancements and fine dining. For me, even though it's important to look trendy and live an eventful life, it's just as important to spend wisely and save so my summer income can fund my full-time student living expenses during the school year.

That's why I'm making an effort to be more careful about tracking my own expenses. Recently, I took my friend's advice and opened an account at Mint.com  that directly links to my checking account. This tool helps me create a realistic budget, while comparing some of my spending habits  to the average American. Eye-opening!

With this budget in mind, I'm thinking about how to cut back on certain expenses and limiting my spending to the items I truly need. Here are some of my ideas:

• Making more meals at home  instead of eating out three times a day
• Revamping my wardrobe by accessorizing  instead of shopping
• Going vintage
• Going online for discounts  prior to making any big purchases
• Signing up for Netflix  instead of going to the movies
• Watching TV shows online instead of paying for cable
• Adjusting my text messaging plan
• Hiking or going jogging  with friends instead of paying for a monthly gym membership
• Giving up a videogame addiction and finding a private tutoring job
• Getting ink cartridges refilled instead of buying brand new ones
• Scanning classifieds for used furniture or using Craigslist  instead of going to fancy stores like Crate & Barrel  and Pottery Barn 
• Using generic products unless brand names are an absolute must

So far, I've managed the accessorizing.

Have any smart spending/saving tips that you'd like to share? Let us know!

Delenie

I'm a college student, and I think it's never too early to start establishing your credit. In fact, it is key to build a good credit history in preparation for the future when you are looking to take out a loan to finance a car or a home. Employers may check your credit rating to get a sense of what kind of person they are hiring, so a good rating could project a positive image and take you a long way.

As for college students who are constantly looking for an apartment to rent, landlords may favor you because it shows that you will be more likely to pay your rent on time.

Recently, we received a comment from reader Jeff on guest blogger Chelsea's post about debit cards:

Our son is off to college this fall, and he's never had a credit card. Would you suggest that we help him apply for a credit card in his name and a small ($500) credit limit, or should we give him our credit card to use?

This was a particularly timely question, as I've just taken off my own credit card training wheels. 

See, for the last six months, I've had a joint credit card account with my mom to build my credit history. To avoid overspending and to prove to my mom that I was an accountable adult, we agreed that I would only use the credit card on big-ticket items since I already had a debit card for everyday purchases.

Another ground rule we set was that I would pay off the balance in full each month. This reassured her and gave me the opportunity to familiarize myself with the billing cycle and payment process.

Plus, I've learned a lot about credit and financial literacy while interning here at Wells Fargo this summer. That, combined with my mom's guidance, gave me the confidence to take off my training wheels and fly solo. I did some research on which credit card was right for me, applied, and qualified on my own! Now I just need to make sure I continue applying what I've learned over the last six months to build my credit responsibly.

What do you think of this training wheels approach to getting your first credit card? Would it work for you?

Caroline

Question for you college freshmen-to-be: Do you plan to get a job  when you start school this fall?

It seems to be a common question among new college students. Should I get a job, or will I be too busy with school work? However, with the tough economic times we're all facing, there may be more of you who have to work whether you want to or not.

If you have to work, fear not. I worked all through college, and besides loving (and needing) the money, I think it helped keep me organized. No, I couldn't sleep as late as some of my friends and I missed some of that soap-watching downtime , but otherwise, I didn't suffer and neither did my grades.

Some students really fear that they won't be able to keep up with their homework if they get a job. My recommendation? Get a Work-Study  job if you're eligible, or get some other job on-campus. These kind of jobs let you work in those otherwise wasted hours between classes and leave your evenings free.

Although in an ideal world, you'd be studying between classes — the reality is that many students are napping, watching TV or otherwise wasting time during the day. You could be making money, getting real-world experience and making future job contacts instead.

Another nice thing about on-campus work: It's likely those labs and offices shut down during your designated vacation time, and your supervisors are understanding if you've got a big test to study for and need some time off.

If you worked during college, what did you do? Do you recommend that new freshman get a job right away?

Delenie

As the recession continues to push our economy in a challenging direction, students across the nation are holding on tight to their degrees, hoping their education will earn them a salary  that's at least enough to pay off their bills. Given these tough conditions, is it time for students like us to shift our focus and study in a more progressive field?

As President Obama  begins to steer our nation in the "green" direction, the renewable energy industry will be facing tremendous growth in the coming years, with an abundance of opportunities  waiting for college students graduating in 2010-2013. Now might not be such a bad time to start taking a few courses on energy efficiency! Or if you have the skills and interest, you might consider a technical job in engineering , information technology , or construction management. 

Although many students may be inclined to major in energy-related fields because that is where the market is heading, you might not necessarily have to if you work hard. Salary increases come with experience and increase the most in the first ten years. Even if you're not making much with an entry-level position after graduating, you have the potential to catch up to your colleagues. Let's compare an English major with an Economics and Electrical Engineering major: 

• As an English major, entry-level jobs average about $31,976 while an Economics major averages $41,704 and an Electrical Engineering major averages $48,883.
• However, just after 5-9 years of experience, English majors will be earning $51,972 while Economics majors average $68,924 and Electrical Engineering majors average $71,824.
• Even though all salaries have increased, there has been the most growth for English and Economics majors with 62.53% and 65.27%, respectively. Meanwhile, salaries have only increased by 46.93% for Electrical Engineering majors.

I'm an Economics major, so this bodes well for me!

My fellow students, how are you guiding your academic careers? Are you basing them on your interest in the subject or on future salaries, or a combination? And what do you think your prospects are for finding a career in this economy?

Barbara

As Staci has said before, it's tough to be friends with me. I'm still a gal on a pretty strict budget. And when the money runs out, I'm a gal who cuts herself off.

So it was difficult last week when Staci proposed we head to the strip-mall nail salon for a quick pedicure  to make our summer feet happy. To her credit, even she doesn't splurge on that service at a fancy (read: expensive) spa.

It was very, very tempting. "How much?" I asked. "Oh, $35 plus a tip," she responded.

Technically I had the money to go. But a $35 indulgence could've made things a bit too tight until my next paycheck. "I just don't think I can swing that right now," I told her, finalizing my decision.

To that Staci gave me a frown and said, "That's sad." Then as I was starting to feel bad for myself, I snapped out of it and responded, "It's not sad, it's responsible."

As we talked about the breakthrough I'd just had, I started to think about other situations where I haven't always acted the same way. I know Staci understands that I'm on a budget and has gotten used to me packing my lunch versus going out and other spendy activities. That helps ease the guilt when I have to say no.

However, my finances aren't out in the open for all my relationships, and I started to realize that I am still very susceptible to financial peer pressure! Frankly, I don't want to be the stingy friend. So sometimes I say yes when I should be saying no (or at least offering a lower-cost option).

Do you feel the same way sometimes? Tell us about the times you've felt peer pressure to spend or times when you've said no.

By the way, later that week I did get a pedicure. It just happened to be with the assistance of hot bucket of water and a home pedicure kit setup in my living room!

Staci

Editor's note: Chelsea McDermott-Lenocio is a guest blogger from our Card Services & Consumer Lending division, where she is a product manager. When she's not out enjoying time in the sun or fishing, you can catch Chelsea shopping for stealer deals on shoes and jewelry at local boutiques.

OK, so paper or plastic might not be the question on your mind when you whip out your wallet at the grocery store (or at any store for that matter), but you may find yourself pulling out your debit card (aka check card) more often than writing a check or paying with cash.

With all the great features of this simple piece of plastic, there's no wonder why the popularity with the debit card has increased since the 1980s. 

Not only does a debit card offer flexibility, but it's also a convenient way to access the money in your account. It can be used to make deposits, withdraw cash, transfer funds between your accounts and perform other transactions at the ATM (Automated Teller Machine).

When you use your debit card, all purchases or other transaction amounts are deducted from the primary deposit account that is linked to your card.

And as you probably know, there are two ways to pay for your cup of coffee or for your book purchases  using your debit card: You can either choose to use your Personal Identification Number  (PIN) or select "credit" and sign the receipt.

I can't even remember how long I've been using my debit card (more than 10 years for sure). But I can tell you that I find myself pressing "credit" habitually (unless the merchant only accepts PIN for payment) because I can't stop thinking about all the Green Rewards and travel arrangements — like airfare, hotel or rental car — that I'll reap once I redeem my rewards points through the optional Wells Fargo Rewards® program!

So what are the real differences between paying with cash and using a debit card, you may ask? Here's a simple breakdown to keep in mind:

So, what do you find yourself using the most, cash or debit card? What features of the card do you like the best?

Stay tuned as Chelsea explores other topics on how you can manage, protect and reward your everyday debit card spending. And if you have any questions or topics you'd like her to cover, let us know!

Delenie

As the new school year rolls around, students are finalizing their financial aid packages for Fall 2009. Some students may have additional expenses not calculated into the Cost of Attendance (COA) that they're worried about paying. The COA is an estimate of the total cost of students' tuition, fees and living expenses on which the school bases financial aid awards. Many students are unaware that, at some schools, additional expenses during the academic year that exceed their financial aid package may qualify them to file a budget appeal  to increase their standard budget. Such expenses include:

• Books
• A computer purchase
• Uninsured medical, dental, or optical procedures
• Rent and utilities
• Transportation costs (car payments, insurance, repairs)
• Child care

If the recalculated COA is higher , students can increase the total amount they are able to borrow. A budget appeal may also allow students to qualify for additional work-study or more federal student loans prior to having to take out any private student loans.

Three years ago, I went through this pretty straightforward process by speaking with my financial aid advisor and getting it approved through the financial aid office. This allowed me to expand my standard budget by an additional $2,500 and purchase a computer of my choice.

This is highly beneficial to students who need to borrow because students may qualify for additional lower-cost options before turning to private student loans to cover additional costs.

Meanwhile, more fortunate students who have secured scholarships from high school may be facing an entirely different situation. Since students with financial need often receive financial aid packages full of grants from the university along with Federal Pell Grants , additional scholarships could jeopardize this nice package and supplement grants from their university. However, filing a budget appeal for qualifying expenses can help you reclaim some of your scholarship money and increase your Cost of Attendance. Since budget appeals are only offered in some schools in varying amounts, you should speak to your financial aid advisor as soon as possible.

Although you may file a budget appeal every year, there are limitations to how often you can purchase a computer. At UC Berkeley, computer purchases can happen every three years. Since three years have passed, I am able to repeat this process now as a senior. This time, I plan on purchasing the latest MacBook Pro , which comes with a free iPod Touch! Since the maximum amount that I can increase my standard budget by is $2,500, I can utilize the remaining amount to pay for medical and dental bills.

If you need to cover additional costs, check to see if budget appeals are offered at your school! For those who have gone through a similar process, what was it like?

Barbara

Does your current (or future) federal student loan payment seem a bit daunting? As of July 1, there's a new repayment option for federal student loans that may help.

Income Based Repayment  (IBR) is designed to help borrowers who find that their current income makes the required payments with a standard repayment term difficult to afford.

Here's how it works:

Loan eligibility: IBR is available for the Federal Stafford Loans, Federal PLUS Loans for graduate and professional students, and Federal Consolidation Loans, either with Direct Loans or a private lender like Wells Fargo through the Federal Family Education Loan Program (FFELP). However, there are a couple of exceptions: The loan cannot be in default, and IBR is not available for Federal PLUS Loans for parents or Federal Consolidation Loans that repaid a Federal PLUS Loan for parents.

Payment calculation: Through IBR, borrowers' monthly payments are calculated by taking into consideration their adjusted gross income , family size, and the state where they reside. If the IBR payment is less than the payment under a 10-year standard repayment plan, then the borrower is eligible for IBR. To see if you may qualify, calculate the payment with Income Based Repayment  and compare the payment with Standard Repayment.

How to apply: If you find that your payment with IBR may be lower than with a standard repayment period, you can apply for IBR directly through your lender. If your loan is with Wells Fargo, you can call 1-800-658-3567.

Now that you know how it works, here are some considerations for you:

Added benefits: A more manageable student loan payment is a big deal, but there are a couple other benefits of IBR. If you make qualifying payments on your loan under Income Based Repayment for 25 years, you may be able to have any remaining balance discharged. Also, if you have a subsidized loan and your IBR payment doesn't cover the monthly interest your loan accrues, that unpaid interest will be subsidized by the government for up to three consecutive years from when you first enter IBR repayment.

Possible drawbacks: Remember to consider the cons of IBR as well. A reduced payment through IBR usually means you're taking more time to pay off your loan, which can mean paying more interest over the life of the loan. Borrowers must also submit necessary paperwork each year to continue with IBR. And if you are no longer eligible for IBR, any unpaid interest that has accrued on your loan is capitalized (added to the principal balance) and will be charged interest.

Anyone have additional questions on Income Based Repayment? Leave them here!